As filed with the Securities and Exchange Commission onDecember 22, 1997
Registration Nos. 333-9745
No. 811-07753
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o
Pre-Effective Amendment No.
Post-Effective Amendment No. 1
x
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940o
Amendment No. 2 x
SEPARATE ACCOUNT VA-6
(Exact Name of Registrant)
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
(Name of Depositor)
101 North Tryon Street, Charlotte, North Carolina 28202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (704) 344-2700
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel Sutherland, Asbill & Brennan, L.L.P.
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004-2404
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate date of proposed public
offering: As soon as practicable after effectiveness of
the Registration Statement.
Title of securities being registered:
Interests in a separate account under flexible premium deferred
variable annuity contracts.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective:
x immediately upon filing pursuant to paragraph(b)
on __________ pursuant to paragraph (b) o 60 days
after filing pursuant to paragraph (a)(1)
on _ pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on _________________
pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
____ this Post-Effective Amendment designates a new
effective date for a previously filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
<S> <C>
1. Cover Page.............................................. Cover Page
2. Definitions............................................. Definitions
3. Synopsis................................................ Summary of this Prospectus; Variable Account Fee Table
4. Condensed Financial Information......................... Condensed Financial Information
5. General
(a) Depositor.......................................... Transamerica and the Separate Account
(b) Registrant......................................... Transamerica and the Separate Account
(c) Portfolio Company.................................. The Funds
(d) Fund Prospectus.................................... The Funds
(e) Voting Rights...................................... Voting Rights
(f) Administrator....................................... Charges under the Contracts
6. Deductions and Expenses
(a) General............................................ Charges under the Contracts
(b) Sales Load %....................................... Charges under the Contracts
(c) Special Purchase Plan.............................. Not Applicable
(d) Commissions........................................ Underwriter
(e) Fund Expenses...................................... Charges under the Contracts
(f) Operating Expenses................................. Fee Table
7. Contracts
(a) Persons with Rights................................ Description of the Contracts; Surrender of a Contract;
Death Benefits; Voting Rights; Ownership
(b) (i) Allocation of Purchase Payments
Payments..................................... Description of the Contracts
(ii) Transfers.................................... Transfers
(iii) Exchanges.................................... Federal Tax Matters
(c) Changes............................................ The Funds; Voting Rights
(d) Inquiries.......................................... Voting Rights
8. Annuity Period.......................................... Settlement Payments
9. Death Benefit........................................... Death Benefits
10. Purchase and Contract Value
(a) Purchases.......................................... Description of the Contracts
(b) Valuation.......................................... Description of the Contracts
(c) Daily Calculation.................................. Description of the Contracts
(d) Underwriter........................................ Underwriter
11. Redemptions
(a) By Contract Owners................................. Surrender of a Contract
By Annuitant....................................... Not Applicable
(b) Texas ORP.......................................... Not Applicable
(c) Check Delay........................................ Surrender of a Contract
(d) Lapse.............................................. Not Applicable
(e) Free Look.......................................... Right to Cancel
12. Taxes................................Federal Tax Matters
13. Legal Proceedings....................................... Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information.................................. Table of Contents of the Statement of Additional
Information
PART B
Item of Form N-4 Statement of Additional Information Caption
15. Cover Page.............................................. Cover Page
16. Table of Contents....................................... Table of Contents
17. General Information
and History............................................. General Information and History
18. Services
(a) Fees and Expenses
of Registrant...................................... (Prospectus) Variable Account Fee Table; (Prospectus)
The Funds
(b) Management Contracts............................... Not Applicable
(c) Custodian.......................................... Safekeeping of Separate Account Assets; Records and
Reports
Independent Auditors ............................. Accountants
(d) Assets of Registrant............................... Not Applicable
(e) Affiliated Person.................................. Not Applicable
(f) Principal Underwriter.............................. The Underwriter
19. Purchase of Securities
Being Offered........................................... (Prospectus) Description of the Contracts
Offering Sales Load..................................... Charges under the Contracts
20. Underwriters............................................ The Underwriter
21. Calculation of Performance
Data ...........Calculation of Yields and Total Returns
22. Annuity Payments........................................ (Prospectus) Settlement Option Payments
23. Financial Statements.................................... Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits
(a) Financial Statements............................... Financial Statements
(b) Exhibits........................................... Exhibits
25. Directors and Officers of
the Depositor........................................... Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant ....................... Persons Controlled By or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners............................... Number of Contract Owners
28. Indemnification......................................... Indemnification
29. Principal Underwriters.................................. Principal Underwriter
30. Location of Accounts
and Records............................................. Location of Accounts and Records
31. Management Services..................................... Management Services
32. Undertakings............................................ Undertakings
Signature Page.......................................... Signature Page
</TABLE>
<PAGE>
[LOGO]
PROSPECTUS FOR
TRANSAMERICA SERIESsm
-- TRANSAMERICA CLASSICsm
VARIABLE ANNUITY
A Variable Annuity Issued by
Transamerica Life Insurance
and Annuity Company
Including Prospectuses for
Janus Aspen Worldwide Growth
Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap
OCC Accum Trust Small Cap
MFS VIT Emerging Growth
Alliance VPF Premier Growth
Dreyfus VUF Capital Appreciation
MFS VIT Research
Transamerica VIF Growth
Alger American Income & Growth
Alliance VPF Growth & Income
MFS VIT Growth with Income
Janus Aspen Balanced Portfolio
OCC Accum Trust Managed Portfolio
Morgan Stanley UF High Yield
Morgan Stanley UF Fixed Income
Transamerica VIF Money Market
December 18, 1997
<PAGE>
TRANSAMERICA SERIES sm
-TRANSAMERICA "CLASSIC" sm
VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
401 North Tryon Street, Charlotte, North Carolina 28202
This prospectus describes the Proprietary Variable Annuity, a variable
annuity contract ("contract") issued by Transamerica Life Insurance and Annuity
Company (referred to as "Transamerica"). The contract allows you, the owner, to
accumulate assets on a tax-deferred basis for retirement and other long-term
financial purposes.
You may direct your purchase payments, as well as any value accumulated
under the contract, to one or more variable sub-accounts of Separate Account
VA-6 or to the general account options, or to both. The money you place in each
variable sub-account will be invested solely in a corresponding mutual fund
investment portfolio ("portfolio"). The value of each variable sub-account will
vary in accordance with the investment performance of the portfolio in which
that variable sub-account invests. You bear the entire investment risk for all
assets you place in the variable sub-accounts. This means that, depending on
market conditions, the amount you invest in the variable sub-accounts may
increase or decline. Currently you may choose among the following 17 variable
sub-accounts:
Janus Aspen Worldwide Growth
Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap
OCC Accum Trust Small Cap
MFS VIT Emerging Growth
Alliance VPF Premier Growth
Dreyfus VIF Capital Appreciation
MFS VIT Research
Transamerica VIF Growth
Alger American Income & Growth
Alliance VPF Growth & Income
MFS VIT Growth with Income
Janus Aspen Balanced
OCC Accum Trust Managed
Morgan Stanley UF High Yield
Morgan Stanley UF Fixed Income
Transamerica VIF Money Market
You may also place your purchase payments or accumulated value in the
general account options. We are currently offering two general account options.
In one, the fixed account, Transamerica guarantees the return of the amount
invested at a specified rate of interest for at least 12 months. Transamerica
will periodically declare the rate of interest applicable to each amount
allocated to the fixed account. In the second option, the guarantee period
account, Transamerica guarantees the return of the amount invested at a declared
rate of interest for a specified guarantee period. Currently, the guarantee
periods available are three, five and seven years; there may be a reduction made
to the amount of interest credited on amounts withdrawn or transferred before
the end of these periods. For both general account options, 3% will be the
minimum rate of interest credited.
This prospectus contains vital information that you should know before
investing. You can obtain more information about the contract by requesting a
copy of the Statement of Additional Information ("SAI") dated December 18 ,
1997. The SAI is available free by writing to Transamerica Life Insurance and
Annuity Company, Annuity Service Center, 401 North Tryon Street, Suite 700,
Charlotte, North Carolina, 28202 or by calling (800) 420-7749. The current SAI
has been filed with the Securities and Exchange Commission and is incorporated
by reference into this prospectus. The table of contents of the SAI is included
at the end of this prospectus.
These securities have not been approved or disapproved by the
Securities and Exchange Commission, nor has the
Commission passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary
is a criminal offense.
For your own benefit and protection, please
read this prospectus carefully before you
invest. Keep it on hand for future
reference.
The date of this prospectus is December 18 , 1997.
<PAGE>
Under the terms of the contract, we promise to pay you a series of
monthly settlement option payments. Payments may be for a fixed or a variable
amount or a combination of both for the life of the annuitant or for some other
period as you select prior to the annuity date.
On or before the annuity date, you may transfer assets between and
among the variable sub-accounts and the general account options. The fixed
account has restrictions on certain transfers while transfers from a guarantee
period account may be subject to an interest adjustment. After the annuity date,
transfers are permitted among the variable sub-accounts only if you elect to
receive variable settlement option payments.
On or before the annuity date, you may elect to withdraw all or a
portion of your cash surrender value in exchange for a cash payment. Withdrawals
out of the guarantee period account may be subject to an interest adjustment.
Withdrawals may be subject to a contingent deferred sales load, certain
administrative fees, premium tax charges, federal, state or local income taxes,
and/or a tax penalty.
This prospectus must be accompanied by current prospectuses
for the portfolios.
THIS PROSPECTUS MAY NOT BE OFFERED IN ANY JURISDICTION WHERE SUCH OFFERING IS
UNLAWFUL. ANY INFORMATION THAT A DEALER, SALESPERSON, OR OTHER PERSON GIVES YOU
ABOUT THIS CONTRACT SHOULD BE CONTAINED IN THIS PROSPECTUS. IF YOU RECEIVE ANY
INFORMATION ABOUT THE CONTRACT THAT IS NOT CONTAINED IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON THAT INFORMATION.
Please note that your investment in the contract:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
Investing in the contract involves certain investment risks, including possible
loss of principal.
This prospectus generally describes only the
variable account portion of the contract,
except when the general account options are
specifically mentioned.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.............................................................
SUMMARY.....................................................................
CONDENSED FINANCIAL INFORMATION.............................................
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT....
Transamerica Life Insurance and Annuity Company....................
Published Ratings..................................................
The Variable Account...............................................
THE PORTFOLIOS..............................................................
THE CONTRACT................................................................
PURCHASE PAYMENTS...........................................................
Purchase Payments..................................................
Allocation of Purchase Payments....................................
Investment Option Limits...........................................
ACCOUNT VALUE...............................................................
TRANSFERS...................................................................
Before the Annuity Date............................................
Telephone Transfers................................................
Possible Restrictions..............................................
Dollar Cost Averaging..............................................
After the Annuity Date.............................................
CASH WITHDRAWALS............................................................
Withdrawals........................................................
Systematic Withdrawal Option.......................................
Automatic Payment Option (APO).....................................
DEATH BENEFIT...............................................................
Payment of Death Benefit...........................................
Designation of Beneficiaries.......................................
...................................................................
Death of Owner Before Annuity Date.................................
If Annuitant Dies Before Annuity Date..............................
Death After Annuity Date...........................................
Survival Provision.................................................
CHARGES, FEES AND DEDUCTIONS................................................
Contingent Deferred Sales Load.....................................
Withdrawal of Funds Without Charges................................
Administrative Charges.............................................
Mortality and Expense Risk Charge..................................
Living Benefits Rider Fee..........................................
Premium Tax Charges................................................
Transfer Fee.......................................................
Other Fees.........................................................
Taxes..............................................................
Portfolio Expenses.................................................
Interest Adjustment................................................
SETTLEMENT OPTION PAYMENTS..................................................
Annuity Date.......................................................
Settlement Option Payments.........................................
Election of Settlement Option Forms and Payment Options............
Payment Options....................................................
Fixed Payment Option...............................................
Variable Payment Option............................................
Settlement Option Forms............................................
FEDERAL TAX MATTERS.........................................................
Introduction.......................................................
Purchase Payments..................................................
Taxation of Annuities..............................................
Qualified Contracts................................................
Taxation of Transamerica ..........................................
Tax Status of Contract.............................................
Possible Changes in Taxation.......................................
Other Tax Consequences.............................................
PERFORMANCE DATA ...........................................................
DISTRIBUTION OF THE CONTRACT................................................
LEGAL PROCEEDINGS.......................................................
LEGAL MATTERS...........................................................
ACCOUNTANTS.............................................................
VOTING RIGHTS...........................................................
AVAILABLE INFORMATION...................................................
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS.................
APPENDIX A - THE GENERAL ACCOUNT OPTIONS.....................................A-1
Fixed Account ......................................................A-1
Guarantee Period Account ...........................................A-2
APPENDIX B...................................................................B-1
Example of Variable Accumulation Unit Value Calculations............B-1
Example of Variable Annuity Unit Value Calculations.................B-1
Example of Variable Annuity Payment Calculations....................B-1
APPENDIX C
Disclosure Statement for Individual Retirement
Annuities and SEP/IRA's ...........................................C-1
The contract is not available in all states.
<PAGE>
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general
account options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract
is surrendered on or before the
annuity date. The cash surrender value is equal to: the account value;
less any account fee, interest
adjustment, contingent deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown on the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period
of at least twelve months for each
allocation or transfer.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges, or
transfers out to the variable account prior to the annuity date.
General Account Options: The fixed account and the guarantee period
account offered by us to which the owner
may allocate purchase payments and transfers.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee
period.
Guarantee Period: The number of years that a guaranteed rate of interest will
be credited to a guarantee period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods, each
with a different guaranteed rate of interest, offered under the guarantee period
account.
Living Benefits Rider: Also called a "Waiver of CDSL" rider in some contracts,
it provides benefits described on
page ___. Not available in all states.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any amounts the
owner allocates to that variable sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box31848,
Charlotte, North Carolina 28231-1848,
telephone (800) 258-4260.
Status (Qualified and Non-Qualified): The contract has a qualified status
if it is issued in connection with a
retirement plan or program. Otherwise, the status is non-qualified.
Valuation Day: Any day the New York Stock Exchange is open. To determine
the value of an asset on a day that is
not a valuation day, we will use the value of that asset as of the end of the
next valuation day.
Valuation Period: The time interval between the closing (generally 4:00 p.m
Eastern Time) of the New York Stock
Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code.
Variable Accumulation Unit: A unit of measure used to determine the variable
accumulated value before the annuity date. The value of a variable accumulation
unit varies with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable
accumulation units under this contract prior
to the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account
which invests solely in shares of one of
the underlying portfolios.
We: The company, Transamerica.
You: The owner.
<PAGE>
SUMMARY
The Contract
The Transamerica Series sm -Transamerica "Classic" sm Variable Annuity
is a flexible purchase payment deferred annuity that is designed to aid your
long-term financial planning and retirement needs. The contract may be used in
connection with a retirement plan which qualifies as a retirement program under
Sections 403(b) or 408 and 408A of the Code, with various types of qualified
pension and profit sharing plans under Section 401 of the Code, or with
non-qualified plans. Some qualified contracts may not be available in all states
or in all situations. The contract is issued by Transamerica Life Insurance and
Annuity Company ("Transamerica"), an indirect wholly-owned subsidiary of
Transamerica Corporation. Its principal office is at 401 North Tryon Street,
Charlotte, North Carolina 28202, telephone 704-344-2700.
This contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used in this prospectus refers to either the individual
annuity contract or to a certificate issued under a group annuity contract. The
term "owner" refers to the owner(s) of the individual contract or the owner(s)
of the certificate, as appropriate.
Transamerica will establish and maintain an account for each contract.
Each owner will receive either an individual annuity contract, or a certificate
evidencing the owner's coverage under a group annuity contract. The contract
provides that the account value, after certain adjustments, will be applied to a
settlement option on a future date you select ("annuity date").
You may allocate all or portions of your purchase payments to one or
more variable sub-accounts or to the general account options.
The account value prior to the annuity date, except for amounts in the
general account options, will vary depending on the investment experience of
each of the variable sub-accounts selected by the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, prior to the annuity date the owner bears the entire investment risk
under the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts
allocated to the variable account, so the proceeds of a surrender could be less
than the amount invested.
The initial purchase payment for each contract must be at least $5,000
($2,000 for contributory IRAs, SEP/IRAs and Roth IRAs). Generally each
additional purchase payment must be at least $1,000, unless an automatic
purchase payment plan is selected. See "Purchase Payments" page __.
The Variable Account
The variable account is a separate account (designated Separate Account
VA-6) that is subdivided into variable sub-accounts. See "The Variable Account"
page __. Assets of each variable sub-account are invested in a specified mutual
fund portfolio ("portfolio"). The variable sub-accounts currently available for
investment are:
Janus Aspen Worldwide Growth
Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap
OCC Accum Trust Small Cap
MFS VIT Emerging Growth
Alliance VPF Premier Growth
Dreyfus VUF Capital Appreciation
MFS VIT Research
Transamerica VIF Growth
Alger American Income & Growth
Alliance VPF Growth & Income
MFS VIT Growth with Income
Janus Aspen Balanced
OCC Accum Trust Managed
Morgan Stanley UF High Yield
Morgan Stanley UF Fixed Income
Transamerica VIF Money Market
The portfolios pay their investment advisers and administrators certain
fees charged against the assets of each portfolio. The variable accumulated
value, if any, of a contract and the amount of any variable settlement option
payments will vary to reflect the investment performance of the variable
sub-accounts to which amounts have been allocated. Additionally, applicable
charges are deducted. See "Charges and Deductions" page __. For more information
about the portfolios, see "The Portfolios" page __ and the accompanying
portfolios' prospectuses.
General Account Options
There are two types of general account options - the fixed account and
the guarantee period account. See "The General Account Options" in Appendix A.
The amounts in the fixed account will be credited interest at a rate of
not less than 3% annually. Transamerica may credit interest at a rate in excess
of 3% at its discretion for any class. Each interest rate will be guaranteed to
be credited for at least 12 months.
The other general account option, the guarantee period account,
provides specified rates of interest for specified terms of currently three,
five and seven years subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the 3%
minimum rate.
Investment Option Limits
Currently, the owner may not elect more than a total of eighteen
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. See "Investment Option
Limits" page __ .
Transfers Before the Annuity Date
Prior to the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see "After the Annuity Date" page __.
Transfers out of the fixed account are restricted to four per contract
year and to a limited percentage of the fixed account value. More frequent
transfers may be allowed under certain services and options, for example, dollar
cost averaging. Transfers out of a guarantee period prior to the end of the term
may be subject to an interest adjustment which may reduce interest credited to
the 3% minimum rate. See "General Account Options" in Appendix A of this
prospectus.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 12 made during the same contract year. See "Transfers" on page __
for additional limitations and information regarding transfers.
Withdrawals
You may withdraw all or part of the cash surrender value on or before
the annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $50,000.
Transamerica may delay payment of any withdrawal from the general account
options for up to six months. See "Cash Withdrawals" page ____.
Withdrawals may be taxable, subject to withholding and subject
to a penalty tax. Withdrawals from
qualified contracts may be subject to severe restrictions and, in
certain circumstances, prohibited. See
"Federal Tax Matters" page __.
Contingent Deferred Sales Load
Transamerica does not deduct a sales charge when purchase payments are
made (although premium tax charges may be deducted). However, if any part of the
account value is withdrawn, a contingent deferred sales load of up to 6% of
purchase payments may be deducted. After a purchase payment has been held by
Transamerica for seven years, it may be withdrawn without charge. In most
states, the owner may elect, for an extra charge, an optional Living Benefits
Rider that provides that the contingent deferred sales load will be waived in
certain circumstances. No contingent deferred sales load is assessed on payment
of the death benefit, on transfers within the contract, or on certain
annuitizations. See "Contingent Deferred Sales Load" page __, "Withdrawals" page
__and "Living Benefits Rider" page __.
Also, beginning 30 days from the contract effective date (or the end of
the free look period if later), any portion of the "allowed amount" may be
withdrawn each contract year without imposition of any contingent deferred sales
load. The allowed amount for each contract year is equal to 15% of purchase
payments, that were received during the last seven years, as of the prior
contract anniversary, less any withdrawals already taken that contract year. All
purchase payments not previously withdrawn that have been held at least seven
years are not subject to a contingent deferred sales load. For purposes of
calculating the contingent deferred sales load, withdrawals will be considered
to be taken first from purchase payments, on a first in/first out basis, and
then from earnings.
Other Charges and Deductions
Transamerica deducts a mortality and expense risk charge of 1.20%
(annually) of the assets in the variable account and an administrative expense
charge of 0.15% (annually) of these assets. The administrative expense charge
may change, but it is guaranteed not to exceed a maximum effective annual rate
of 0.35%. See "Mortality and Expense Risk Charge" page ____ and "Administrative
Charges" page _____.
An account fee of currently $30 (or 2% of the account value, if less)
is deducted at the end of each contract year and upon surrender. This fee may
change but it is guaranteed not to exceed $60 (or 2% of the account value, if
less) per contract year. If the account value is more than $50,000 on the last
business day of a contract year, (or as of the date the contract is
surrendered), the account fee will be waived for that year.
After the annuity date, the annual annuity fee of $30 will be deducted
in equal installments from each periodic payment under the variable payment
option.
For each transfer in excess of 12 during a contract year, a transfer
fee of $10 will be imposed. (See
"Transfer Fee" page __.)
Charges for premium taxes (including retaliatory premium taxes) are not
currently deducted, except for annuitizations, but such charges could be imposed
in some jurisdictions. Depending on the applicability of such taxes, the charges
could be deducted from purchase payments, from amounts withdrawn, and/or upon
annuitization.
(See "Premium Tax Charges" page __.)
In addition, amounts withdrawn or transferred out of a guarantee period
account prior to the end of its term may be subject to an interest adjustment.
(See "Guaranteed Period Account" in Appendix A.)
If the owner elects the Living Benefits Rider a fee of 0.05% (annually)
of the account value will be deducted at the end of each contract month at the
rate of 1/12 times 0.05% times the account value on the last valuation day of
the month. (The Living Benefit Rider is not available in all states.)
Currently, no fees are deducted for any other services or options under
the contract. However, Transamerica does reserve the right to impose fees to
cover processing for certain services and options in the future, including
dollar cost averaging, systematic withdrawals, automatic payouts, asset
allocation and asset rebalancing.
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. The information below should be considered together with the narrative
provided under the heading "Charges and Deductions" on page __ of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Sales Load(1)
Sales Load Imposed on Purchase Payments 0
Maximum Contingent Deferred Sales Load(2) 6%
Range of Contingent Deferred Sales Load Over Time
<TABLE>
<CAPTION>
Contingent Deferred
Years Since Sales Load
Purchase Payment Receipt (as a percentage of purchase payment)
<S> <C> <C>
Less than 1 year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less 7 years 2%
7 or more years 0%
</TABLE>
Other Contract Expenses
Transfer Fee (first 12 per contract year)(3) 0
Fees For Other Services and Options(4) 0
Account Fee(5) $30
Living Benefits Rider Fee (if elected)(6) 0.05%
Variable Account Annual Expenses(7)
(as a percentage of the variable accumulated value)
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge(8) 0.15%
Total Variable Account Annual Expenses 1.35%
Portfolio Expenses
(as a percentage of assets after fee waiver and/or expense
reimbursement)(9)
<TABLE>
<CAPTION>
Total
Portfolio
Management Other Annual
Portfolio Fees Expenses Expenses
<S> <C> <C> <C>
Janus Aspen Worldwide Growth 0.66 0.14 0.80
Morgan Stanley UF International 0.00 1.15 1.15
Magnum
Dreyfus VIF Small Cap 0.75 0.04 0.79
OCC Accumulation Trust Small Cap 0.72 0.21 0.93
MFS VIT Emerging Growth 0.75 0.25 1.00
Alliance VPF Premier Growth 0.72 0.23 0.95
Dreyfus VUF Capital Appreciation 0.75 0.09 0.84
MFS VIT Research 0.75 0.25 1.00
Transamerica VIF Growth 0.75 0.10 0.85
Alger American Income & Growth 0.63 0.19 0.82
Alliance VPF Growth & Income 0.63 0.19 0.82
MFS VIT Growth with Income 0.75 0.25 1.00
Janus Aspen Balanced 0.79 0.15 0.94
OCC Accumulation Trust Managed 0.79 0.05 0.84
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Transamerica VIF Money Market 0.35 0.25 0.60
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. Transamerica has no reason to doubt the accuracy of that
information, but Transamerica has not verified those figures. In preparing the
table above and the examples that follow, Transamerica has relied on the figures
provided by the portfolios. These figures are for the year ended December 31,
1996, except for the Transamerica VIF Money Market Portfolio, which are
estimates for the year 1998, its first year of operation. Actual expenses in
future years may be higher or lower than these figures.
Notes to Fee Table:
(1) The contingent deferred sales load applies to each contract, regardless
of how the account value is allocated between the variable account and
the general account options.
(2) A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after
seven years, a purchase payment may be withdrawn free of any contingent
deferred sales load. (See "Charges and Deductions" page __.)
(3) A transfer fee of $10 will be imposed for each transfer in excess
of 12 in a contract year. (See
"Charges and Deductions" page __.)
(4) Transamerica currently does not impose fees for any other services, or
options. However, Transamerica reserves the right to impose a fee for
various services and options including dollar cost averaging,
systematic withdrawals, automatic payouts, asset allocation and asset
rebalancing.
(5) The current account fee is $30 (or 2% of the account value, if less
per contract year. This fee will
be waived for account values over $50,000. This limit may be
changed in the future. The fee may be
changed, but it may not exceed $60 (or 2% of the account value,
if less). See "Charges and Deductions"
page __.
(6) If the owner elects the Living Benefits Rider, the rider fee will be
deducted at the rate of 1/12 of 0.05% at the end of each contract month
based on the account value at that time. See "Living Benefits Rider"
page___ .
(7) The variable account annual expenses do not apply to the general account
options.
(8) The current annual administrative expense charge of 0.15% may be
increased to 0.35%. (See "Charges and
Deductions" page __.)
(9) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in
the Portfolio Expenses table are the expenses paid for 1996 (except for
the Transamerica VIF Money Market Portfolio, which are estimates,
taking into account expense reimbursements, for 1998, its first year of
operation). The expenses shown in the table reflect a portfolio's
adviser's waivers or fees or reimbursement of expenses if applicable.
It is anticipated that such waivers or reimbursements will continue for
calendar years 1997 and 1998. Without such waivers or reimbursements,
the annual expenses for 1996 for certain portfolios would have been, as
a percentage of assets, as follows:
<TABLE>
<CAPTION>
Total Portfolio
Management Other Annual Expense
Fee Expenses
<S> <C> <C> <C>
Janus Aspen Worldwide Growth 0.77 0.14 0.91
Morgan Stanley UF International Magnum 0.80 1.58 2.38
OCC Accumulation Trust Small Cap 0.80 0.21 1.01
MFS VIT Emerging Growth 0.75 0.41 1.16
Alliance VPF Premier Growth 1.00 0.23 1.23
MFS VIT Research 0.75 0.73 1.48
Transamerica VIF Growth 0.75 0.59 1.34
Alliance VPF Growth & Income 0.63 0.32 0.95
MFS VIT Growth with Income 0.75 1.32 2.07
Janus Aspen Balanced 0.92 0.15 1.07
OCC Accumulation Trust Managed 0.80 0.05 0.85
Morgan Stanley UF High Yield 0.50 0.80 1.30
Morgan Stanley UF Fixed Income 0.40 1.19 1.59
</TABLE>
The other expenses of 0.59% of the Transamerica VIF Growth Portfolio reflect all
12 months of 1996, including the first 10 months of 1996 when the portfolio was
organized as a separate account of Transamerica Occidental Life Insurance
Company; for those 10 months, the separate account was assessed mortality and
expense risk charges which will no longer be assessed at the portfolio level.
Without expense reimbursements, the other expenses for the first year of
operation for the Transamerica VIF Money Market Portfolio are expected to be
0.xx% There were no fee waivers or expense reimbursements for the Dreyfus VIF
Small Cap Portfolio, Dreyfus VIF Capital Appreciation Portfolio or Alger
American Income & Growth.
EXAMPLES
The following tables show the total expenses an owner would incur in
various situations assuming a $1,000 investment and a 5% annual return on
assets.
These examples assume an average account value of $40,000 and,
therefore, a deduction of 0.075% has been made to reflect the $30 account fee.
These examples also assume that all amounts were allocated to the variable
sub-account indicated. These examples also assume that no transfer fees or other
option or service fees or premium tax charges have been assessed. Premium tax
charges may be applicable. (See "Premium Tax Charges" page ____.)
Examples 1 through 3 show expenses for contracts without the optional
Living Benefit Rider based on fee waivers and reimbursements for the portfolios
for 1996. There is no guarantee that any fee waivers or expense reimbursements
will continue in the future. For annuitizations before the first contract
anniversary, and for annuitizations under a form that does not include life
contingencies, the contingent deferred sales load may apply (see expense
examples in column 1).
<TABLE>
<CAPTION>
3. If the owner elects
Examples 1-3 to annuitize at the end
An owner would pay the following 1. If the owner 2. If the owner does of the applicable
expenses on a $1,000 investment, surrenders the not surrender and does period under a
assuming a 5% annual return on contract at the end of not annuitize the Settlement Option with
assets: the applicable time contract: life contingencies:/
period:
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C> <C> <C>
Janus Aspen Worldwide Growth 73.56 112.07 22.56 69.57 22.56 69.27
Morgan Stanley UF International 89.28 158.71 38.28 116.21 38.28 116.21
Magnum
Dreyfus VIF Small Cap 73.46 111.77 22.46 69.27 22.46 69.27
OCC Accum Trust Small Cap 73.79 111.68 22.79 69.18 22.79 69.18
MFS VIT Emerging Growth 75.56 118.10 24.56 75.60 24.56 75.60
Alliance VPF Premium Growth 75.06 116.60 24.06 74.10 24.06 74.10
Dreyfus VIF Capital Appreciation 73.96 113.28 22.96 70.78 22.96 70.78
MFS VIT Research 75.56 118.10 24.56 75.60 24.56 75.60
Transamerica VIF Growth 74.06 113.58 23.06 71.08 23.06 71.08
Alger American Income & Growth 73.66 112.37 22.66 69.87 22.66 69.87
Alliance VPF Growth and Income 73.76 112.68 22.76 70.18 22.76 70.18
MFS VIF Growth with Income 75.56 118.10 24.56 75.60 24.56 75.60
Janus Aspen Balanced Portfolio 74.96 116.30 23.96 73.80 23.96 73.80
OCC Accum Trust Managed Portfolio 74.69 114.42 23.69 71.92 23.69 71.92
Morgan Stanley UF High Yield 78.56 127.08 27.56 84.58 27.56 84.58
Morgan Stanley UF Fixed Income 81.45 135.67 30.45 93.17 30.45 93.17
Transamerica VIF Money Market 71.55 106.01 20.55 63.51 20.55 63.51
</TABLE>
Examples 4 through 6 show expenses for contracts with the optional
Living Benefits Rider, based on the fee waivers and reimbursements for the
portfolios for 1996. There is no guarantee that fee waivers or expense
reimbursements will continue in the future. For annuitizations before the first
contract anniversary and for annuitizations under a form that does not include
life contingencies, a contingent deferred sales load may apply (see examples in
column 4).
<TABLE>
<CAPTION>
6. If the owner elects
Examples 4-6 to annuitize at the end
An owner would pay the following 4. If the owner 5. If the owner does of the applicable
expenses on a $1,000 investment, surrenders the not surrender and does period under a
assuming a 5% annual return on contract at the end of not annuitize the Settlement Option with
assets: the applicable time contract: life contingencies:
period:
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C> <C> <C>
Janus Aspen Worldwide Growth 74.06 113.58 23.06 71.08 23.06 71.08
Morgan Stanley UF International 89.77 160.15 38.77 117.65 38.77 117.65
Magnum
Dreyfus VIF Small Cap 73.96 113.28 22.96 70.78 22.96 70.78
OCC Accum Trust Small Cap 74.28 113.15 23.28 70.65 23.28 70.65
MFS VIT Emerging Growth 76.06 119.60 25.06 77.10 25.06 77.10
Alliance VPF Premium Growth 75.56 118.10 24.56 75.60 24.56 75.60
Dreyfus VIF Capital Appreciation 74.46 114.79 23.46 72.29 23.46 72.29
MFS VIT Research 76.06 119.60 25.06 77.10 25.06 77.10
Transamerica VIF Growth 74.56 115.09 23.56 72.59 23.56 72.59
Alger American Income & Growth 74.16 113.88 23.16 71.38 23.16 71.38
Alliance VPF Growth and Income 74.26 114.19 23.26 71.69 23.26 71.69
MFS VIF Growth with Income 76.06 119.60 25.06 77.10 25.06 77.10
Janus Aspen Balanced Portfolio 75.46 117.80 24.46 75.30 24.46 75.30
OCC Accum Trust Managed Portfolio 75.19 115.90 24.19 73.40 24.19 73.40
Morgan Stanley UF High Yield 79.06 128.56 28.06 86.06 28.06 86.06
Morgan Stanley UF Fixed Income 81.95 137.15 30.95 94.65 30.95 94.65
Transamerica VIF Money Market 72.05 107.53 21.05 65.03 21.05 65.03
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT
TO THE GUARANTEES IN THE CONTRACT. THE ASSUMED 5% ANNUAL RATE OF RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS ASSUMED RATE.
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a
variable basis or a combination of a fixed and variable basis, as you select.
You have flexibility in choosing the annuity date, but it may generally not be a
date later than the annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last, but never later than the annuitant's 97th birthday.
Certain qualified contracts may have restrictions as to the annuity date and the
types of settlement options available. (See "Settlement Option Payments" page
___.)
Four settlement options are available under the contract: (1) life
annuity; (2) life and contingent
annuity; (3) life annuity with period certain; and (4) joint and survivor
annuity. (See "Settlement Option Forms"
page __.)
Death of Owner Before the Annuity Date
If an owner dies prior to the annuity date and before either the
owner's or any joint owner's 85th birthday, the death benefit for the contract
will be the greatest of (a) the account value or (b) the sum of all purchase
payments made to the contract, less withdrawals and applicable premium tax
charges, or (c) the highest account value on any contract anniversary prior to
the earlier of the owner's or joint owner's 85th birthday, plus purchase
payments made and less withdrawals and applicable premium tax charges since that
contract anniversary. If death occurs after the earlier of the owner's or joint
owner's 85th birthday, the death benefit will be the account value. If the owner
is not a natural person, the annuitant will be treated as the owner(s) for
purposes of the death benefit.
The death benefit will generally be paid within seven days of receipt
of the required proof of death of the owner and election of the method of
settlement or as soon thereafter as Transamerica has sufficient information to
make the payment, but if no settlement method is elected the death benefit will
be distributed within five years after the owner's death. No contingent deferred
sales load is imposed. The death benefit may be paid as either a lump sum or as
a settlement option. (See "Death Benefit" page __.) Amounts in the guarantee
period account will not be subject to interest adjustments in calculating the
death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on
increases in the account value until a distribution under the contract occurs
(e.g., a withdrawal or settlement option payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of a contract). Generally, a portion (up to 100%) of
any distribution or deemed distribution is taxable as ordinary income. The
taxable portion of distributions is generally subject to income tax withholding
unless the recipient elects otherwise (although withholding is mandatory for
certain qualified contracts). In addition, a federal penalty tax may apply to
certain distributions. (See "Federal Tax Matters" page __.)
Right to Cancel
The owner has the right to examine the contract for a limited period,
known as a "free look period." The owner can cancel the contract during this
period by delivering or mailing a written notice of cancellation, or sending a
telegram to the Service Center and by returning the contract before midnight of
the tenth day after receipt of the contract (or longer if required by state
law). Notice given by mail and the return of the contract by mail will be
effective on the date received by Transamerica. Unless otherwise required by
law, Transamerica will refund the purchase payment(s) allocated to any general
account option (less any withdrawals) plus the variable accumulated value as of
the date the written notice and the contract are received by Transamerica. See
"Purchase Payments" page __ and "Account Value" page __.)
Questions
Questions about procedures or the contract can be answered by the
Transamerica Annuity Service Center ("Service Center"), at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, (800) 258-4260. All inquiries should
include the contract number and the owner's name.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this prospectus and in the prospectuses
for the portfolios which should be referred to for more detailed information.
With respect to qualified contracts, it should be noted that the requirements of
a particular retirement plan, an endorsement to the contract, or limitations or
penalties imposed by the Code or the Employee Retirement Income Security Act of
1974, as amended, may impose additional limits or restrictions on purchase
payments, withdrawals, distributions, or benefits, or on other provisions of the
contract. This prospectus does not describe such limitations or restrictions.
(See "Federal Tax Matters" page __.)
CONDENSED FINANCIAL INFORMATION
Because the variable account has not yet commenced operations, there
are no financial statements available.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company ("Transamerica") is a
stock life insurance company incorporated under the laws of the State of
California in 1966 and redomesticated to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies.
Transamerica is a wholly-owned indirect subsidiary of Transamerica Corporation.
The address of Transamerica is 401 North Tryon Street, Charlotte, North Carolina
28202.
Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial
strength and/or claims-paying ability of Transamerica and should not be
considered as bearing on the investment performance of the variable account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of
Transamerica as measured by Standard & Poor's Insurance Ratings Services,
Moody's, or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to owners. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms, including its obligations
under the general account options of this contract. Such ratings do not reflect
the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
The Variable Account
Separate Account VA-6 of Transamerica (the "variable account") was
established by Transamerica as a separate account under the laws of the State of
North Carolina pursuant to June 11, 1996, resolutions of Transamerica's Board of
Directors. The variable account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the variable account.
The assets of the variable account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 58-7-95 of
the North Carolina Insurance Law provides that the assets of a separate account
are not chargeable with liabilities incurred in any other business operation of
the insurance company (except to the extent that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the variable account, whether or not
realized, are credited to or charged against the variable account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the variable account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica.
The variable account currently has seventeen variable sub-accounts
available under the contract, each of which invests solely in a specific
corresponding portfolio. Changes to the variable sub-accounts may be made at the
discretion of Transamerica. (See "Addition, Deletion, or Substitution" page __.)
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests
exclusively in one of the portfolios. Descriptions of each portfolio's
investment objectives follow. The management fees listed below are fees
specified in the applicable advisory contract (i.e., before any fee waivers).
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. Worldwide Growth Portfolio normally invests in issuers from
at least five different countries, including the United States. The Portfolio
may at times invest in fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first $300
million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The International Magnum Portfolio of the Morgan Stanley Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in Equity Securities
of non-U.S. issuers domiciled in EAFE countries. (The countries in which the
Portfolio will invest are those comprising the Morgan Stanley Capital
International EAFE Index (the "EAFE Index"), which includes Australia, Japan,
New Zealand, most nations located in Western Europe and certain developed
countries in Asia, such as Hong Kong and Singapore (each an "EAFE country," and
collectively the "EAFE countries"). Under normal circumstances, at least 65% of
the total assets of the Portfolio will be invested in Equity Securities of
issuers in at least three different EAFE countries.)
Adviser: Morgan Stanley Asset Management Inc. Management Fee: 0.80% of the
first $500 million plus 0.75% of the
next $500 million plus 0.70% of the assets over $1 billion.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation. It seeks to achieve its objective by investing
principally in common stocks; under normal market conditions, the Series will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase which the Dreyfus Corporation
believes to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
Adviser: The Dreyfus Corporation. Management Fee: 0.75%.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations of under $1 billion. Under
normal circumstances at least 65% of the portfolios' assets will be invested in
equity securities. The majority of securities purchased by the Portfolio will be
traded on the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options, warrants, bonds, notes
and debentures which are convertible into or exchangeable for, or which grant a
right to purchase or sell, such securities. In addition, the Portfolio may also
purchase foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by American depository receipts
listed on a domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million
plus 0.75% of the next $400 million
plus 0.70% of assets over $800 million.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the investment objective of long-term
growth of capital. The policy is to invest primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks of companies that MFS
believes are early in their life cycle but which have the potential to become
major enterprises (emerging growth companies). While the portfolio will invest
primarily in common stocks, the portfolio may, to a limited extent, seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment grade"
(commonly known as "junk bonds") or in comparable unrated securities, when, in
the opinion of the Adviser, such an investment presents a greater opportunity
for appreciation with comparable risk to an investment in "investment grade"
securities. Under normal market conditions the portfolio will invest not more
than 5% of its nets assets in these securities. Consistent with its investment
objective and policies described above, the portfolio may also invest up to 25%
(and generally expects to invest not more than 15%) of its net assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.41%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since
investments will be made based upon their potential for capital appreciation,
current income will be incidental to the objective of capital growth. The
Portfolio will invest predominantly in the equity securities (common stocks,
securities convertible into commons stocks and rights and warrants to subscribe
for or purchase common stocks) of a limited number of large, carefully selected,
high-quality U.S. companies that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. The portfolio investments in the 25 such
companies most highly regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets. The portfolio thus
differs from more typical equity mutual funds by investing most of its assets in
a relatively small number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the value of its total
assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P. Management Fee: 1%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund seeks
to provide long-term capital growth consistent with the preservation of capital
current income is a secondary goal. It seeks to achieve its goals by investing
in common stocks of domestic and foreign issuers.
Adviser: The Dreyfus Corporation. Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.55% of the first $150
million plus 0.50% of the next $150 million plus 0.375% of the assets over
$300 million.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The policy is to invest a substantial proportion
of its assets in equity securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in which the portfolio
may invest include the following: common stocks, preferred stocks and preference
stocks, securities such as bonds, warrants or rights that are convertible into
stocks and depository receipts for those securities. These securities may be
listed on securities exchanges, traded in various over-the counter markets or
have no organized markets. A smaller proportion of the assets may be invested in
bonds, short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's non-convertible debt
investments, if any, may consist of "investment grade" securities, and, with
respect to no more than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser believes to be a similar
quality to these lower rated securities (commonly know as "junk bonds").
Consistent with its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth. Common stock (listed and unlisted) is the basic form
of investment. Although the Portfolio invests the majority of its assets in
common stocks, the Portfolio may also invest in debt securities and preferred
stocks (both having a call on common stocks by means of a conversion privilege
or attached warrants) and warrants or other rights to purchase common stocks.
Unless market conditions would indicate otherwise, the Growth Portfolio will be
invested primarily in such equity-type securities. When in the judgment of
Investment Services market conditions warrant, the Growth Portfolio may, for
temporary defensive purposes, hold part or all of its assets in cash, debt or
money market instruments. The Growth Portfolio may invest up to 10% of its
assets in debt securities having a call on common stocks that are rated below
investment grade.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Income & Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. Except during temporary defensive periods, the portfolio attempts
to invest 100%, and it is a fundamental policy of the portfolio to invest at
least 65%, of its total assets in dividend paying equity securities. Alger
Management will favor securities it believes also offer opportunities for
capital appreciation. The portfolio may invest up to 35% of its total assets in
money market instruments and repurchase agreements and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth & Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks may be made
by the portfolio. Purchases and sales of portfolio securities are made at such
times and in such amounts as are deemed advisable in light of market, economic
and other conditions.
Adviser: Alliance Capital Management L.P. Management Fee: 0.625%.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the Growth with Income Portfolio will invest at least
65% of its assets in equity securities of companies that are believed to have
long-term prospects for growth and income. Equity securities in which the
portfolio may invest include the following: common stocks, preferred stocks and
preference stock; securities such as bonds, warrants or rights that are
convertible into stocks; and depository receipts for those securities. These
securities may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized markets. Consistent with its
investment objective and policies described above, the portfolio may also invest
up to 75% (and generally expects to invest no more than 15%) of its net assets
in foreign securities (including emerging market securities and Brady Bonds)
which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Manager's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the portfolio will also invest in high
quality short term money market and cash equivalent securities and may invest
almost all of its assets in such securities when the Manager deems it advisable
in order to preserve capital. In addition, the portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the-counter
markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of first $400 million
plus 0.75% of next $400 million plus
0.70% of the assets over $800 million.
The High Yield Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of High Yield Securities,
including Corporate Bonds and other Fixed Income Securities and Derivatives.
High Yield Securities are rated below investment grade and are commonly referred
to as "junk bonds." The portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first
$500 million plus 0.45% of next $500
million plus 0.40% of the assets over $1 billion.
The Fixed Income Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of U.S. Government and Agencies,
Corporate Bonds, MBSs, Foreign Bonds and other Fixed Income Securities and
Derivatives. The portfolio's average weighted maturity will ordinarily exceed
five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the
first $500 million plus 0.35% of the
next $500 million plus 0.30% of the assets over $1 billion.
The Money Market Portfolio of the Transamerica Variable Insurance Fund,
Inc., seeks to maximize current income
from money market securities consistent with liquidity and the
preservation of principal. The Money Market
Portfolio invests primarily in high quality U. S. dollar-denominated
money market instruments with remaining
maturities of 13 months or less, including: obligations issued or
guaranteed by the U. S. and foreign
governments and their agencies and instrumentalities; obligations of U. S.
and foreign banks, or their foreign
branches, and U. S. savings banks; short-term corporate obligations,
including commercial paper, notes and bonds;
other short-term debt obligations with remaining maturities of 397 days
or less; and repurchase agreements
involving any of the securities mentioned above. The Money Market Portfolio
may also purchase other marketable,
non-convertible corporate debt securities of U. S. issuers. These
investments include bonds, debentures,
floating rate obligations, and issues with optional maturities.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.35%.
Meeting investment objectives depends on various factors,
including, but not limited to, how well the
portfolio managers anticipate changing economic and market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE
PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
An investment in the contract is not a deposit or obligation of, or
guaranteed or endorsed, by any bank, nor is the contract federally insured by
the Federal Deposit Insurance Corporation or any other government agency.
Investing in the contract involves certain investment risks, including possible
loss of principal.
Since all of the portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the variable account and one or more
other separate accounts investing in the portfolios. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate accounts from investing in
the portfolios. See the portfolios' prospectuses for greater details.
Additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the portfolios which accompany this prospectus. The portfolios' prospectuses
should be read carefully before any decision is made concerning the allocation
of purchase payments to, or transfers among, the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or
their advisers, in varying amounts, that may be based on the amount of assets
allocated to the portfolios. The payments are for administrative or distribution
services.
Addition, Deletion, or Substitution
Transamerica does not control the portfolios and cannot guarantee that
any of the variable sub-accounts offered under this contract or any of the
portfolios will always be available for allocation of purchase payments or
transfers. Transamerica retains the right to make changes in the variable
account and in its investments.
Transamerica reserves the right to eliminate the shares of any
portfolio held by a variable sub-account and to substitute shares of another
portfolio or of another investment company for the shares of any portfolio, if
the shares of the portfolio are no longer available for investment or if, in
Transamerica's judgment, investment in any portfolio would be inappropriate in
view of the purposes of the variable account. To the extent required by the 1940
Act, a substitution of shares attributable to the owner's interest in a variable
sub-account will not be made without prior notice to the owner and the prior
approval of the Commission. Nothing contained herein shall prevent the variable
account from purchasing other securities for other series or classes of variable
annuity contracts, or from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
New variable sub-accounts for the contracts may be established when, in
the sole discretion of Transamerica, marketing, tax, investment or other
conditions so warrant. Any new variable sub-accounts will be made available to
existing owners on a basis to be determined by Transamerica. Each additional
variable sub-account will purchase shares in a mutual fund portfolio or other
investment vehicle. Transamerica may also eliminate one or more variable
sub-accounts if, in its sole discretion, marketing, tax, investment or other
conditions so warrant. In the event any variable sub-account is eliminated,
Transamerica will notify owners and request a re-allocation of the amounts
invested in the eliminated variable sub-account.
In the event of any substitution or change, Transamerica may make such
changes in the contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the contracts, the variable account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred annuity contract.
The rights and benefits are described below and in the individual contract or in
the certificate and group contract; however, Transamerica reserves the right to
make any modification to conform the individual contract and the group contract
and certificates thereunder to, or give the owner the benefit of, any federal or
state statute or rule or regulation. The obligations under the contract are
obligations of Transamerica. The contracts are available on a non-qualified
basis and on a qualified basis. Contracts available on a qualified basis are as
follows: (1) rollover and contributory individual retirement annuities (IRAs)
under Code Sections 408(a), 408(b); (2) conversion and contributory Roth IRAs
under Code Section 408A; (3) simplified employee pension plans (SEP/IRAs) that
qualify for special federal income tax treatment under Code Section 408(k); (4)
Code Section 403(b) annuities and (5) qualified pension and profit sharing plans
intended to qualify under Code Section 401. Generally, qualified contracts
contain certain restrictive provisions limiting the timing and amount of
purchase payments to, and distributions from, the qualified contract. (For
further discussion concerning qualified contracts, see "Federal Tax Matters"
page ____.)
Ownership
The owner is entitled to the rights granted by the contract. If the
owner dies, the rights of the owner belong to the joint owner, if any, and then
to the owner's beneficiary. If there are joint owners, the one designated as the
primary owner will receive all mail and any tax reporting information.
For non-qualified contraacts, the owner is entitled to designate the
annuitant(s) and, if the owner is an individual, the owner can change the
annuitant(s) at any time before the annuity date. Any such change will be
subject to our then current underwriting requirements. Transamerica reserves the
right to reject any change of annuitant(s) which has been made without our prior
written consent.
If the owner is not an individual, the annuitant(s) may not be changed
once the contract is issued. Different rules apply to qualified contracts. See
"Federal Tax Matters," page ___.
For each contract, a different account will be established and values,
benefits and charges will be calculated separately. The various administrative
rules described below will apply separately to each contract, unless otherwise
noted.
PURCHASE PAYMENTS
Purchase Payments
All purchase payments must be paid to the Service Center. A
confirmation will be issued to the owner upon the acceptance of each purchase
payment.
The initial purchase payment must be at least $5,000 ($2,000 for
contributory IRAs and SEP-IRAs).
The contract will be issued and the initial purchase payment generally
will be credited within two business days after the receipt of both sufficient
information to issue a contract and the initial purchase payment at the Service
Center. Acceptance is subject to sufficient information being provided in a form
acceptable to Transamerica, and Transamerica reserves the right to reject any
request for issuance of a contract or purchase payment. Contracts normally will
not be issued with respect to owners, joint owners, or annuitants more than 90
years old, although Transamerica in its discretion may waive this restriction in
appropriate cases. Transamerica further reserves the right to not accept
purchase payments after the owners' (or annuitants' if non-individual owner)
90th birthday.
If the initial purchase payment allocated to the variable
sub-account(s) cannot be credited within two days of receipt of the purchase
payment and information requesting issuance of a contract because the
information is incomplete or for any other reason, then Transamerica will
contact the owner, explain the reason for the delay and will refund the initial
purchase payment within five business days, unless the owner consents to
Transamerica retaining the initial purchase payment and crediting it as soon as
the requirements are fulfilled.
Additional purchase payments may be made at any time prior to the
annuity date. Additional purchase payments must be at least $1,000 or at least
$100 if made pursuant to an automatic purchase payment plan under which the
additional purchase payments are automatically deducted from a bank account and
allocated to the contract. In addition, minimum allocation amounts apply (see
"Allocation of Purchase Payments" below). Additional purchase payments are
credited to the contract as of the date the payment is received.
Total purchase payments for any contract may not exceed $1,000,000
without prior approval of Transamerica.
In no event may the sum of all purchase payments for a contract during
any taxable year exceed the limits imposed by any applicable federal or state
law, rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract.
You may allocate purchase payments between and among one or more of the variable
sub-accounts and the general account options as long as the portions are whole
number percentages and any allocation percentage for a variable sub-account is
at least 10%. In addition, there is a minimum allocation of $100 to any variable
sub-account and the fixed account, and $1,000 to each guarantee period.
Transamerica may waive this minimum allocation amount under certain options and
circumstances.
Each purchase payment will be subject to the allocation percentages in
effect at the time of receipt of such purchase payment. The allocation
percentages for additional purchase payments may be changed by the owner at any
time by submitting a request for such change, in a form and manner acceptable to
Transamerica, to the Service Center. Any changes to the allocation percentages
are subject to the limitation(s) above. Any change will take effect with the
first purchase payment received with or after receipt by the Service Center of
the request for such change and will continue in effect until subsequently
changed.
In certain jurisdictions and under certain conditions where by law
Transamerica is required to return upon the exercise of the free look option,
either (1) the purchase payment or (2) the greater of the purchase payment or
account value, any initial allocation to the variable account may be held in the
money market variable sub-account during the applicable free look period plus 5
days for delivery. Any such allocations to the money market variable sub-account
will automatically be transferred at the end of the free-look period plus 5 days
according to the owner's requested allocation. Such transfer will not count
against the 12 allowed transfers without charge during the first contract year.
Investment Option Limits
Currently, the owner may not allocate amounts to more than eighteen
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. Each variable sub-account,
each duration of guarantee period under the guarantee period account and the
fixed account that ever received a transfer or purchase payment allocation count
as one towards this total of eighteen limit.
Transamerica may waive this limit in the future.
For example, if the owner makes an allocation to the money market
variable sub-account and later transfers all amounts out of this money market
variable sub-account, it would still count as one for the purposes of the
limitation even if it held no value. If the owner transfers from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If the owner selects a
guarantee period and renews for the same term, the count will be one; but if the
owner renews to a guarantee period with a different term, the count will be two.
ACCOUNT VALUE
Before the annuity date, the account value is equal to: (a) the general
account options accumulated value plus (b) the variable accumulated value.
The variable accumulated value is determined at the end of each
valuation day. To determine the variable accumulated value on a day that is not
a valuation day, the value as of the end of the next valuation day will be used.
The variable accumulated value is expected to change from valuation period to
valuation period, reflecting the investment experience of the selected
portfolios as well as the deductions for charges and fees. A valuation period is
the period between successive valuation days. It begins at the close of the New
York Stock Exchange (generally 4:00 p.m. ET) on each valuation day and ends at
the close of the New York Stock Exchange on the next succeeding valuation day. A
valuation day is each day that the New York Stock Exchange is open for regular
business.
Purchase payments allocated to a variable sub-account are credited to
the variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of: (a) the date sufficient information, in an
acceptable manner and form, is received at our Service Center; or (b) the date
our Service Center receives the initial purchase payment. In the case of any
additional purchase payment, variable accumulation units for that payment will
be credited at the end of the valuation period during which Transamerica
receives the payment. The value of a variable accumulation unit for each
variable sub-account is established at the end of each valuation period and is
calculated by multiplying the value of that unit at the end of the prior
valuation period by the variable sub-account's net investment factor for the
valuation period. The value of a variable accumulation unit may go up or down.
The net investment factor is used to determine the value of
accumulation and annuity unit values for the end of a valuation period. The
applicable formula can be found in the statement of additional information.
Transfers involving variable sub-accounts will result in the crediting
and/or cancellation of variable accumulation units having a total value equal to
the dollar amount being transferred to or from a particular variable
sub-account. The crediting and cancellation of such units is made using the
variable accumulation unit value of the applicable variable sub-account as of
the end of the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the
account value among the variable sub-accounts and the guarantee periods.
Transfers are restricted into or out of the fixed account. See "General Account
Options" in Appendix A.
Transfers among the variable sub-accounts and the general account
options may be made by submitting a request, in a form and manner acceptable to
Transamerica, to the Service Center. The transfer request must specify: (1) the
variable sub-account(s) and/or the general account option(s) from which the
transfer is to be made; (2) the amount of the transfer; and (3) the variable
sub-account(s) and/or general account option(s) to receive the transferred
amount. The minimum amount which may be transferred from the variable
sub-accounts and the general account options is $1,000. Transfers among the
variable sub-accounts are also subject to such terms and conditions as may be
imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its
term, the amount transferred may be subject to an interest adjustment. (See "The
General Account Options" in Appendix A.) A transfer from a guarantee period made
within 30 days before the last day of its term will not be subject to any
interest adjustment.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 12 made during the same contract year. Transamerica reserves the
right to waive the transfer fee or vary the number of transfers without charge
or not count transfers under certain options or services for purposes of the
allowed number without charge. See "Transfers" on page __ for additional
limitations regarding transfers. All requests received during a single valuation
period will be treated as a single transfer. A transfer generally will be
effective on the date the request for transfer is received by the Service
Center.
If a transfer reduces the value in a variable sub-account or guarantee
period or in the fixed account to less than $1,000, then Transamerica reserves
the right to transfer the remaining amount along with the amount requested to be
transferred in accordance with the transfer instructions provided by the owner.
Under current law, there will not be any tax liability for transfers within the
contract.
Other Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect owners from adverse impacts on portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant variable sub-account values from one
variable sub-account to another may prevent the underlying portfolio from taking
advantage of investment opportunities because the portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in portfolio transaction costs which must be
indirectly borne by owners. Therefore, Transamerica reserves the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney and to require that each transfer request be made by
a separate communication to Transamerica. Transamerica also reserves the right
to require that each transfer request be submitted in writing and be manually
signed by the owner(s); telephone or facsimile transfer requests may not be
allowed.
Telephone Transfers
Transamerica will allow telephone transfers if the owner has provided
proper authorization for such transfers in a form and manner acceptable to
Transamerica. Transamerica reserves the right to suspend telephone transfer
privileges at any time, for some or all contracts, for any reason. Withdrawals
are not permitted by telephone.
Transamerica will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to unauthorized or
fraudulent instructions. In the opinion of certain government regulators,
Transamerica may be liable for such losses if it does not follow those
procedures. The procedures Transamerica will follow for telephone transfers may
include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Prior to the annuity date, the owner may request that amounts be
automatically transferred on a monthly basis from a "source account," which is
currently either the money market sub-account or the fixed account, to any of
the variable sub-accounts by submitting a request to the Service Center in a
form and manner acceptable to Transamerica. Other source accounts may be
available; call the Service Center for availability.
Only one source account can be elected at a time. The transfers will
begin when the owner requests, but no sooner than one week following, receipt of
such request, provided that dollar cost averaging transfers will not commence
until the later of (a) 30 days after the contract effective date, or (b) the
estimated end of the free look period (allowing 5 days for delivery). Transfers
will continue for the number of consecutive months selected by the owner unless
(1) terminated by the owner, (2) automatically terminated by Transamerica
because there are insufficient amounts in the source account, or (3) for other
reasons as described in the election form. The owner may request that monthly
transfers be continued for a term then available by giving notice to the Service
Center in a form and manner acceptable to Transamerica within 30 days prior to
the last monthly transfer. If no request to continue the monthly transfers is
made by the owner, this option will terminate automatically with the last
transfer at the end of the term.
In order to be eligible for dollar cost averaging, the following
conditions must be met: (1) the value of the source account must be at least
$5,000; (2) the minimum amount that can be transferred out of the source account
is $250 per month; and (3) the minimum amount transferred into any other
variable sub-account is the greater of $250 or 10% of the amount being
transferred. These limits may be changed for new elections of this service.
Dollar cost averaging transfers can not be made from a source account from which
systematic withdrawals or automatic payouts are also being made.
There is currently no charge for the dollar cost averaging option and
transfers due to dollar cost averaging currently will not count toward the
number of transfers allowed without charge per contract year.
Transamerica may charge in the future for dollar cost average.
Dollar cost averaging transfers may not be made to or from the
guarantee period account or to the fixed account.
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable
sub-accounts, the performance of each variable sub-account may cause proportions
of the values in the variable sub-accounts to vary from the allocation
percentages. The owner may instruct Transamerica to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in the owner
instructions to Transamerica and accepted by Transamerica. The owner may elect
to have the rebalancing done on an annual, semi-annual or quarterly basis. The
owner may elect to have amounts allocated among the variable sub-accounts using
whole percentages, with a minimum of 10% allocated to each variable sub-account.
The owner may elect to establish, change or terminate the automatic
asset rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. Automatic asset rebalancing currently will
not count towards the number of transfers without charge in a contract year.
Transamerica reserves the right to discontinue the automatic asset rebalancing
service at any time for any reason. There is currently no charge for the
automatic asset rebalancing service. Transamerica may in the future charge for
this service and may count the transfers toward those allowed without charge.
After the Annuity Date
If a variable payment option is elected, the owner may make transfers
among variable sub-accounts after the annuity date by giving a written request
to the Service Center, subject to the following provisions: (1) transfers after
the annuity date may be made no more than four times during any contract year;
and (2) the minimum amount transferred from one variable sub-account to another
is the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be
processed based on the formula outlined in the appendix in the Statement of
Additional Information.
CASH WITHDRAWALS
The owner of a non-qualified contract may withdraw all or part of the
cash surrender value at any time prior to the annuity date by giving a written
request to the Service Center. For qualified contracts, reference should be made
to the terms of the particular retirement plan or arrangement for any additional
limitations or restrictions, including prohibitions, on cash withdrawals. See
"Federal Tax Matters," page ____. The cash surrender value is equal to the
account value, less any account fee, interest adjustment, contingent deferred
sales load and premium tax charges. A full surrender will result in a cash
withdrawal payment equal to the cash surrender value at the end of the valuation
period during which the election is received along with all completed forms then
required by Transamerica. No surrenders or withdrawals may be made after the
annuity date. Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct the Service Center
to withdraw amounts from specific variable sub-account(s) and/or from the
general account options. If the owner does not specify, the withdrawal will be
taken pro rata based on value from all variable sub-accounts with current
values. If the variable accumulated value is insufficient, the withdrawal will
be taken pro rata from the general account options with current values. If the
requested withdrawal reduces the value of a variable sub-account from which the
withdrawal was made to less than $1,000, Transamerica reserves the right to
transfer the remaining value of that sub-account pro rata among the remaining
active variable sub-accounts with values equal to or greater than $1,000. If no
variable sub-accounts with value remain, any such transfer will be made to the
money market sub-account. The owner will be notified in writing of any such
transfer.
A partial withdrawal request cannot be made if it would reduce the
account value to less than $2,000. In that case, the owner will be notified.
Withdrawal (including surrender) requests generally will be processed
as of the end of the valuation period during which the request, including all
completed forms, is received. Payment of any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and processing
of any transfers will occur within seven days from the date the election is
received, except that Transamerica may postpone such payment if: (1) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; or (2) an emergency exists as
defined by the Commission, or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when all required withdrawal request
forms are received. Payments of any amounts derived from a purchase payment paid
by check may be delayed until the check has cleared the owner's bank.
When a withdrawal is made from a guarantee period before the end of its
term, the amount withdrawn may be subject to an interest adjustment. See "The
General Account Options" in Appendix A.
Transamerica may delay payment of any withdrawal from the general
account options for up to six months after Transamerica receives the request for
such withdrawal. If Transamerica delays payment for more than 30 days,
Transamerica will pay interest on the withdrawal amount up to the date of
payment.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK FOR ALL AMOUNTS IN THE
VARIABLE ACCOUNT AND BECAUSE CERTAIN WITHDRAWALS ARE SUBJECT TO A CONTINGENT
DEFERRED SALES LOAD AND OTHER CHARGES, THE TOTAL AMOUNT PAID UPON SURRENDER OF
THE CONTRACT MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
An owner may elect, under the systematic withdrawal option or automatic
payout option (but not both), to withdraw certain amounts on a periodic basis
from the variable sub-accounts prior to the annuity date.
The tax consequences of a withdrawal or surrender are discussed later
in this prospectus. See "Federal Tax Matters" page ___.
Systematic Withdrawal Option
Prior to the annuity date, you may elect to have withdrawals
automatically made from one or more variable sub-account(s) on a monthly basis.
Other distribution modes may be permitted. The withdrawals will not begin until
than the later of (a) 30 days after the contract effective date or (b) the end
of the free look period. Withdrawals will be from the variable sub-account(s)
and in the percentage allocations that you specify. If no specifications are
made, withdrawals will be pro rata based on value from all variable
sub-account(s) and general account options with value and any applicable
interest adjustment will apply to withdrawals from the general account options.
Systematic withdrawals cannot be made from a variable sub-account from which
dollar cost averaging transfers are being made and cannot be elected
concurrently with the automatic payment option. The systematic withdrawal option
is currently not available with respect to the general account options.
To be eligible for the systematic withdrawal option, the account value
must be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. Currently, the owner can elect any amount over
$100 to be withdrawn systematically. The owner may also make partial withdrawals
while receiving systematic withdrawals. If the total withdrawals (systematic,
automatic, or partial) in a contract year exceed the allowed amount to be
withdrawn without charge for that year, any applicable contingent deferred sales
load will then apply.
The withdrawals will continue indefinitely unless terminated. If this
option is terminated it may not be elected again until the end of the next 12
full months.
Transamerica reserves the right to impose an annual fee of up to $25
for processing payments under this option. This fee, which is currently waived,
will be deducted in equal installments from each systematic withdrawal during a
contract year.
Systematic withdrawals may be taxable and, prior to age 59 1/2, subject
to a 10% federal tax penalty. See "Federal Tax Matters," page ______.
Automatic Payout Option ("APO")
Prior to the annuity date, for qualified contracts, the owner may elect
the automatic payout option (APO) to satisfy minimum distribution requirements
under Sections 401(a)(9), 403(b), and 408(b)(3) of the Code. See "Federal Tax
Matters" page ____. For IRAs and SEP/IRAs this may be elected no earlier than
six months prior to the calendar year in which the owner attains age 701/2, but
payments may not begin earlier than January of such calendar year. For other
qualified contracts, APO can be elected no earlier than six months prior to the
later of when the owner (a) attains age 70 1/2; and (b) retires from employment.
Additionally, APO withdrawals may not begin before the later of (a) 30 days
after the contract effective date or (b) the end of the free look period. APO
may be elected in any calendar month, but no later than the month of the owner's
84th birthday.
Withdrawals will be from the variable sub-account(s) and in the
percentage allocations you specify. If no specifications are made, withdrawals
will be pro rata based on value from all variable sub-account(s). Withdrawals
can not be made from a variable sub-account from which dollar cost averaging
transfers are being made. The APO is not currently available with respect to the
general account options. The calculation of the APO amount will reflect the
total account value although the withdrawals are only from the variable
sub-accounts. This calculation and APO are based solely on value in this
contract.
To be eligible for this option, the following conditions must be met:
(1) the account value must be at least $12,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500. These conditions may change.
Currently, withdrawals under this option are only paid annually.
The withdrawals will continue indefinitely unless terminated. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If an owner dies before the annuity date, a death benefit is payable.
If death occurs prior to any owner's or joint owner's 85th birthday, the death
benefit will be equal to the greatest of (a) the account value, or (b) the sum
of all purchase payments made to the contract less withdrawals and applicable
premium tax charges, or (c) the highest account value on any contract
anniversary prior to the earlier of the owner's or joint owner's 85th birthday,
plus purchase payments made less withdrawals and applicable premium tax charges
since that contract anniversary. If the owner or joint owner dies before the
annuity date and after either the deceased owner's or joint owner's 85th
birthday, the death benefit is equal to the account value. For purposes of
calculating such death benefit, the account value is determined as of the date
the benefit is paid. If the owner is not a natural person, the annuitant(s) will
be treated as the owner(s) for purposes of the death benefit. For example, if
the owner is a trust that allows a person(s) other than the trustee to exercise
the ownership rights under this certificate, such person(s) must be named
annuitant(s) and will be treated as the owner(s) so the death benefit will be
determined based on the age of the annuitant(s).
An ownership change will be subject to our then current underwriting
rules and may decrease the death benefit. However, such reduction will never
decrease the death benefit below the account value.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death
of the owner. Upon receipt of this proof and an election of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as Transamerica has sufficient information about the beneficiary
to make the payment.
The death benefit will be determined as of the end of the valuation
period during which our Service Center receives both proof of death of the owner
or joint owner and the written notice of the settlement option elected by the
person to whom the death benefit is payable. If no settlement method is elected,
the death benefit will be a lump sum distributed within five years after the
owner's death. No contingent deferred sales load nor interest adjustment will
apply.
Until the death benefit is paid, the account value allocated to the
variable account remains in the variable account, and fluctuates with investment
performance of the applicable portfolio(s). Accordingly, the amount of the death
benefit depends on the account value at the time the death benefit is paid, not
at the time of death.
Designation of Beneficiaries
The owner may select one or more beneficiaries by designating the
person(s) to receive the amounts payable under this contract if: the owner dies
before the annuity date and there is no joint owner; or the owner dies after the
annuity date and settlement option payments have begun under a selected
settlement option that guarantees payments for a certain period of time. The
interest of any beneficiary who dies before the owner will terminate at time of
death of such beneficiary.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as otherwise required by
law.
If more than one beneficiary is named, each named beneficiary will
share equally in any benefits or rights granted by this contract unless the
owner gives us other instructions at the time the beneficiaries are named.
Transamerica may rely on any affidavit by any responsible person
in determining the identity or
non-existence of any beneficiary not identified by name
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay
the death benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, this certificate will remain in
force with the annuitant's surviving spouse as the new annuitant if:
o This contract is owned by a trust; and
o The beneficiary is either the annuitant's surviving spouse, or
a trust holding the contract solely for the benefit of such
spouse.
The manner in which we will pay the death benefit depends on the status
of the person(s) involved in the contract. The death benefit will be payable to
the first person from the applicable list below:
If the owner is the annuitant:
o The joint owner, if any
o The beneficiary, if any
If the owner is not the annuitant:
o The joint owner, if any
o The beneficiary, if any
o The annuitant;
o The joint annuitant; if any
If the death benefit is payable to the owner's surviving spouse (or to a trust
for the sole benefit of such surviving spouse),
We will continue this contract with the owner's spouse as the new
annuitant (if the owner was the annuitant) and the new owner (if applicable),
unless such spouse selects another option as provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse,
We will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above,
The person(s) to whom the death benefit is payable may elect to receive
it:
o In a lump sum; or
o As settlement option payments, provided the person making the
election is an individual. Such payments must begin within one
year after the owner's death and must be in equal amounts over
a period of time not extending beyond the individual's life or
life expectancy.
Election of either option must be made no later than 60 days prior to
the one-year anniversary of the owner's death. Otherwise, the death benefit will
be settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid,
We will pay the remaining death benefit in a lump sum to the payee
named by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse),
We will pay the death benefit in a lump sum within one year after the
owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the
annuitant (or the last of joint annuitants) dies before the annuity date, the
owner will become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts
payable will continue to be distributed at least as rapidly as under the
settlement and payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership
rights granted under this contract will pass to the person to whom the death
benefit would have been paid if the owner had died before the annuity date, as
specified above.
Survival Provision
The interest of any person to whom the death benefit is payable who
dies at the time of, or within 30 days after, the death of the owner will also
terminate if no benefits have been paid to such beneficiary, unless the owner
had given us written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments (although we
reserve the right to charge for any applicable premium tax charges). Therefore,
the full amount of the purchase payments are invested in one or more of the
variable sub-accounts and/or the general account options.
Contingent Deferred Sales Load
No deduction for sales charges is made from purchase payments at the
time they are made. However, a contingent deferred sales load of up to 6% of
purchase payments may be imposed on certain withdrawals or surrenders to
partially cover certain expenses incurred by Transamerica relating to the sale
of the contract, including commissions paid to salespersons, the costs of
preparation of sales literature and other promotional costs and acquisition
expenses.
The contingent deferred sales load percentage varies according to the
number of years between when a purchase payment was credited to the contract and
when the withdrawal is made. The amount of the contingent deferred sales load is
determined by multiplying the amount withdrawn subject to the contingent
deferred sales load by the contingent deferred sales load percentage in
accordance with the following table. In no event shall the aggregate contingent
deferred sales load assessed against the contract exceed 6% of the aggregate
purchase payments.
<TABLE>
<CAPTION>
Number of Years
Since Receipt of Contingent Deferred Sales Load
contingent deferred sales load
Purchase Payment As a Percentage of Purchase Payment
<S> <C>
Less than one year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more years 0%
</TABLE>
Free Withdrawals-Allowed Amount
Beginning 30 days after the contract effective date (or the end of the
free look period, if later), the owner may make a withdrawal up to the "allowed
amount" without incurring a contingent deferred sales load each contract year
before the annuity date.
The allowed amount each contract year is equal to 15% of the total
purchase payments received during the last seven years determined as of the last
contract anniversary less any withdrawals during the present contract year. In
the first contract year, the 15% will be applied to the total purchase payments
at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without
charge.
Withdrawals will be made first from purchase payments on a
first-in/first-out basis and then from earnings. The allowed amount may vary
depending on the state of issuance. If the allowed amount is not fully withdrawn
or paid out during a contract year, it does not carry over to the next contract
year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, the owner may also elect, in certain
states, a Living Benefits Rider for an additional fee that provides that the
contingent deferred sales load will be waived in any of the three following
instances:
(1) if the owner receives extended medical care in a licensed hospital or
nursing care facility (as defined in the contract) for at least 60 consecutive
days, and the request for the withdrawal or surrender, together with proof of
such extended care, is received at the Service Center during the term of such
care or within 90 days after the last day upon which the owner received such
extended care; or
(2) if the owner receives medically required in-home care for at least 60 days
and such extended in-home medical care is certified by a qualified medical
professional and the owner may also be required to submit other evidence as
required by Transamerica such as evidence of medicare eligibility; or
(3) if the owner becomes terminally ill after the first contract year and the
terminal illness is diagnosed by a qualified medical professional and is
reasonably expected to result in death within 12 months.
Neither (1) nor (2) apply if the owner is receiving extended medical care in a
licensed hospital or nursing care facility or in-home medical care at the time
the contract is purchased.
Transamerica reserves the right to not accept purchase payments after
the owner has qualified for any of these waivers. Owner under this rider means
either the owner or the joint owner, if any. Any withdrawals under this rider on
which the contingent deferred sales load is waived will not reduce the allowed
amount for the contract year.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed: upon
annuitization after the first contract year to an option involving life
contingencies; upon payment of the death benefit; or upon transfers of account
value. Any applicable contingent deferred sales load will be deducted from the
amount requested for both partial withdrawals (including withdrawals under the
systematic withdrawal option or the APO) and full surrenders unless the owner
elects to "gross-up" the amount for a partial withdrawal to cover the applicable
contingent deferred sales load. The contingent deferred sales load and any
premium tax charge applicable to a withdrawal from the guarantee period account
will be deducted from the amount withdrawn after the interest adjustment, if
any, is applied and before payment is made.
Administrative Charges
Account Fee
At the end of each contract year before the annuity date, Transamerica
deducts an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60 (or 2% of the account value, if less) per contract year.
If the contract is surrendered, the account fee, unless waived will be deducted
from a full surrender before the application of any continent deferred sales
load. The account fee will be deducted on a pro rata basis (based on values)
from the account value including both the variable sub-accounts and the general
account options. No interest adjustment will be assessed on any deduction for
the account fee taken from the guarantee period. If the entire account value is
in the general account options, then the annual account fee will be deducted on
a pro rata basis from the general account options. The account fee for a
contract year will be waived if the account value exceeds $50,000 on the last
business day of that contract year or as of the date the contract is
surrendered.
Annuity Fee
After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year ($2.50 each month if monthly payments). This fee will not
be changed. No annuity fee will be deducted from fixed payments.
Administrative Expense Charge
Transamerica also makes a daily deduction (the administrative expense
charge) from the variable account (both before and after the contract date) at
an effective current annual rate of 0.15% of assets held in each variable
sub-account to reimburse Transamerica for administrative expenses. Transamerica
has the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. Transamerica will provide 30 days
written notice of any change in fees. The administrative charges do not bear any
relationship to the actual administrative costs of a particular contract. The
administrative expense charge is reflected in the variable accumulation or
variable contract unit values for each variable sub-account.
Mortality and Expense Risk Charge
Transamerica deducts a charge for bearing certain mortality and expense
risks under the contracts. This is a daily charge at an effective annual rate of
1.20% of the assets in the variable account. Transamerica guarantees that this
charge of 1.20% will never increase. The mortality and expense risk charge is
reflected in the variable accumulation and variable contract unit values for
each variable sub-account.
Variable accumulated values and variable settlement option payments are
not affected by changes in actual mortality experience incurred by Transamerica.
The mortality risks assumed by Transamerica arise from its contractual
obligations to make settlement option payments determined in accordance with the
settlement option tables and other provisions contained in the contract and to
pay death benefits prior to the annuity date.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the contracts and the variable
account will exceed the amount recovered through the administrative expense
charge, account fees, transfer fees and any fees imposed for certain options and
services.
If the mortality and expense risk charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the contingent deferred sales load will
not generate sufficient funds to pay the cost of distributing the contracts. To
the extent that the contingent deferred sales load is insufficient to cover the
actual cost of contract distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the mortality and expense risk charge.
Living Benefits Rider Fee
If the owner elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of .05% of the account
value at that time. The fee is deducted from each variable sub-account on pro
rata based on the value in each variable sub-account through the cancellation of
variable accumulation units. If there is insufficient variable accumulated
value, the fee will be deducted pro rata from the values in the general account
options (any interest adjustment will apply.) Transamerica reserves the right to
waive the interest adjustment for deduction from the guarantee period account
for this rider fee.
Premium Tax Charges
Currently there is no charge for premium taxes except upon
annuitization. However, Transamerica may be required to pay premium or
retaliatory taxes currently ranging from 0% to 3.5%. Transamerica reserves the
right to deduct a charge for these premium taxes from premium payments, from
amounts withdrawn, or from amounts applied on the annuity date. In some states
and jurisdictions, charges for both direct premium taxes and retaliatory premium
taxes may be imposed at the same or different times with respect to the same
purchase payment, depending upon applicable law.
Transfer Fee
Transamerica currently imposes a fee for each transfer in excess of the
first 12 in a single contract year. Transamerica will deduct the charge from the
amount transferred. This fee is $10 and will be used to help cover
Transamerica's costs of processing transfers. Transamerica reserves the right to
waive this fee or to not count transfers under certain options and services as
part of the number of allowed annual transfers without charge.
Option and Service Fees
Transamerica reserves the right to impose reasonable fees for
administrative expenses associated with processing certain options and services.
These fees would be deducted from each use of the option or service during a
contract year.
Taxes
No charges are currently made for taxes. However, Transamerica reserves
the right to deduct charges in the future for federal, state, and local taxes or
the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of
portfolio shares and therefore the fees and expenses paid by each portfolio. A
complete description of the fees, expenses, and deductions from the portfolios
are found in the portfolios' prospectuses. (See "The Portfolios" page __.)
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from the guaranteed period account, see "The General
Account Options -- the Guarantee Period Account" in Appendix A of this
prospectus.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the
contract begins. On the annuity date, we will apply the annuity amount (defined
below) to provide payments under the settlement option selected by the owner.
The first settlement option payment will be made 30 days after the annuity date.
The annuity date is selected by the owner and may be changed from time to time
by the owner by giving notice, in a form and manner acceptable to Transamerica,
to the Service Center, provided that notice of each change is received by the
Service Center at least thirty (30) days prior to the then-current annuity date.
The annuity date cannot be earlier than the first contract anniversary except
for certain qualified contracts. The latest annuity date which may be elected is
the later of (a) the first day of the calendar month immediately preceding the
month of the annuitant's or joint annuitants' 85th birthday, or (b) the first
day of the month coinciding with or next following the tenth contract
anniversary (but in no event later than the annuitants' or joint annuitants'
97th birthday). The latest allowed annuity date may vary in certain
jurisdictions.
The annuity date must be the first day of a calendar month. The first
settlement option payment will be on the first day of the month immediately
following the annuity date. Certain qualified contracts may have restrictions as
to the annuity date and the types of settlement options available. See "Federal
Tax Matters," page ___.
Settlement Option Payments
The annuity amount is the account value, less any interest adjustment,
less any applicable contingent deferred sales load, and less any applicable
premium tax charges. Any contingent deferred sales load will be waived if the
settlement option payments involve life contingencies and begin on or after the
first contract anniversary.
If the amount of the monthly payment from the settlement option
selected by the owner would result in a monthly settlement option payment of
less than $150, or if the annuity amount is less than $5,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the cash
surrender value in a cash payment. Monthly settlement option payments from the
variable payment option will further be subject to a minimum monthly payment of
$75 from each variable sub-account from which such payments are made.
The owner may choose from the settlement options below. Transamerica
may consent to other plans of payment before the annuity date. For settlement
options involving lifecontingency, the actual age and/or sex of the annuitant,
or a joint annuitant will affect the amount of each payment. Sex-distinct rates
generally are not allowed under certain qualified contracts. Transamerica
reserves the right to ask for satisfactory proof of the annuitant's (or joint
annuitant's) age. Transamerica may delay settlement option payments until
satisfactory proof is received. Since payments to older annuitants are expected
to be fewer in number, the amount of each annuity payment shall be greater for
older annuitants than for younger annuitants.
The owner may choose from the two payment options described below. The
annuity date and settlement options available for qualified contracts may also
be controlled by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, the owner
may, by written request, change the settlement option or payment option. The
request for change must be received by the Service Center at least 30 days prior
to the annuity date.
In the event that a settlement option form and payment option is not
selected at least 30 days before the annuity date, Transamerica will make
settlement option payments in accordance with the 120 month period certain and
life settlement option and the applicable provisions of the contract.
Payment Options
Owners may elect a fixed or a variable payment option, or a
combination of both (in 25% increments of
the annuity amount).
Unless specified otherwise, the annuity amount in the variable account
will be used to provide a variable payment option and the amount in the general
account options will be used to provide a fixed payment option. In this event,
the initial allocation of variable annuity units for the variable sub-accounts
will be in proportion to the account value in the variable sub-accounts on the
annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
pursuant to the terms of the settlement option elected. If a fixed payment
option is selected, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica, and the amount of payments will be established by the fixed
settlement option selected and the age and sex (if sex-distinct rates are
allowed by law) of the annuitant(s) and will not reflect investment experience
after the annuity date. The fixed payment amounts are determined by applying the
fixed settlement option purchase rate specified in the contract to the portion
of the annuity amount applied to the payment option. Payments may vary after the
death of an annuitant under some options; the amounts of variances are fixed on
the annuity date.
Variable Payment Option
A variable payment option provides for payments that vary in dollar
amount, based on the investment performance of the selected variable
sub-account(s). The variable settlement option purchase rate tables in the
contract reflect an assumed annual interest rate of 4%, so if the actual net
investment performance of the variable sub-account(s) is less than 4%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-account(s) is higher than 4%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 4% rate, then the dollar amount of the actual payments will
remain constant. Transamerica may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts selected
by the owner, and on the allocations among the variable sub-accounts.
For further details as to the determination of variable payments, see
the Statement of Additional Information.
Settlement Option Forms
The owner may choose any of the settlement option forms described
below. Subject to approval by Transamerica, the owner may select any other
settlement option forms then being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments end
with the payment due just before the annuitant's death. There is no death
benefit. It is possible that no payment will be made if the annuitant dies after
the annuity date but before the first payment is due; only one payment will be
made if the annuitant dies before the second payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will continue for as long as the annuitant lives. After the annuitant
dies, payments will be made to the contingent annuitant, for as long as the
contingent annuitant lives. The continued payments can be in the same amount as
the original payments, or in an amount equal to one-half or two-thirds thereof.
Payments will end with the payment due just before the death of the contingent
annuitant. There is no death benefit after both die. If the contingent annuitant
does not survive the annuitant, payments will end with the payment due just
before the death of the annuitant. It is possible that no payments or very few
payments will be made, if the annuitant and contingent annuitant die shortly
after the annuity date.
The written request for this form must: (a) name the contingent
annuitant; and (b) state the percentage of paymentsto be made after the
annuitant dies. Once payments start under this settlement option form, the
person named as contingent annuitant for purposes of being the measuring life,
may not be changed. Transamerica will require proof of age for the annuitant and
for the contingent annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the
first day of the month immediately
following the annuity date, if the annuitant is living. Payments will
be made for the longer of: (a) the
annuitant's life; or (b) the period certain. The period certain may be 120 or
180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the annuitant's
death. No benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless the owner provides
otherwise.
The written request for this form must: (a) state the length of
the period certain; and (b) name the
beneficiary.
(4) Joint and Survivor Annuity. Payments will be made starting on the
first day of the month immediately following the annuity date, if and for as
long as the annuitant and joint annuitant are living. After the annuitant or
joint annuitant dies, payments will continue for so long as the survivor lives.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that no payments
or very few payments will be made under this form if the annuitant and joint
annuitant both die shortly after the annuity date.
The written request for this form must: (a) name the joint annuitant;
and (b) state the percentage of continued payments to be made upon the first
death. Once payments start under this settlement option form, the person named
as joint annuitant, for the purpose of being the measuring life, may not be
changed. Transamerica will need proof of age for the annuitant and joint
annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
settlement option not described in this section subject to Transamerica's
agreement and any applicable state or federal law or regulation. Requests for
any other settlement option must be made in writing to the Service Center at
least 30 days before the annuity date.
After the annuity date, (a) no changes can be made in the settlement
option and payment option; (b) no additional purchase payment will be accepted
under the contract; and (c) no further withdrawals will be allowed.
The owner of a non-qualified contract may, at any time after the
contract date by written notice to us at our Service Center, change the payee of
benefits being provided under the contract. The effective date of change in
payee will be the latter of: (a) the date we receive the written request for
such change; or (b) the date specified by the owner. The owner of a qualified
contract may not change payees, except as permitted by the plan, arrangement or
federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the likelihood
of the continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis
("non-qualified contract") or purchased and used in connection with plans or
arrangements qualifying for special tax treatment ("qualified contract").
Qualified contracts are designed for use in connection with plans or
arrangements entitled to special income tax treatment under Sections 401,
403(b), 408 and 408A of the Code. The ultimate effect of federal income taxes on
the amounts held under a contract, on settlement option payments, and on the
economic benefit to the owner, the annuitant, or the beneficiary may depend on
the type of retirement plan or arrangement for which the contract is purchased,
on the tax and employment status of the individual concerned, and on
Transamerica's tax status. In addition, certain requirements must be satisfied
in purchasing a qualified contract with proceeds from a tax qualified retirement
plan or arrangement and receiving distributions from a qualified contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
qualified contracts should seek competent legal and tax advice regarding the
suitability of the contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the contract. The following
discussion is based on the assumption that the contract qualifies as an annuity
for federal income tax purposes and that all purchase payments made to qualified
contracts are in compliance with all requirements under the Code and the
specific retirement plan or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, a prospective
purchaser must specify whether he or she is purchasing a non-qualified contract
or a qualified contract. If the initial purchase payment is derived from an
exchange, transfer, conversion or surrender of another annuity contract,
Transamerica may require that the prospective purchaser provide information with
regard to the federal income tax status of the previous annuity contract.
Transamerica will require that persons purchase separate contracts if they
desire to invest monies qualifying for different annuity tax treatment under the
Code. Each such separate contract would require the minimum initial purchase
payment previously described. Additional purchase payments under a contract must
qualify for the same federal income tax treatment as the initial purchase
payment under the contract; Transamerica will not accept an additional purchase
payment under a contract if the federal income tax treatment of such purchase
payment would be different from that of the initial purchase payment.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value (e.g., withdrawals or settlement
option payments). For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the account value (and in the case of a
qualified contract, any portion of an interest in the plan) generally will be
treated as a distribution. The taxable portion of a distribution is taxable as
ordinary income.
The owner of any contract who is not a natural person generally must
include in income any increase in the excess of the account value over the
"investment in the contract" (discussed below) during the taxable year. There
are some exceptions to this rule and a prospective owner that is not a natural
person should discuss these with a competent tax adviser.
The following discussion generally applies to a contract owned by a
natural person.
Withdrawals
With respect to non-qualified contracts, partial withdrawals (including
withdrawals under the systematic withdrawal option) are generally treated as
taxable income to the extent that the account value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The
"investment in the contract" generally equals the amount of non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts (including
withdrawals under the systematic withdrawal option or the automatic payout
option), a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit under the retirement plan or arrangement. The "investment in the
contract" generally equals the amount of non-deductible purchase payments made
by or on behalf of any individual. For certain qualified contracts, the
"investment in the contract" can be zero. Special tax rules applicable to
certain distributions from qualified contracts are discussed below, under
"Qualified Contracts."
If a partial withdrawal from the guarantee period account is subject to
an interest adjustment, the account value immediately before the withdrawal will
not be altered to take into account the interest adjustment. As a result, for
purposes of determining the taxable portion of a partial withdrawal, the account
value will be treated as including the amount deducted from the guarantee period
account due to the interest adjustment.
Full surrenders are treated as taxable income to the extent that the
amount received exceeds the "investment in the contract."
Settlement Option Payments
Although the tax consequences may vary depending on the settlement
option elected under the contract, in general a ratable portion of each payment
that represents the amount by which the account value exceeds the "investment in
the contract" will be taxed based on the ratio of the "investment in the
contract" to the total benefit payable; after the "investment in the contract"
is recovered, the full amount of any additional settlement option payments is
taxable.
For variable payments, the taxable portion is generally determined by
an equation that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract."
For fixed payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the payments for the term selected ;
however, the remainder of each settlement option payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional settlement option payments is taxable. If settlement option payments
cease as a result of an annuitant's death before full recovery of the
"investment in the contract," consult a competent tax adviser regarding
deductibility of the unrecovered amount.
Withholding
The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
Penalty Tax
There may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions: (1) made on or after the date on which the owner attains age
591/2; (2) made as a result of death or disability of the owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the life(ves) or life expectancy(ies) of the owner and a
"designated beneficiary." Other exceptions to the tax penalty may apply to
certain distributions from a qualified contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of an
owner. Generally such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under a settlement
option, they are taxed in the same manner as settlement option payments, as
described above. For these purposes, the investment in the contract is not
affected by the owner's death. That is, the investment in the contract remains
the amount of any purchase payments paid which are not excluded from gross
income.
Transfers, Assignments, or Exchanges of the Contract
For non-qualified contracts, a transfer of ownership of a contract, the
designation of an annuitant, payee, or other beneficiary who is not also the
owner, or the exchange of a contract may result in certain tax consequences to
the owner that are not discussed herein. An owner contemplating any such
designation, transfer, assignment, or exchange should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Qualified contracts may not be assigned or transferred, except as permitted by
the Code or the Employee Retirement Income Security Act of 1974 (ERISA).
Multiple Contracts
All deferred non-qualified contracts that are issued by Transamerica
(or its affiliates) to the same owner during any calendar year are treated as
one contract for purposes of determining the amount includible in gross income
under Section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Qualified Contracts
In General
The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 591/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.
We make no attempt to provide more than general information about use
of the contracts with the various types of retirement plans. Owners and
participants under retirement plans, as well as annuitants and beneficiaries,
are cautioned that the rights of any person to any benefits under qualified
contracts may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the contract (including any
endorsements) issued in connection with such a plan. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
administration of the contracts. Owners are responsible for determining that
contributions and other transactions with respect to the contracts satisfy
applicable law. Purchasers of contracts for use with any retirement plan should
consult their legal counsel and tax adviser regarding the suitability of the
contract.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the contract in order to provide retirement savings under the plans. Adverse
tax consequences to the plan, to the participant or to both may result if this
contract is assigned or transferred to any individual as a means to provide
benefits payments. Purchasers of a contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan documents and
the contract to their specific needs.
Individual Retirement Annuities, Simplified Employee Plans and Roth IRAs
The contract is also designed for use with IRA rollovers and
contributory IRA's. A contributory IRA is a contract to which initial and
subsequent purchase payments are subject to limitations imposed by the Code.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as an "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA.
The sale of a contract for use with an IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a
contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA or their purchase. Purchasers should
seek competent advice as to the suitability of the contract for use with IRAs.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP/IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer.
The contract may also be used for Roth IRA conversions and contributory
Roth IRAs. A contributory Roth IRA is a contract to which initial and subsequent
purchase payments are subject to limitations imposed by the Code. Section 408A
of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a non-Roth IRA may be converted to a Roth IRA. A non-Roth IRA
is an individual retirement account or annuity described in section 408(a) or
408(b), other than a Roth IRA. Purchasers should seek competent advise as to the
suitability of the contract for use with Roth IRAs.
Tax Sheltered Annuities
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to Social Security
and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
qualified contract from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under qualified contracts or under the terms
of the plans in respect of which qualified contracts are issued.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the variable account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the variable account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the variable
account, then Transamerica may impose a charge against the variable account
(with respect to some or all contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contract
Diversification Requirements
Section 817(h) of the Code requires that with respect to
non-qualified contracts, the investments of the portfolios be "adequately
diversified" in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control for the investments of a
segregated asset account may cause the investor (i.e., the owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner has additional flexibility in allocating premium payments and
account values. These differences could result in an owner being treated as the
owner of a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any non-qualified contract to
provide that (a) if any owner dies on or after the annuity date but prior to the
time the entire interest in the contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and (b)
if any owner dies prior to the annuity date, the entire interest in the contract
will be distributed within five years after the date of the owner's death. These
requirements will be considered satisfied as to any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary, provided
that such distributions begin within one year of the owner's death. The owner's
"designated beneficiary" refers to a natural person designated by such owner as
a beneficiary and to whom ownership of the contract passes by reason of death.
However, if the owner's "designated beneficiary" is the surviving spouse of the
deceased owner, the contract may be continued with the surviving spouse as the
new owner.
The non-qualified contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. All provisions
in the contract will be interpreted to maintain such tax qualification. We may
make changes in order to maintain this qualification or to conform the contract
to any applicable changes in the tax qualification requirements. We will provide
you with a copy of any changes made to the contract.
Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the variable sub-accounts. In addition, Transamerica may
advertise the effective yield of the money market variable sub-account. These
figures will be based on historical information and are not intended to indicate
future performance.
The yield of the money market variable sub-account refers to the
annualized income generated by an investment in that variable sub-account over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in that variable sub-account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a variable sub-account (other than the money market
variable sub-account) refers to the annualized income generated by an investment
in the variable sub-account over a specified thirty-day period. The yield is
calculated by assuming that the income generated by the investment during that
thirty-day period is generated each thirty-day period over a twelve-month period
and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent
deferred sales load or premium taxes that may be applicable to a particular
contract. To the extent that the contingent deferred sales load or premium taxes
are applicable to a particular contract, the yield of that contract will be
reduced. For additional information regarding yields and total returns, please
refer to the Statement of Additional Information.
The average annual total return of a variable sub-account refers to
return quotations assuming an investment has been held in the variable
sub-account for various periods of time including, but not limited to, a period
measured from the date the variable sub-account commenced operations. When a
variable sub-account has been in operation for 1, 5, and 10 years, respectively,
the average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment (including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes) as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any variable sub-account derived from rankings of
variable annuity separate accounts or their investment products tracked by
Lipper Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and
Poor's Indices, Dow Jones Industrial Average, and other rating services,
companies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (2) the effect
of tax deferred compounding on variable sub-account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the contract, the effects of the contract's lifetime
payout options, and the operation of certain special investment features of the
contract -- such as the dollar cost averaging option. Transamerica may explain
and depict in charts, or other graphics, the effects of certain investment
strategies, such as allocating purchase payments between the general account
options and a variable sub-account. Transamerica may also discuss the Social
Security system and its projected payout levels and retirement plans generally,
using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the variable sub-accounts. The non-standard average annual total return and
cumulative total return will assume that no contingent deferred sales load is
applicable. Transamerica may from time to time also disclose yield, standard
total returns, and non-standard total returns for any or all variable
sub-accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the variable
sub-accounts based on the performance of a portfolio prior to the time the
variable account commenced operations.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the contracts under a Distribution Agreement with Transamerica.
TSSC may also serve as an underwriter and distributor of other contracts issued
through the variable account and certain other separate accounts of Transamerica
and affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products.
Under the Sales Agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. The percentage may be up to
5.75% and in certain situations additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable
account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the variable account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the contract has been
provided by Sutherland, Asbill & Brennan LLP. The organization of Transamerica,
its authority to issue the contract and the validity of the form of the contract
have been passed upon by James W. Dederer, General Counsel and Secretary of
Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica for each of the
three years in the period ended December 31, 1996, have been audited by Ernst &
Young LLP, Independent Auditors, as set forth in their reports appearing in the
Statement of Additional Information, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing. There are no audited financial statements for the variable account
since it had not commenced operations as of the date of this prospectus.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in
the variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio in accordance with instructions
received from persons having voting interests in the corresponding variable
sub-account. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, or if
Transamerica determines that it is allowed to vote all portfolio shares in its
own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes
which are available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date
coincident with the date established by that portfolio for determining
shareholders eligible to vote at the meeting of the portfolios. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the respective portfolios.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
contracts participating in the variable sub-account. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis.
Each person or entity having a voting interest in a variable
sub-account will receive proxy material, reports and other material relating to
the appropriate portfolio.
It should be noted that generally the portfolios are not required, and
do not intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission under the 1933 Act
relating to the contract offered by this prospectus. This prospectus has been
filed as a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto, and
reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS Page
THE CONTRACT .........................................................
DOLLAR COST AVERAGING.................................................
NET INVESTMENT FACTOR.................................................
VARIABLE PAYMENT OPTIONS..............................................
Variable Annuity Units and Payments..........................
Variable Annuity Unit Value..................................
Transfers After the Annuity Date ............................
GENERAL PROVISIONS ...................................................
Non-Participating............................................
Misstatement of Age or Sex ..................................
Proof of Existence and Age ..................................
Annuity Data
Assignment...................................................
Annual Report................................................
Incontestability.............................................
Entire Contract..............................................
Changes in the Contract......................................
Protection of Benefits.......................................
Delay of Payments............................................
Notices and Directions.......................................
CALCULATION OF YIELDS AND TOTAL RETURNS...............................
Money Market Sub-Account Yield Calculation...................
Other Sub-Account Yield Calculations.........................
Standard Total Return Calculations...........................
Adjusted Historical Portfolio Performance Data...............
Other Performance Data.......................................
DISTRIBUTION OF THE CONTRACT
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS................................
STATE REGULATION......................................................
RECORDS AND REPORTS...................................................
FINANCIAL STATEMENTS..................................................
APPENDIX
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
.........This prospectus is generally intended to serve as a disclosure
document only for the contract and the
variable account. For complete details regarding the general account options,
see the contract itself.
.........The account value allocated to the general account options becomes part
of the general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act,
and Transamerica has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus which relate to
the general account options.
.........The general account options are part of the general account of
Transamerica. The general account of
Transamerica consists of all the general assets of Transamerica, other than
those in the variable account, or in
any other separate account. Transamerica has sole discretion to invest the
assets of its general account subject
to applicable law.
.........The allocation or transfer of funds to the general account options
does not entitle the owner to share
in the investment experience of Transamerica's general account.
.........There are two general account options: the fixed account and the
guarantee period account, as described
below.
THE FIXED ACCOUNT
.........Currently, Transamerica guarantees that it will credit interest at
a rate of not less than 3% per year,
compounded annually, to amounts allocated to the fixed account under the
contracts. However, Transamerica
reserves the right to change the minimum rate according to state insurance law.
Transamerica may credit interest
at a rate in excess of 3% per year. There is no specific formula for the
determination of excess interest
credits. Some of the factors that the company may consider in determining
whether to credit excess interest to
amounts allocated to the fixed account and the amount in that account are
general economic trends, rates of
return currently available and anticipated on the company's investments,
regulatory and tax requirements, and
competitive factors.
=====================================================
Any interest credited to amounts allocated to the fixed account
in excess of 3% per year will be determined in the sole discretion of
Transamerica. The owner assumes the risk that interest credited to the fixed
account allocations may not exceed the minimum guarantee of 3% for any given
year.
====================================================
.........Rates of interest credited to the fixed account will be guaranteed for
at least twelve months and will vary by the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, Transamerica may change the annual rate of interest for
that class; this new annual rate of interest will remain in effect for at least
twelve months. New purchase payments made to the contract which are allocated to
the fixed account may receive different rates of interest and these rates of
interest may differ from those interest rates credited amounts transferred from
the variable sub-accounts or guarantee period account to the fixed account and
from those credited amounts not transferred out but remaining in the fixed
account from allocations applied under certain options and services.
Transfers
.........Each contract year the owner may transfer a percentage of the
value of the fixed account to variable
sub-accounts or to the guarantee period account. The maximum percentage that
may be transferred will be declared
annually by Transamerica. This percentage will be determined by Transamerica
at its sole discretion, but will
not be less than 10% of the value of the fixed account on the preceding
contract anniversary and will be
declared each year. Currently, this percentage is 25%. The owner is limited
to four transfers from the fixed
account each contract year, and the total of all such transfers cannot
exceed the current maximum. If
Transamerica permits dollar cost averaging from the fixed account to the
variable sub-accounts, the above
restrictions are not applicable.
.........Generally, transfers may not be made from any variable
sub-account to the fixed account for the
six-month period following any transfer from the fixed account to one or
more of the variable sub-accounts.
Additionally, transfers may not be made from the fixed account to: 1) any
guarantee period; 2) the Transamerica
VIF Money Market Sub-Account; and 3) any variable sub-account identified
by Transamerica and investing in a
portfolio of fixed income investments. Transamerica reserves the right to
modify the limitations on transfers to
and from the fixed account and to defer transfers from the fixed account
for up to six months from the date of
request.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides a guaranteed fixed rates of
interest compounded annually for specific guarantee periods. Amounts allocated
to the guarantee period account will be credited with interest of no less than
3% per year. Amounts withdrawn from a guarantee period prior to the end of its
guarantee period will be subject to an interest adjustment, as explained below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently Transamerica is offering three, five and
seven year guarantee periods but these may change at any time.
=========================
The owner bears the risk that, after the initial guarantee period,
Transamerica will not credit interest in excess of 3% per year to amounts
allocated to the guarantee period account.
Each amount allocated or transferred to the guarantee period account
will establish a new guarantee period of a duration selected by the owner from
among those then being offered by Transamerica. Every guarantee period offered
by Transamerica will have a duration of at least one year. The minimum amount
that may be allocated or transferred to a guarantee period is $1,000. Purchase
payments allocated to a guarantee period will be credited on the date the
payment is received at the Service Center. Any amount transferred from another
guarantee period or from a variable sub-account to a guarantee period will
establish a new guarantee period as of the effective date of the transfer.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and
expiration date. The guaranteed interest rate applicable to a guarantee period
will depend on the date the guarantee period is established and the duration
chosen by the owner. A guarantee period chosen may not extend beyond the annuity
date.
Transamerica reserves the right to limit the maximum number of
guarantee periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
guarantee period. The effective annual rate of interest established by
Transamerica for a guarantee period will remain in effect for the duration of
the guarantee period.
Interest will be credited to a guarantee period based on its daily
balance at a daily rate which is equivalent to the guaranteed interest rate
applicable to that guarantee period for amounts held during the entire guarantee
period. Amounts withdrawn or transferred from a guarantee period prior to its
expiration date will be subject to an Interest Adjustment as described below. In
no event will the effective annual rate of interest applicable to a guarantee
period be less than 3% per year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period prior
to its expiration date (excluding withdrawals for the purpose of paying the
death benefit), the amounts withdrawn or transferred will be subject to an
interest adjustment. The interest adjustment reflects the impact that changing
interest rates have on the value of money invested at a fixed interest rate. The
interest adjustment is computed by multiplying the amount withdrawn or
transferred by the following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1
where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to
the number of years remaining in the guarantee period at the
time of withdrawal or transfer (fractional years are rounded
up to the next full year); and
N is the number of full months remaining in the term at the time
the withdrawal or transfer request is processed.
In general the interest adjustment will operate to decrease the value
upon withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate (as of the date of the
transaction) that would apply for a guarantee period equal to the number of full
or fractional years remaining in the guarantee period as of that date. (For
purposes of determining the interest adjustment, if the company does not offer a
guarantee period of that duration, the applicable current interest rate will be
determined by linear interpolation between current interest rates for two
periods that are available). If the current interest rate thus determined plus
1/2 of one percent is greater than the guaranteed interest rate, the interest
adjustment will be negative and amount withdrawn or transferred will be
decreased. However, the value will never be decreased below the initial
allocation plus daily interest at 3% interest per year. There are no positive
interest adjustments.
Expiration of a guarantee period
At least 45 days, but not more than 60 days, prior to the expiration
date of a guarantee period, Transamerica will notify the owner as to the options
available when a guarantee period expires. The owner may elect one of the
following:
(a) transfer the amount held in that guarantee period to a new
guarantee period from among those being offered by
Transamerica at such time.
(b) transfer the amount held in that guaranteed period to one or
more variable sub-accounts or to another general account
option then available.
Transamerica must receive the owner's notice electing one of these at
the Service Center by the expiration date of the guarantee period. If such
election has not been received by Transamerica at the Service Center, the amount
held in that guarantee period will remain in the guaranteed period account and a
new guarantee period of the same duration as the expiring guarantee period, if
offered, will automatically be established by Transamerica with a new guaranteed
interest rate declared by Transamerica for that guarantee period. The new
guarantee period will start on the day following the expiration date of the
previous guarantee period.
If Transamerica is not currently offering guarantee period having the
same duration as the expiring guarantee period, the new guarantee period will be
the next longer duration, or if Transamerica is not offering a guarantee period
longer than the duration of the expiring guarantee period, the next shorter
duration. However, no guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000,
Transamerica reserves the right to transfer such amount to the money market
variable sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the
current valuation period is $20.15; at the end of the immediately preceding
valuation period it was $20.10; the valuation period is one day; and no
dividends or distributions caused the portfolio to go "ex-dividend" during the
current valuation period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for mortality and expense risk charge and the administrative
expense charge of .00367% (the daily equivalent of the current charge of 1.35%
on an annual basis) gives a net investment factor of 1.00245. If the value of
the variable accumulation unit for the immediately preceding valuation period
had been 15.500000, the value for the current valuation period would be 15.53798
(15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a variable annuity unit for the immediately preceding valuation period had been
13.500000. If the first variable annuity payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the variable annuity unit for the current valuation period would be 13.53163
(13.5 x 1.00245 (the net investment factor) x 0.999893). 0.999893 is the factor,
for a one day valuation period, that neutralizes the assumed rate of four
percent (4%) per year used to establish the variable annuity rates found in the
contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000
variable accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable
annuity unit value for the particular variable sub-account for the valuation
period which ends immediately preceding the first day of the month is 15.500000
and 13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000. Then the first variable annuity payment would be:
3.200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit
value on the 10th day of the second month is 13.565712. Then the second variable
annuity payment would be $285.59 (21.052444 x 13.565712).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm -
TRANSAMERICA CLASSIC sm
VARIABLE ANNUITY
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects
discussed in the current prospectus for the Transamerica Classic sm Variable
Annuity ("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-6. The owner may obtain a free copy
of the prospectus by writing to: Transamerica Life Insurance and Annuity
Company, Annuity Service Center,401 North Tryon Street, Suite 700, Charlotte,
North Carolina 28202 or calling (8000 420-7749. Terms used in the current
prospectus for the contract are incorporated into this statement.
The contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used herein refers to both the individual contract and
the certificates issued under the group contract.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND SHOULD BE READ ONLY IN
CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT AND THE PORTFOLIOS.
December 22, 1997
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT
NET INVESTMENT FACTOR
SETTLEMENT OPTION PAYMENTS
Variable Annuity Units and Payments
Variable Annuity Unit Value
Transfers After the Annuity Date
GENERAL PROVISIONS IRS Required Distributions Non-Participating Misstatement of
Age or Sex Proof of Existence and Age Annuity Data Assignment Annual
Report Incontestability Entire Contract Changes in the Contract
Protection of Benefits Delay of Payments Notices and Directions
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
Other Sub-Account Yield Calculations
Standard Total Return Calculations
Adjusted Historical Portfolio Performance Data
Other Performance Data
HISTORIC PERFORMANCE DATA
General Limitations
Adjusted Historical Sub-Account Performance Data
DISTRIBUTION OF THE CONTRACT
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
STATE REGULATION
RECORDS AND REPORTS
FINANCIAL STATEMENTS
<PAGE>
THE CONTRACT
The following pages provides additional information about the
contract which may be of interest to some owners.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor
for a valuation period, before the annuity date, is (a) divided by (b), minus
(c) minus (d):
Where (a) is:
The net asset value per share held in the sub-account, as of the end of
the valuation period; plus the per-share amount of any dividend or
capital gain distributions if the "ex-dividend" date occurs in the
valuation period; plus or minus a per-share charge or credit as
Transamerica may determine, as of the end of the valuation period, for
taxes.
Where (b) is:
The net asset value per share held in the sub-account as of the end of
the last prior valuation period.
Where (c) is:
The daily charge of 0.00329% (1.20% annually) for the mortality and
expense risk charge times the number of calendar days in the current
valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current valuation
period. This charge may be increased, but will not exceed 0.00096%
(0.35% annually).
A valuation day is defined as any day that the New York Stock
Exchange is open.
SETTLEMENThe variable settlement options provide for payments that fluctuate in
dollar amount, based on the investment performance of the selected variable
sub-account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; by (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of
the number of variable annuity units in each variable sub-account and the
variable sub-account's variable annuity unit value as of the tenth day of the
month before the payment due date. The amount of each payment may vary.
Variable Annuity Unit Value
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. Transamerica may offer other assumed interest rates than
4%. The appropriate interest factor will be applied to compensate for the
assumed interest rate.
Transfers After the Annuity Date
After the annuity date, the owner may transfer variable annuity units
from one sub-account to another, subject to certain limitations. See "Transfers"
page 25 of the prospectus. The dollar amount of each subsequent monthly annuity
payment after the transfer must be determined using the new number of variable
annuity units multiplied by the variable sub-account's variable annuity unit
value on the tenth day of the month preceding payment. Transamerica reserves the
right to change this day of the month.
The formula used to determine a transfer after the annuity date can be
found in the Appendix to this statement of additional information.
GENERAL PROVISIONS
IRS Required Distributions
If any owner under a non-qualified contract dies before the entire
interest in the contract is distributed, the value generally must be distributed
to the designated beneficiary so that the contract qualifieS as an annuity under
the Code. (See "Federal Tax Matters" page 38 of the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated in the application, the settlement option payments under the contract
will be whatever the annuity amount applied on the annuity date would purchase
on the basis of the correct age or sex of the annuitant and/or other measuring
life. Any overpayments or underpayments by Transamerica as a result of any such
misstatement may be respectively charged against or credited to the settlement
option payment or payments to be made after the correction so as to adjust for
such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the contract, Transamerica may require
proof of the existence and/or proof of the age of the annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
Annuity Data
Transamerica will not be liable for obligations which depend on
receiving information from a payee or measuring life until such information is
received in a satisfactory form.
Assignment
No assignment of a contract will be binding on Transamerica unless made
in writing and given to Transamerica at the Service Center. Transamerica is not
responsible for the adequacy of any assignment. The owner's rights and the
interest of any annuitant or non-irrevocable beneficiary will be subject to the
rights of any assignee of record.
Annual Report
At least once each contract year prior to the annuity date, the owner
will be given a report of the current account value allocated to each
sub-account of the variable account and any general account option. This report
will also include any other information required by law or regulation. After the
annuity date, a confirmation will be provided with every variable annuity
payment.
Incontestability
Each contract is incontestable from the contract effective date except
in certain states where medical questions are required on the application for
the optional Living Benefits Rider.
<PAGE>
Entire Contract
Transamerica has issued the contract in consideration and acceptance of
the payment of the initial purchase payment and certain required information in
an acceptable form and manner or, where state law requires, the application. In
those states that require a written application, a copy of the application is
attached to and is part of the contract and along with the contract constitutes
the entire contract.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. The owner has all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any change in the individual contract
or the group contract or individual certificates thereunder and then only in
writing. Transamerica will not be bound by any promise or representation made by
any other persons.
Transamerica may change or amend the individual contract or the group
contract or individual certificates thereunder if such change or amendment is
necessary for the individual contract or the group contract or individual
certificates thereunder to comply with any state or federal law, rule or
regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death benefits)
under the contract will be subject to any claim or process of law by any
creditor.
Delay of Payments
Payment of any cash withdrawal, lump sum death benefit, or variable
payment or transfer due from the variable account will occur within seven days
from the date the election becomes effective, except that Transamerica may be
permitted to postpone such payment if: (1) the New York Stock Exchange is closed
for other than usual weekends or holidays, or trading on the Exchange is
otherwise restricted; or (2) an emergency exists as defined by the Securities
and Exchange Commission (Commission), or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
In addition, while it is our intention to process all transfers from
the sub-accounts immediately upon receipt of a transfer request, we have the
right to delay effecting a transfer from a variable sub-account for up to seven
days. We may delay effecting such a transfer if there is a delay of payment from
an affected portfolio. If this happens, then we will calculate the dollar value
or number of units involved in the transfer from a variable sub-account on or as
of the date we receive a transfer request in a acceptable form and manner, but
will not process the transfer to the transferee sub-account until a later date
during the seven-day delay period when the portfolio underlying the transferring
sub-account obtains liquidity to fund the transfer request through sales of
portfolio securities, new purchase payments, transfers by investors or
otherwise. During this period, the amount transferred would not be invested in a
variable sub-account.
Transamerica may delay payment of any withdrawal from any general
account options for a period of not more than six months after Transamerica
receives the request for such withdrawal. If Transamerica delays payment for
more than 30 days, Transamerica will pay interest on the withdrawal amount up to
the date of payment. See "Cash Withdrawals" page 27 of the prospectus.
Notices and Directions
Transamerica will not be bound by any authorization, direction,
election or notice which is not, in a form and manner acceptable to
Transamerica, and received at the Service Center.
Any written notice requirement by Transamerica to the owner will be
satisfied by our mailing of any such required written notice, by first-class
mail, to the owner's last known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, Transamerica
is required to compute the money market sub-account's current annualized yield
for a seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the money market series or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of realized gains and losses on the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the money market
sub-account at the beginning of such seven-day period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return and annualizing this quotient on a 365-day
basis. The net change in account value reflects the deductions for the annual
account fee, the mortality and expense risk charge and administrative expense
charges and income and expenses accrued during the period. Because of these
deductions, the yield for the money market sub-account of the variable account
will be lower than the yield for the money market series or any comparable
substitute funding vehicle.
The Commission also permits Transamerica to disclose the effective
yield of the money market sub-account for the same seven-day period, determined
on a compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 6% of purchase
payments) that may be applicable to a contract.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current annualized
yield of one or more of the variable sub-accounts (except the money market
sub-account) for 30-day periods. The annualized yield of a sub-account refers to
the income generated by the sub-account over a specified 30-day period. Because
this yield is annualized, the yield generated by a sub-account during the 30-day
period is assumed to be generated each 30-day period. The yield is computed by
dividing the net investment income per variable accumulation unit earned during
the period by the price per unit on the last day of the period, according to the
following formula:
YIELD= 2[{a-b + 1}6 - 1]
cd
Where:
a = net investment income earned during the period by the
portfolio attributable to the shares owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements).
c = the average daily number of variable accumulation units
outstanding during the period.
d = the maximum offering price per variable accumulation unit on
the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all contracts. The yield calculations do not reflect the
effect of any contingent deferred sales load that may be applicable to a
particular contract. Contingent deferred sales load range from 6% to 0% of the
amount of account value withdrawn depending on the elapsed time since the
receipt of each purchase payment.
Because of the charges and deductions imposed by the variable account,
the yield for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts normally will
fluctuate over time. Therefore, the disclosed yield for any given period is not
an indication or representation of future yields or rates of return. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average annual total
returns for one or more of the sub-accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion of such
period).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
contingent deferred sales loads that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
Transamerica may also disclose "historic" performance data for a
portfolio, for periods before the variable sub-account commenced operations.
Such performance information will be calculated based on the performance of the
portfolio and the assumption that the sub-account was in existence for the same
periods as those indicated for the portfolio, with a level of contract charges
currently in effect.
This type of adjusted historical performance data may be disclosed on
both an average annual total return and a cumulative total return basis.
Moreover, it may be disclosed assuming that the contract is not surrendered
(i.e., with no deduction for the contingent deferred sales load) and assuming
that the contract is surrendered at the end of the applicable period (i.e.,
reflecting a deduction for any applicable contingent deferred sales load).
Other Performance Data
Transamerica may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard described
above. The non-standard format will be identical to the standard format except
that the contingent deferred sales load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total
returns in conjunction with the standard format described above. The cumulative
returns will be calculated using the following formula assuming that the
contingent deferred sales load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account
recurring charges for the period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one,
five, or ten-year period at the end of the one, five,
or ten-year period (or fractional portion of the
period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the
standard performance data is also disclosed.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent past performance and are not indicative of
future performance. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses which may not continue in the future.
Portfolio information, including historical daily net asset values and
capital gains and dividends distributions regarding each portfolio has been
provided by that portfolio. The adjusted historical sub-account performance data
is derived from the data provided by the portfolios. Transamerica has no reason
to doubt the accuracy of the figures provided by the portfolios. Transamerica
has not verified these figures.
Adjusted Historical Sub-Account Performance Data
The charts below show adjusted historical performance date for sixteen
sub-accounts for the periods, prior to the inception of the sub-accounts, based
on the performance of the corresponding portfolios since their inception date,
with a level of charges equal to those currently assessed under the contracts.
These figures are not an indication of the future performance of the
sub-accounts.
The dates next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio. The Transamerica VIF
Money Market portfolio has not yet commenced operations. The sub-accounts will
commence operations January 2, 1998. Hence, there is no actual performance data
for these sub-accounts.
Notes:
1. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
at which time the Present Trust commenced operations. The total net assets of
the Small Cap Portfolio immediately after the transaction were $139,812,573 in
the Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of the
Present Trust reflect the performance of the Small Cap Portfolio of the Old
Trust.
2. The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable annuities,
through a reorganization on November 1, 1996. Accordingly, the performance data
for the Transamerica VIF Growth Portfolio includes performance of its
predecessor.
3. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
was effectively divided into two investment funds - The Old Trust and the
present OCC Accumulation Trust (the "Present Trust") at the time of the
transaction there was $682,601,380 in the Old Trust and $51,345,102 in the
Present Trust. For the period prior to September 16, 1994, the performance
figures for the Managed Portfolio of the Present Trust reflect the performance
of the Managed Portfolio of the Old Trust.
<PAGE>
Standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance for each sub-account
are as follows. These figures include mortality and expenses charges of 1.20%
per annum, administrative expenses charge of 0.15% per annum, an account fee of
$30 per annum adjusted for average account size and the applicable contingent
deferred sales load (maximum of 6% of purchase payments) and do not reflect any
fee deduction for the optional Living Benefits Rider.
- -------------------
<TABLE>
<CAPTION>
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.30% 15.77% N/A N/A 20.55%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF N/A N/A N/A N/A N/A
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 10.01% 15.43% 34.32% N/A 46.65%
(8/30/90) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 11.78% 8.24% 12.27% N/A 13.06%
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 10.39% N/A N/A N/A 19.60%
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 14.53% 17.60% N/A N/A 17.09%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 17.65% 17.25% N/A N/A 15.64%
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/25/95) 15.40% N/A N/A N/A 18.39%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 21.29% 26.46% 22.59% 20.69% 16.43%
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 13.30% 11.74% 10.16% N/A 9.73%
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 16.55% 16.40% 13.11% N/A 11.26%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 16.57% N/A N/A N/A 20.09%
(10/5/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 9.45% 10.73% N/A N/A 11.98%
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 15.35% 19.91% 17.20% N/A 18.40%
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High N/A N/A N/A N/A N/A
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed N/A N/A N/A N/A N/A
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance for each sub-account
are as follows. These figures include mortality and expenses charges of 1.20%
per annum, administrative expenses charge of 0.15% per annum, an account fee of
$30 per annum adjusted for average account size, the applicable contingent
deferred sales load (maximum 6% of purchase payments) and optional Living
Benefits Rider fee of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.24% 15.71% N/A N/A 20.48%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
9.95% 15.37% 34.25% N/A 46.58%
Dreyfus VIF Small Cap
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
11.72% 8.18% 12.21% N/A 13.00%
OCC Accumulation Trust
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
10.33% N/A N/A N/A 19.53%
MFS VIT Emerging Growth
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
14.48% 17.54% N/A N/A 17.03%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
17.59% 17.19% N/A N/A 15.58%
Dreyfus VIF Capital
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.34% N/A N/A N/A 18.33%
MFS VIT Research (7/25/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.23% 26.40% 22.53% 20.63% 16.37%
Transamerica VIF Growth
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
13.24% 11.68% 10.11% N/A 9.67%
Alger American Income &
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.49% 16.34% 13.05% N/A 11.21%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.51% N/A N/A N/A 20.03%
MFS VIT Growth w/ Income
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
9.40% 10.67% N/A N/A 11.92%
Janus Aspen Balanced
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.29% 19.85% 17.14% N/A 18.34%
OCC Accumulation Trust
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF High
Yield (1/1/97)
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-standard average annual total returns for periods since inception
of the portfolio, including adjusted historical performance for each sub-account
are as follows. These figures include mortality and expenses charges of 1.20%
per annum, administrative expenses charge of 0.15% per annum and an account fee
of $30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum of 6% of purchase payments)
and do not reflect any fee deduction for the optional Living Benefits Rider.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 26.40% 16.82% N/A N/A 21.37%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.11% 16.48% 34.53% N/A 46.69%
Dreyfus VIF Small Cap
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.88% 9.44% 12.69% N/A 13.06%
OCC Accumulation Trust
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.49% N/A N/A N/A 22.84%
MFS VIT Emerging Growth
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.63% 18.61% N/A N/A 17.52%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
22.75% 18.27% N/A N/A 16.41%
Dreyfus VIF Capital
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.50% N/A N/A N/A 21.66%
MFS VIT Research (7/25/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.39% 27.34% 22.89% 20.69% 16.43%
Transamerica VIF Growth
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
18.40% 12.86% 10.62% N/A 9.73%
Alger American Income &
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.65% 17.44% 13.52% N/A 11.60%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.67% N/A N/A N/A 24.04%
MFS VIT Growth w/ Income
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
14.55% 11.87% N/A N/A 12.96%
Janus Aspen Balanced
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.45% 20.89% 17.56% N/A 18.40%
OCC Accumulation Trust
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF High
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-standard average annual total returns for periods since inception
of the portfolio, including adjusted historical performance for each sub-account
are as follows. These figures include mortality and expenses charges of 1.20%
per annum, administrative expenses charge of 0.15% per annum and, an account fee
of $30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum 6% of purchase payments).
They do reflect deduction of the fee for the optional Living Benefits Rider Fee
of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 26.34% 16.76% N/A N/A 21.31%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.05% 16.42% 34.46% N/A 46.61%
Dreyfus VIF Small Cap
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.82% 9.38% 12.63% N/A 13.00%
OCC Accumulation Trust
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.43% N/A N/A N/A 22.78%
MFS VIT Emerging Growth
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.58% 18.55% N/A N/A 17.46%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
22.69% 18.21% N/A N/A 16.36%
Dreyfus VIF Capital
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.44% N/A N/A N/A 21.60%
MFS VIT Research (7/25/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.33% 27.28% 22.83% 20.63% 16.37%
Transamerica VIF Growth
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
18.34% 12.81% 10.57% N/A 9.67%
Alger American Income &
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.59% 17.38% 13.46% N/A 11.54%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.61% N/A N/A N/A 23.98%
MFS VIT Growth w/ Income
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
14.50% 11.81% N/A N/A 12.90%
Janus Aspen Balanced
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.39% 20.83% 17.50% N/A 18.34%
OCC Accumulation Trust
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF High
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expenses charges of 1.20% per annum, administrative
expenses charge of 0.15% per annum, an account fee of $30 per annum adjusted for
average account size and the applicable contingent deferred sales load (maximum
of 6% of purchase payments) and do not reflect any fee deduction for the
optional Living Benefits Rider.
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the 1-year For the 3-year For the For the 10-year commencement of
operation of period ending period ending 5-year period period ending portfolio
corresponding portfolio) 12/31/96 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.30% 55.15% N/A N/A 85.41%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
10.01% 53.78% 337.20% N/A 1034.15%
Dreyfus VIF Small Cap
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
11.78% 26.81% 78.33% N/A 181.28%
OCC Accumulation Trust
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
10.39% N/A N/A N/A 29.48%
MFS VIT Emerging Growth
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
14.53% 62.62% N/A N/A 103.96%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
17.65% 61.19% N/A N/A 70.76%
Dreyfus VIF Capital
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.40% N/A N/A N/A 27.48%
MFS VIT Research (7/25/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.29% 102.24% 176.88% 555.69% 1057.12%
Transamerica VIF Growth
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
13.30% 39.52% 62.25% N/A 112.80%
Alger American Income &
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.55% 57.70% 85.12% N/A 89.07%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.57% N/A N/A N/A 25.32%
MFS VIT Growth w/ Income
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
9.45% 35.75% N/A N/A 45.32%
Janus Aspen Balanced
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.35% 72.41% 121.10% N/A 314.94%
OCC Accumulation Trust
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF High
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expenses charges of 1.20% per annum, administrative
expenses charge of 0.15% per annum, an account fee of $30 per annum adjusted for
average account size, the applicable contingent deferred sales load (maximum 6%
of purchase payments) and the optional Living Benefits Rider Fee of 0.05% per
annum.
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the 1-year For the For the 5-year For the commencement of
operation of period ending 3-year period period ending 10-year period portfolio
corresponding portfolio) 12/31/96 ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.24% 54.92% N/A N/A 85.10%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF N/A N/A N/A N/A N/A
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 9.95% 53.55% 336.10% N/A 1030.55%
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 11.72% 26.61% 77.88% N/A 180.10%
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 10.33% N/A N/A N/A 29.39%
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 14.48% 62.37% N/A N/A 103.50%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 17.59% 60.94% N/A N/A 70.43%
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/25/95) 15.34% N/A N/A N/A 27.39%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 21.23% 101.93% 176.18% 552.43% 1047.85%
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 13.24% 39.30% 61.83% N/A 111.94%
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 16.49% 57.46% 84.66% N/A 88.49%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 16.51% N/A N/A N/A 25.24%
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 9.40% 35.54% N/A N/A 45.07%
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 15.29% 72.15% 120.54% N/A 313.20%
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High N/A N/A N/A N/A N/A
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed N/A N/A N/A N/A N/A
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adjusted historical non-standard cumulative total returns for periods
since inception of the portfolio for each sub-account are as follow. These
figures include mortality and expenses charges of 1.20% per annum,
administrative expenses charge of 0.15% per annum and an account fee of $30 per
annum adjusted for average account size but do not reflect any applicable
contingent deferred sales load (maximum of 6% of purchase payments) and do not
reflect any fee deduction for the optional Living Benefits Rider.
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the 1-year For the For the 5-year For the commencement of
operation of period ending 3-year period period ending 10-year period portfolio
corresponding portfolio) 12/31/96 ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 26.40% 59.40% N/A N/A 89.66%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF N/A N/A N/A N/A N/A
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 15.11% 58.03% 340.60% N/A 1035.85%
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 16.88% 31.06% 81.73% N/A 181.28%
Small Cap (7/31/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 15.49% N/A N/A N/A 34.58%
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 19.63% 66.87% N/A N/A 107.36%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 22.75% 65.44% N/A N/A 75.01%
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/25/95) 20.50% N/A N/A N/A 32.58%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 26.39% 106.49% 180.28% 555.69% 1057.12%
(12/1/80) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 18.40% 43.77% 65.65% N/A 112.80%
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 21.65% 61.95% 88.52% N/A 92.47%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 21.67% N/A N/A N/A 30.42%
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 14.55% 40.00% N/A N/A 49.57%
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 20.45% 76.66% 124.50% N/A 314.94%
Managed (7/31/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High N/A N/A N/A N/A N/A
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed N/A N/A N/A N/A N/A
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adjusted historical non-standard cumulative total returns for periods
since inception of the portfolio for each sub-account are as follow. These
figures include mortality and expenses charges of 1.20% per annum,
administrative expenses charge of 0.15% per annum and an account fee of $30 per
annum adjusted for average account size, but do not reflect any applicable
contingent deferred sales load (maximum 6% of purchase payments). They do
reflect deductions of the fee for the optional Living Benefits Rider Fee of
0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 26.34% 59.17% N/A N/A 89.35%
Growth (9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF
International Magnum
(1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.05% 57.80% 339.50% N/A 1032.25%
Dreyfus VIF Small Cap
(8/30/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.82% 30.86% 81.28% N/A 180.10%
OCC Accumulation Trust
Small Cap (7/31/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
15.43% N/A N/A N/A 34.49%
MFS VIT Emerging Growth
(7/23/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.58% 66.62% N/A N/A 106.90%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
22.69% 65.19% N/A N/A 74.68%
Dreyfus VIF Capital
Appreciation (4/27/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.44% N/A N/A N/A 32.49%
MFS VIT Research (7/25/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.33% 106.18% 179.58% 552.43% 1047.85%
Transamerica VIF Growth
(12/1/80)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
18.34% 43.55% 65.23% N/A 111.94%
Alger American Income &
Growth (11/14/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.59% 61.71% 88.06% N/A 91.89%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.61% N/A N/A N/A 30.34%
MFS VIT Growth w/ Income
(10/8/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
14.50% 39.79% N/A N/A 49.32%
Janus Aspen Balanced
(9/12/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.39% 76.40% 123.94% N/A 313.20%
OCC Accumulation Trust
Managed (7/31/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF High
Yield (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed
Income (1/1/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the contracts. TSSC may also serve as principal underwriter and
distributor of other contracts issued through the variable account and certain
other separate accounts of Transamerica and any affiliated of Transamerica. TSSC
is a wholly owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Transamerica pays
TSSC for acting as the principal underwriter under a distribution agreement.
TSSC has entered into sales agreements with other broker-dealers to
solicit applications for the contracts through registered representatives who
are licensed to sell securities and variable insurance products. These
agreements provide that applications for the contracts may be solicited by
registered representatives of the broker-dealers appointed by Transamerica to
sell its variable life insurance and variable annuities. These broker-dealers
are registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for contracts will be sold by
broker-dealers which will receive compensation as described in the Prospectus.
The offering of the contracts is expected to be continuous and TSSC
does not anticipate discontinuing the offering of the contracts. However, TSSC
reserves the right to discontinue the offering of the contracts.
During fiscal year 1996, no commissions were paid to TSSC as
underwriter of the contracts; no amounts were retained by TSSC. Under the Sales
Agreement, TSSC will pay broker-dealers compensation based on a percentage of
each purchase payment. The percentage may be up to 5.75% and in certain
situations additional amounts for marketing allowances, production bonuses,
service fees, sales awards and meetings, and asset based trailer commission may
be paid.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The
assets of the variable account are kept separate and apart from Transamerica
general account assets. Records are maintained of all purchases and redemptions
of portfolio shares held by each of the sub-accounts.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the contract will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be
maintained by Transamerica or by the Service Center. As presently required by
the provisions of the 1940 Act and regulations promulgated thereunder which
pertain to the variable account, reports containing such information as may be
required under the 1940 Act or by other applicable law or regulation will be
sent to owners semi-annually at their last known address of record.
<PAGE>
FINANCIAL STATEMENTS
Because the variable account has not yet commenced operations, there is
no financial statement for the variable account.
The financial statements for Transamerica included in this statement of
additional information should be considered only as bearing on the ability of
Transamerica to meet its obligations under the contracts. They should not be
considered as bearing on the investment performance of the assets in the
variable account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the following
formulas:
(1) Determine the number of units to be transferred from the variable sub-
account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next Variable Accumulation Payment's due date.
Where:
(AUV1) is the variable accumulation Unit value of the Variable
sub-account that the transfer is being made from as of the end of the
valuation Period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the Variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
<PAGE>
Audited Consolidated Financial Statements
Transamerica Life Insurance and Annuity Company and Subsidiaries
December 31, 1996
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1996
Audited Consolidated Financial Statements
Report of Independent Auditors............................ 1
Consolidated Balance Sheet................................ 2
Consolidated Statement of Income.......................... 3
Consolidated Statement of Shareholder's Equity............ 4
Consolidated Statement of Cash Flows...................... 5
Notes to Consolidated Financial Statements................ 6
<PAGE>
1
4112/T-4
3/20/97
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Life Insurance and Annuity Company
We have audited the accompanying consolidated balance sheet of Transamerica Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica Life
Insurance and Annuity Company and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note A, Transamerica Life Insurance and Annuity Company and
subsidiaries changed their method of accounting for certain debt securities
effective January 1, 1994.
February 12, 1997
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1996 1995
--------------------- ------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 13,687,899 $ 12,951,154
Equity securities available for sale 87,812 52,930
Mortgage loans on real estate 395,855 399,711
Real estate 608 3,426
Policy loans 20,362 16,619
Other long-term investments 11,302 14,810
Short-term investments 33,790 45,977
--------------------- ---------------------
14,237,628 13,484,627
Cash 4,368 22,421
Accrued investment income 177,420 170,838
Accounts receivable 47,261 19,501
Reinsurance recoverable on paid and unpaid losses 22,104 19,165
Deferred policy acquisitions costs 248,442 198,349
Other assets 35,544 74,501
Separate account assets 1,638,946 1,348,388
--------------------- ---------------------
$ 16,411,713 $ 15,337,790
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 10,271,301 $ 9,305,237
Reserves for future policy benefits 3,150,082 3,242,722
Policy claims and other 40,241 25,583
--------------------- ---------------------
13,461,624 12,573,542
Income tax liabilities 115,457 192,436
Accounts payable and other liabilities 132,019 95,913
Separate account liabilities 1,638,946 1,348,388
--------------------- ---------------------
15,348,046 14,210,279
Shareholder's equity:
Common stock ($100 par value):
Authorized--50,000 shares
Issued and outstanding --15,300 shares 1,530 1,530
Additional paid-in capital 241,791 241,561
Retained earnings 632,098 533,330
Net unrealized investment gains 188,248 351,090
--------------------- ---------------------
1,063,667 1,127,511
--------------------- ---------------------
$ 16,411,713 $ 15,337,790
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1996 1995 1994
---------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 219,381 $ 294,163 $ 201,182
Net investment income 1,037,417 956,134 840,725
Net realized investment gains (losses) 8,333 19,023 (740)
--------------- --------------- ---------------
TOTAL REVENUES 1,265,131 1,269,320 1,041,167
Benefits:
Benefits paid or provided 937,084 860,118 731,117
Increase in policy reserves and
liabilities 51,508 158,040 109,799
--------------- --------------- ---------------
988,592 1,018,158 840,916
Expenses:
Amortization of deferred policy
acquisition costs 16,949 12,048 13,952
Salaries and salary related expenses 46,261 38,846 32,791
Other expenses 63,993 46,889 41,025
--------------- --------------- ---------------
127,203 97,783 87,768
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 1,115,795 1,115,941 928,684
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 149,336 153,379 112,483
Provision for income taxes 50,568 80,532 39,163
--------------- --------------- ---------------
NET INCOME $ 98,768 $ 72,847 $ 73,320
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Unrealized
Additional Investment
Common Stock Paid-in Retained Gains
Shares Amount Capital Earnings (Losses)
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 15,000 $ 1,500 $ 239,895 $ 387,163 $ 7,652
Cumulative effect of change in
accounting for investments 413,800
Net income 73,320
Change in net unrealized
investment gains (losses) (637,116)
Balance at December 31, 1994 15,000 1,500 239,895 460,483 (215,664)
Net income 72,847
Common stock issued 300 30
Capital contributions from
parent 1,666
Change in net unrealized
investment gains (losses) 566,754
Balance at December 31, 1995 15,300 1,530 241,561 533,330 351,090
Net income 98,768
Capital contributions from
parent 230
Change in net unrealized
investment gains (162,842)
Balance at December 31, 1996 15,300 $ 1,530 $ 241,791 $ 632,098 $ 188,248
========== =========== ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1996 1995 1994
----------------- ------------------ ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 98,768 $ 72,847 $ 73,320
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable
and accounts receivable (30,699) (19,588) (10,310)
Policy liabilities 589,476 647,724 563,969
Other assets, accounts payable and other
liabilities, and income taxes 66,536 (88,884) (17,527)
Policy acquisition costs deferred (57,498) (50,483) (45,504)
Amortization of deferred policy acquisition costs 16,969 13,910 16,832
Net realized gains on investment transactions (8,353) (20,885) (2,140)
Other (18,875) 26,818 (32,014)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 656,324 581,459 546,626
INVESTMENT ACTIVITIES
Purchases of securities (4,044,338) (3,873,531) (5,922,110)
Purchases of other investments (114,058) (219,898) (101,984)
Sales of securities 2,669,548 2,386,893 2,763,971
Sales of other investments 117,881 70,071 51,969
Maturities of securities 247,411 252,315 2,016,369
Net change in short-term investments 12,187 (15,466) 11,345
Other (5,614) (6,204) 2,253
----------------- ----------------- -----------------
NET CASH USED BY
INVESTING ACTIVITIES (1,116,983) (1,405,820) (1,178,187)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 4,254,998 3,321,069 2,311,431
Withdrawals from policyholder contract deposits (3,812,392) (2,477,169) (1,680,994)
Capital contribution from parent - 30 -
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 442,606 843,930 630,437
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH (18,053) 19,569 (1,124)
Cash at beginning of year 22,421 2,852 3,976
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 4,368 $ 22,421 $ 2,852
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Life Insurance and Annuity Company ("TALIAC") and its
subsidiaries (collectively, "the Company") engage in providing life insurance,
pension and annuity products, structured settlements and investments, which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1996, the Financial Accounting Standards
Board issued a new standard on accounting for transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. The Company
must adopt the standard in 1997. The standard requires that a transfer of
financial assets be accounted for as a sale only if certain specified conditions
for surrender of control over the transferred assets exist. When adopted, the
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's standard
on accounting for certain investments in debt and equity securities which
requires the Company to report at fair value, with unrealized gains and losses
excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs and policy liabilities, with any resultant
adjustment also excluded from earnings and reported on an after tax basis in
shareholder's equity. As of January 1, 1994, the impact of adopting the standard
was to increase shareholder's equity by $413.8 million (net of deferred policy
acquisition cost adjustment of $107.6 million and deferred taxes of $222.8
million) with no effect on net income.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TALIAC and its subsidiaries, all of which
operate primarily in the life insurance industry. TALIAC is a wholly owned
subsidiary of Transamerica Occidental Life Insurance Company (the "parent")
which is an indirect wholly owned subsidiary of Transamerica Corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Investments: Investments are shown on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific
identification basis. The Company reports realized gains and losses on
investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if the unrealized gains or losses on securities available for sale were
realized. Changes in such adjustments are included in net unrealized investment
gains or losses on an after tax basis as a separate component of shareholder's
equity and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of variable annuity contracts and other pension deposit contracts. The
assets held in these Separate Accounts are invested primarily in fixed
maturities, equity securities, other marketable securities, and short-term
investments. The Separate Account assets are stated at fair value and are not
subject to liabilities arising out of any other business the Company may
conduct. Investment risks associated with fair value changes are borne by the
contract holders. Accordingly, investment income and realized gains and losses
attributable to Separate Accounts are not reported in the Company's results of
operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 3.2% to 9.5% in 1996 and 2.8% to 10% in 1995 and 1994.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include limited-payment life insurance policies, annuities with life
contingencies and term life insurance policies. The reserves for future policy
benefits for traditional life insurance products have been provided on a
net-level premium method based upon estimated investment yields, withdrawals,
mortality, and other assumptions which were appropriate at the time the policies
were issued. Such estimates are based upon past experience with a margin for
adverse deviation. Interest assumptions range from 3.5% in earlier years to
11.25%. Reserves for future policy benefits are evaluated as if unrealized gains
or losses on securities available for sale were realized and adjusted for any
resultant premium deficiencies. Changes in such adjustments are included in net
unrealized investment gains or losses on an after tax basis as a separate
component of shareholder's equity and, accordingly, have no effect on net
income.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: TALIAC and its subsidiaries are included in the consolidated
federal income tax returns filed by Transamerica Corporation, which by the terms
of a tax sharing agreement generally requires TALIAC and its subsidiaries to
accrue and settle income tax obligations in amounts that would result from
filing separate tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities and equity securities available for
sale are as follows (in thousands):
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 133,066 $ 14,715 $ 49 $ 147,732
Obligations of states and political
subdivisions 116,066 2,285 46 118,305
Foreign governments 30,162 2,057 - 32,219
Corporate securities 7,649,254 273,390 58,781 7,863,863
Public utilities 1,700,327 80,106 8,331 1,772,102
Mortgage-backed securities 3,546,032 166,605 29,532 3,683,105
Redeemable preferred stocks 65,285 10,280 4,992 70,573
----------------- ---------------- ----------------- -----------------
Total fixed maturities $ 13,240,192 $ 549,438 $ 101,731 $ 13,687,899
================= ================ ================= =================
Equity securities $ 31,749 $ 58,095 $ 2,032 $ 87,812
================= ================ ================ =================
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 63,123 $ 5,612 $ 68,735
Obligations of states and political
subdivisions 90,371 3,080 93,451
Foreign governments 33,024 4,480 37,504
Corporate securities 5,718,182 445,286 $ 10,797 6,152,671
Public utilities 1,643,203 141,813 1,082 1,783,934
Mortgage-backed securities 4,502,214 296,683 6,116 4,792,781
Redeemable preferred stocks 18,727 3,757 406 22,078
----------------- ---------------- ---------------- ----------------
Total fixed maturities $ 12,068,844 $ 900,711 $ 18,401 $ 12,951,154
================= ================ ================ ================
Equity securities $ 27,379 $ 26,685 $ 1,134 $ 52,930
================= ================ ================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1997 $ 283,203 $ 290,779
Due in 1998-2001 2,610,341 2,636,570
Due in 2002-2006 2,344,952 2,401,802
Due after 2006 4,390,379 4,605,070
---------------- ----------------
9,628,875 9,934,221
Mortgage-backed securities 3,546,032 3,683,105
Redeemable preferred stock 65,285 70,573
---------------- ----------------
$ 13,240,192 $ 13,687,899
================ ===============
The components of the carrying value of real estate are as follows (in
thousands):
1996 1995
--------------- ----------
Investment real estate $ 608 $ 628
Properties held for sale - 2,798
--------------- ---------------
$ 608 $ 3,426
=============== ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
As of December 31, 1996, the Company held total investments in each of the
following issuers, other than the United States Government or a United States
Government agency or authority, which exceeded 10% of total shareholder's equity
(in thousands) (See Note H.):
Name of Issuer Carrying Value
Transamerica Corporation $ 283,292
MBNA Corporation 240,861
First U.S.A. Bank 133,382
Secured Bond Trust 1996-1 128,945
Dean Witter Discover Co. 120,957
The carrying value of assets on deposit with public officials in compliance with
regulatory requirements was $14.8 million at December 31, 1996.
<TABLE>
<CAPTION>
Net investment income (expense) by major investment category is summarized as
follows (in thousands):
1996 1995 1994
--------------- ---------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 1,003,698 $ 929,826 $ 819,747
Equity securities 1,915 708 1,193
Mortgage loans on real estate 33,432 26,322 22,310
Real estate 320 462 908
Policy loans 841 693 628
Other long-term investments (518) 442 746
Short-term investments 4,685 5,375 3,316
---------------- ---------------- ----------------
1,044,373 963,828 848,848
Investment expenses (6,956) (7,694) (8,123)
---------------- ---------------- ----------------
$ 1,037,417 $ 956,134 $ 840,725
================ ================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE B--INVESTMENTS (Continued)
Significant components of net realized investment gains (losses) are as follows
(in thousands):
1996 1995 1994
---------------- ----------------- -----------
Net gains (losses) on disposition of investment in:
<S> <C> <C> <C>
Fixed maturities $ 6,247 $ 29,272 $ 3,380
Equity securities 7,023 3,206 372
Other (175) 220 (40)
---------------- ---------------- ----------------
13,095 32,698 3,712
Provision for impairment (4,742) (11,813) (1,572)
Accelerated amortization of DPAC (20) (1,862) (2,880)
---------------- ---------------- ----------------
$ 8,333 $ 19,023 $ (740)
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1996 1995 1994
---------------- ----------------- -----------
Gross gains $ 22,962 $ 31,163 $ 22,868
Gross losses (16,715) (1,891) (19,488)
---------------- ---------------- ----------------
$ 6,247 $ 29,272 $ 3,380
================ ================ ================
</TABLE>
Proceeds from disposition of investments in fixed maturities available for sale
were $2,899.9 million in 1996, $2,560.9 million in 1995 and $4,778.3 million in
1994.
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1996 1995
<S> <C> <C>
Fixed maturities $ 22,495 $ 29,430
Mortgage loans on real estate 11,031 10,031
--------------- ---------------
$ 33,526 $ 39,461
=============== ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31,
1996 1995
Unrealized gains on investment in:
<S> <C> <C>
Fixed maturities $ 447,707 $ 882,310
Equity securities 56,063 25,551
-------------------- --------------------
503,770 907,861
Fair value adjustments to:
DPAC (19,159) (28,723)
Reserves for future policy benefits (195,000) (339,000)
-------------------- --------------------
(214,159) (367,723)
Related deferred taxes (101,363) (189,048)
-------------------- --------------------
$ 188,248 $ 351,090
==================== ====================
</TABLE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
<TABLE>
<CAPTION>
Significant components of changes in DPAC are as follows (in thousands):
1996 1995 1994
-------------------- -------------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 198,349 $ 238,526 $ 161,827
Cumulative effect of change in
accounting for investments - - (107,590)
Amounts deferred:
Commissions 39,736 34,717 33,166
Other 17,762 15,766 12,338
Amortization attributed to:
Net gain on disposition of investments (20) (1,862) (2,880)
Operating income (16,949) (12,048) (13,952)
Fair value adjustment 9,564 (76,750) 155,617
-------------------- -------------------- --------------------
Balance at end of year $ 248,442 $ 198,349 $ 238,526
==================== ==================== ====================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Liabilities for investment-type products $ 10,050,058 $ 9,135,930
Liabilities for non-traditional life insurance products 221,243 169,307
------------------ ------------------
$ 10,271,301 $ 9,305,237
================== ==================
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $195 million as of December 31, 1996 and $339 million as
of December 31, 1995.
<TABLE>
<CAPTION>
NOTE E--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Current tax liabilities $ 963 $ 6,205
Deferred tax liabilities 114,494 186,231
------------------ ------------------
$ 115,457 $ 192,436
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Deferred policy acquisition costs $ 85,629 $ 114,032
Unrealized investment gains 101,363 189,048
Life insurance policy liabilities (60,263) (102,634)
Provision for impairment of investments (11,734) (13,811)
Other-net (501) (404)
------------------ ------------------
$ 114,494 $ 186,231
================== ==================
</TABLE>
TALIAC offsets all deferred tax assets and liabilities and presents them in a
single amount in the consolidated balance sheet.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE E--INCOME TAXES
Components of provision for income taxes are as follows (in thousands):
1996 1995 1994
------------------ ------------------ ------------
<S> <C> <C> <C>
Current tax expense $ 34,627 $ 20,335 $ 31,415
Deferred tax expense 15,941 60,197 7,748
------------------ ------------------ ------------------
$ 50,568 $ 80,532 $ 39,163
================== ================== ==================
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1996 1995 1994
------------------ ------------------ ------------
Income before income taxes $ 149,336 $ 153,379 $ 112,483
Tax rate 35% 35% 35%
------------------ ------------------ ------------------
Federal income taxes at statutory rate 52,268 53,683 39,369
Income not subject to tax (855) (532) (254)
Adjustment to deferred tax asset - 28,300 -
Other (845) (919) 48
------------------ ------------------ ------------------
$ 50,568 $ 80,532 $ 39,163
================== ================== =================
</TABLE>
In 1995, the Company determined that certain deferred tax assets were not
realizable and wrote down the deferred tax assets by $28.3 million.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1996 was $20.3 million.
At December 31, 1996, $610 million was available for payment of dividends
without such tax consequences. No income taxes has been provided on the
policyholders' surplus account since the conditions that would cause such taxes
are remote.
Income taxes of $39.9 million, $29.0 million and $35.0 million, were paid
principally to the parent in 1996, 1995, and 1994, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE F--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from the Net
Amount Companies Parent Amount
1996
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 25,452,566 $ 5,773,367 $ - $ 19,679,199
=================== =================== =================== ==================
Premiums and other
considerations $ 140,479 $ 34,965 $ 113,867 $ 219,381
=================== =================== =================== ==================
Benefits paid or
provided $ 663,344 $ 68 $ 273,808 $ 937,084
=================== =================== =================== ==================
1995
Life insurance in force,
at end of year $ 17,685,133 $ 4,540,826 $ - $ 13,144,307
=================== =================== =================== ==================
Premiums and other
considerations $ 272,272 $ 28,393 $ 50,284 $ 294,163
=================== =================== =================== ==================
Benefits paid or
provided $ 588,044 $ 520 $ 272,594 $ 860,118
=================== =================== =================== ==================
1994
Life insurance in force,
at end of year $ 11,419,732 $ 4,475,693 $ 154 $ 6,944,193
=================== =================== =================== ==================
Premiums and other
considerations $ 92,022 $ 27,630 $ 136,790 $ 201,182
=================== =================== =================== ==================
Benefits paid or
provided $ 464,873 $ 320 $ 266,564 $ 731,117
=================== =================== =================== ==================
</TABLE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly listed stocks and
bonds.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
The Company's total pension costs (benefits) recognized for all plans were
$(1.5) million in 1996, $0.4 million in 1995 and $0.8 million in 1994, all of
which related to the plan sponsored by Transamerica Corporation. The plans
sponsored by the Company are not material to the consolidated financial position
of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1996, 1995 and 1994.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its affiliates in the normal course of operations. These transactions include
premiums received for employee benefit services (none in 1996 or in 1995, and
$0.7 million in 1994) administration of pension funds, loans and advances,
investments in a money market fund managed by an affiliated company, rental of
space, and other specialized services. At December 31, 1996, pension funds
administered for these related companies aggregated $1,067.9 million and the
investment in an affiliated money market fund, included in short-term
investments, was $13.1 million.
During 1996, the Company transferred certain below investment grade bonds with
an aggregate book value of $242 million, including an aggregate interest
receivable of $5.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $247.4 million,
comprised of collateralized higher-rated bond obligations of $233.3 million
issued by the special purpose subsidiary and cash of $14.1 million. The excess
of fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$7.4 million to an affiliate within the Transamerica Corporation group of
consolidated companies and cash of $25.2 million to the parent in exchange for
mortgage loans of $35.1 million. The excess of fair value of the consideration
received over the book value of the real estates transferred, net of related tax
payable to the parent, is included as a capital contribution.
Included in the investment in fixed maturities available for sale is a note
receivable from Transamerica Corporation of $50 million. The note receivable
matures in 2013 and bears interest at 7%.
NOTE I--REGULATORY MATTERS
TALIAC and its subsidiaries are subject to state insurance laws and regulations,
principally those of the Company's state of incorporation. Such regulations
include the risk-based capital requirement and the restriction on the payment of
dividends. Generally, dividends during any year may not be paid, without prior
regulatory approval, in excess of the greater of 10% of the Company's statutory
capital and surplus as of the preceding year end or the Company's statutory net
income from operations for the preceding year. The insurance department of the
domiciliary
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE I--REGULATORY MATTERS (Continued)
<TABLE>
<CAPTION>
state recognizes these amounts as determined in conformity with statutory
accounting practices prescribed or permitted by the insurance department, which
vary in some respects from generally accepted accounting principles. The
Company's statutory net income and statutory capital and surplus which are
represented by TALIAC's net income and capital and surplus are summarized as
follows (in thousands):
1996 1995 1994
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 75,836 $ 69,103 $ 57,293
Statutory capital and surplus, at
end of year 596,526 527,276 447,239
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guaranty, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1996, commitments to maintain liquidity for
benefit payments on notional amounts of $1.9 billion were outstanding compared
to $620 million at December 31, 1995.
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1996 and 1995, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $6.9
million in 1996, $3.3 million in 1995 and $2.7 million in 1994. The following is
a schedule by years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1996 (in thousands):
Year ending December 31:
1997 $ 1,837
1998 2,463
1999 2,399
2000 2,225
2001 2,181
Later years 17,033
$ 28,138
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel are working toward a settlement. Any such
proposed settlement is subject to of significant contingencies, including
approval by the court. The lawsuit may proceed if such contingencies are not
satisfied. In the opinion of TALIAC, any ultimate liability which might result
from such litigation would not have a materially adverse effect on the
consolidated financial position of TALIAC or the results of its operations.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
--------------------------------------------
1996 1995
----------------------------------- --------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 13,687,899 $ 13,687,899 $ 12,951,154 $ 12,951,154
Equity securities available for sale 87,812 87,812 52,930 52,930
Mortgage loans on real estate 395,855 413,798 399,711 452,204
Policy loans 20,362 20,362 16,619 16,619
Short-term investments 33,790 33,790 45,977 45,977
Cash 4,368 4,368 22,421 22,421
Accrued investment income 177,420 177,420 170,838 170,838
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 3,890,964 3,623,710 3,749,666 3,584,500
Single premium immediate annuities 90,133 90,256 81,178 86,905
Guaranteed investment contracts 2,790,663 2,811,556 2,619,768 2,696,459
Other deposit contracts 3,278,298 3,319,115 2,685,318 2,747,908
Off-balance-sheet assets (liabilities):
Interest rate swap agreements
hedges of liabilities in a:
Receivable position - 37,348 - 23,658
Payable position - (5,095) - (3,086)
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment income. The
differential to be paid or received on those interest rate swap agreements that
are designated as hedges of financial liabilities is recorded on an accrual
basis as a component of benefits paid or provided. While the Company is not
exposed to credit risk with respect to the notional amounts of the interest rate
swap agreements, the Company is subject to credit risk from potential
nonperformance of counterparties throughout the contract periods. The amounts
potentially subject to such credit risk are much smaller than the notional
amounts. The Company controls this credit risk by entering into transactions
with only a selected number of high quality institutions, establishing credit
limits and maintaining collateral when appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains of losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 240,035 $ 6.69% $ 1,970
Floating rate interest 245,905 6.76% 5,711
Floating rate interest based on one
index and receives floating rate
interest based on another index 312,118 - (8,989)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 333
Floating rate interest 1,323,953 6.16% 31,477
Floating rate interest based on one
index and receives floating rate
interest based on another index 58,585 - 443
Interest rate floor agreements 160,500 7.00% 11,107
Swaptions 1,827,570 4.93% 10,403
December 31, 1995
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 145,173 7.87% $ (5,708)
Floating rate interest 140,000 5.65% (679)
Floating rate interest based on one
index and receives floating rate
interest based on another index 65,000 - (229)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 741
Floating rate interest 922,678 6.18% 20,025
Floating rate interest based on one
index and receives floating rate
interest based on another index 52,000 - (110)
Interest rate floor agreements 160,500 7.00% 19,507
Interest rate cap agreements 250,000 5.93% 792
Swaptions 1,117,140 5.52% 20,957
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Activities with respect to the notional amounts are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Beginning End
of Year Additions Maturities Terminations of Year
1996:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 350,173 $ 516,497 $ 53,554 $ 15,058 $ 798,058
Interest rate swap agreements
designated as hedges of
financial liabilities 1,034,678 1,411,285 902,225 101,200 1,442,538
Interest rate floor agreements 160,500 - - - 160,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,117,140 820,000 109,570 - 1,827,570
--------------- -------------- --------------- ---------------- ---------------
$ 2,912,491 $ 2,747,782 $ 1,315,349 $ 116,258 $ 4,228,666
=============== ============== =============== ================ ===============
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 184,777 $ 246,791 $ 59,948 $ 21,447 $ 350,173
Interest rate swap agreements
designated as hedges of
financial liabilities 501,545 1,023,910 460,777 30,000 1,034,678
Interest rate floor agreements 160,500 - - - 160,500
Interest rate cap agreements 100,000 250,000 100,000 - 250,000
Swaptions - 1,117,140 - - 1,117,140
--------------- -------------- --------------- ---------------- ---------------
$ 946,822 $ 2,637,841 $ 620,725 $ 51,447 $ 2,912,491
=============== ============== =============== ================ ===============
1994:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 63,000 $ 121,777 $ 184,777
Interest rate swap agreements
designated as hedges of
financial liabilities 110,000 391,545 501,545
Interest rate floor agreements - 160,500 160,500
Interest rate cap agreements - 100,000 100,000
--------------- -------------- --------------- ---------------- ---------------
$ 173,000 $ 773,822 $ - $ - $ 946,822
=============== ============== =============== ================ ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1996, the Company had no significant concentration of credit risk.
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
All required financial statements are included in Parts A and B of this
Registration Statement.
(b) Exhibits:
(1) Resolutions of Board of Directors of Transamerica Life Insurance and
Annuity
Company (the "Company") authorizing the creation of Separate Account VA-6 (the
"Separate
Account"). 1/
(2) Not Applicable.
(3) Form of Underwriting Agreement between the Company, the Separate
Account and
Transamerica Securities Sales Corporation.2/
(4) Form of Flexible Premium Deferred Variable Annuity Contract. 2/
(5) Form of Application for Flexible Premium Variable Annuity. 2/
(6) (a) Articles of Incorporation of Transamerica Life Insurance and
Annuity Company.1/
(b) By-Laws of Transamerica Life Insurance and Annuity Company.1/
(7) Not Applicable.
(8) Form of Participation Agreements regarding the Portfolio.
(a) re The Alger American Fund 3
(b) re Alliance Variable Products Series Fund, Inc.3
(c) re Dreyfus Variable Investment Fund 4
(d) re Janus Aspen Series 3
(e) re MFS Variable Insurance Trust 4
(f) re Morgan Stanley Universal Funds, Inc. 3
(g) re OCC Accumulation Trust 3
(h) re Transamerica Variable Insurance Fund, Inc.2/
(9) Opinion and Consent of Counsel.2/
<PAGE>
(10) (a) Consent of Counsel.3/
(b) Consent of Independent Auditors.3/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations.3/
(14) Not Applicable.
(15) Powers of Attorney.2/
(27) Financial Data Schedule 2/
- ----------------------------
1/ Incorporated by reference to the like numbered exhibit to the initial filing
of the Registration Statement of Transamerica Life Insurance and Annuity
Company's Separate Account VA-6 on Form N-4, File No. 333-9745, (August 8,
1996).
2/ Incorporated by reference to the like numbered exhibit to the Pre-Effective
Amendment No. 1 to the Registration Statement of Transamerica Life Insurance and
Annuity Company's Separate Account VA-6 on Form N-4, File No. 333-9745 (August
22, 1997).
3/ Filed herewith.
4/ To be filed by subsequent post-effective amendment filing.
<PAGE>
Items 25. Directors and Officers of the Depositor.
The names of Directors and Executive Officers of the Company, their
positions and offices with the Company, and their other affiliations are as
follows. The address of Directors and Executive Officers is 1150 South Olive
Street, Los Angeles, California 90015-2211, unless indicated by asterisk.
List of Directors of Transamerica Life Insurance and Annuity Company
Robert Abeles Richard N. Latzer
Thomas J. Cusack
James W. Dederer Karen MacDonald
Gary U. Rolle'
Richard H. Finn
<PAGE>
David E. Gooding T. Desmond Sugrue
Edgar H. Grubb Nooruddin Veerjee
Frank C. Herringer Robert A. Watson
List of Officers for Transamerica Life Insurance and Annuity Company
Thomas J. Cusack Chairman
Nooruddin S. Veerjee FSA President
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer CLU General Counsel and Secretary
Nicki Bair FSA Senior Vice President
Roy Chong-Kit Senior Vice President and Chief Actuary
Bruce Clark Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
John O. Meyers Senior Vice President
Richard N. Latzer Chief Investment Officer
Gary U. Rolle' CFA Chief Investment Officer
William R. Wellnitz FSA Senior Vice President and Actuary
Stephen J. Ahearn Investment Officer
Glen. E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Lyman Lokken Investment Officer
Michael G. Luongo Investment Officer
Thomas D. Lyon Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
Lawrence M. Agin FSA Vice President & Associate Actuary
Frank Beardsley Vice President
Marsha Blackman Vice President
Rose Ann Bremser Vice President
David Chernow Vice President
Matt Coben Vice President
Thomas P. Dolan Vice President
Paul Hankowitz MD Vice President & Chief Medical Director
Thomas Hauptli Vice President
Phoebe Huang Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil Vice President & Associate Acutary
<PAGE>
Michael Kappos Vice President
Kenneth Kiefer Vice President
Ken Kilbane Vice President
James D. Lamb FSA Vice President & Acutary
Maureen McCarthy Vice President
Vic Modugno Vice President & Associate Actuary
Mischelle Mullin Vice President
Paul L. Norris FSA Vice President & Actuary
Thomas P. O'Neill Vice President
Alison B. Pettingall Vice President
Donald P. Radisich Vice President
William N. Scott FLMI Vice President
Christina Stiver Vice President
Karen Stout Vice President
James O. Strand Vice President
Alice Su Vice President
Colleen Vandermark Vice President
Richard L. Weinstein FSA Vice President & Associate Actuary
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Reid A. Evers Second Vice President & Assistant General Counsel
David Fairhall FSA Second Vice President & Associate Actuary
Sharon Haley Second Vice President
Karin Kemenes Second Vice President
Emily Urbano Second Vice President
Aldo Davanzo Assitant Secretary
Kamran Haghighi Tax Officer
Kim A. Tursky Assistant Secretary
Virginia M. Wilson Controller
James Wolfenden Statement Officer
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Registrant is a separate account of Transamerica Life Insurance and Annuity
Company, is controlled by the Contract Owners, and is not controlled by or under
common control with any other person. The Depositor, Transamerica Life Insurance
and Annuity Company, is wholly owned by Transamerica Occidental Life Insurance
Company, which is wholly owned by Transamerica Insurance Corporation of
California (Transamerica-California). Transamerica-California may be deemed to
be controlled by its parent, Transamerica Corporation.
The following chart indicates the persons controlled by or under common
control with Transamerica.
<PAGE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
Inter-America Corporation - California
Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. - Delaware
River Thames Insurance Company Limited - England
RTI Holdings, Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
Transamerica CBO I, Inc. - Delaware
Transamerica Corporation (Oregon) - Oregon
Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Company (Europe) - Maryland
Transamerica Insurance Finance Corporation, California
- California
Transamerica Insurance Finance Corporation, Canada - Ontario
Transamerica Finance Corporation - Delaware
TA Leasing Holding Co., Inc. - Delaware
Trans Ocean Ltd. - Delaware
Trans Ocean Container Corp. - Delaware
Cool Solutions, Inc. - Delaware
TOD Liquidating Corp. - California
TOL S.R.L. - Italy
Trans Ocean Leasing Deutschland GMBH - Germany
Trans Ocean Leasing PTY Limited - Australia
Trans Ocean Management Corporation -
Trans Ocean Regional Corporate Holdings - California
Trans Ocean SARL - France
Trans Ocean Tank Services Corporation - Delaware
Trans Ocean Container Finance Corp. - Delaware
Transamerica Leasing Inc. - Delaware
Better Asset Management Company LLC - Delaware
Greybox L.L.C. - Delaware
Transamerica Leasing Holdings Inc. - Delaware
Greybox Services Limited - United Kingdom
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing SRL - Italy
<PAGE>
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil Ltda. - Brazil
Transamerica Leasing GmbH - West Germany
Transamerica Leasing Limited - United Kingdom
ICS Terminals (UK) Limited - United Kingdom
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing (Proprietary) Limited - South Africa
Transamerica Tank Container Leasing Pty. Limited -
Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III Inc. - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing A/S - Denmark.
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - Fra.
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
TELColorado Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
The Plain Company - Delaware
Transamerica Global Distribution Finance Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
BWAC Seventeen, Inc. - Delaware
Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada -
Canada
TCF Commercial Leasing Corporation, Canada - Ontario
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited - United Kingdom
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
Transamerica Commercial Finance France S.A. - France
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmaatschappij B.V. - Netherlands
Transamerica GmbH - Germany - Germany
<PAGE>
Transamerica Finance Loan Company - Delaware
Transamerica Financial Services Holding Company - Delaware
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
Pacific Agency, Inc. - Indiana
Pacific Agency, Inc. - Nevada
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Financial Services Limited, United Kingdom -
United Kingdom
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation (Washington) - Washington
Transamerica Financial Consumer Discount Company (Pennsylvania) -
Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Services Mortgage Company - Delaware
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services Company - Ohio
Transamerica Financial Services Inc. - Hawaii
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services, Inc. - West Virginia
Transamerica Insurance Administrators, Inc. - Delaware
Transamerica Mortgage Company - Delaware
Transamerica Financial Services Finance Co. - Delaware
Transamerica HomeFirst, Inc. - California
Transamerica Foundation - California
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas - Texas
TBK Insurance Agency of Ohio, Inc. - Ohio
Transamerica Financial Resources Insurance Agency of Alabama Inc
- Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. -
Massachusetts
<PAGE>
Transamerica International Insurance Services, Inc. - Delaware
Home Loans and Finance Ltd. - United Kingdom
Transamerica Occidental Life Insurance Company - California Bulkrich
Trading Limited - Hong Kong First Transamerica Life Insurance
Company - New York NEF Investment Company - California Transamerica
Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Colorado
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Securities Sales Corporation - Maryland
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
Transamerica Investment Services, Inc. - Delaware
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- Maryland
Transamerica LP Holdings Corp. - Delaware
Transamerica Properties, Inc. - Delaware
Transamerica Retirement Management Corporation - Delaware
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) -
N/A
Transamerica Realty Services, Inc. - Delaware
Bankers Mortgage Company of California - California
Pyramid Investment Corporation - Delaware
The Gilwell Company - California
Transamerica Affordable Housing, Inc. - California
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Ventana Inn, Inc. - California
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contractowners
None.
<PAGE>
Item 28. Indemnification
Transamerica Life Insurance and Annuity Company's Articles of Incorporation
provide in Article VIII as follows:
To the full extent from time to time permitted by law, no person who is
serving or who has served as a director of the Corporation shall be personally
liable in any action for monetary damages for breach of his or her duty as a
director, whether such action is brought by or in the right of the corporation
or otherwise. Neither the amendment or repeal of this Article nor inconsistent
with this Article, shall eliminate or reeduce the protection afforded by this
Article to a director of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article would
have accrued or arising prior to such amendment, repeal or adoption.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling person of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liability (other than the payment by the registrant of expenses incurred or paid
by the 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 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Life Insurance and Annuity
Company are covered under a Directors and Officers liability program which
includes direct coverage to directors and officers (Coverage A) and corporate
reimbursement (Coverage B) to reimburse the Company for indemnification of its
directors and officers. Such directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers. In general, the term "loss" means any amount which the
insureds are legally obligated to pay for a claim for Wrongful Acts. In general,
the term "Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers.
Item 29. Principal Underwriter
(a) Transamerica Securities Sales Corporation, the principal underwriter,
is also the underwriter for: Transamerica Investors, Inc.; Transamerica
Variable Insurance
Fund, Inc.; Transamerica Occidental Life Insurance Company's Separate Accounts:
VA-2; VA-2L; VA-2NL; VA-2NLNY; VA-5; and VA-5NLNY; Transamerica Life Insurance
and Annuity Company's Separate Accounts VL and VA-1. The Underwriter is
wholly-owned by Transamerica Insurance Corporation of California.
<PAGE>
(b) The following table furnishes information with respect to each director
and officer of the principal Underwriter currently distributing securities of
the registrant:
Barbara Kelley Director & President
Regina Fink Director & Secretary
Nooruddin Veerjee Director
Dan Trivers Senior Vice President
Nicki Bair Vice President
Chris Shaw Second Vice President
Ben Tang Treasurer
Item 30. Location of Accounts and Records
Physical possession of each account, book, or other document required to be
maintained is kept at the Company's offices at 101401 North Tryon Street,
Charlotte, North Carolina 28202.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information;
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
(d) Transamerica hereby represents that the fees and charges deducted under
the Contracts are reasonable in the aggregate in relation to services rendered,
expenses expected to be incurred and risks assumed by Transamerica. <PAGE>
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Transamerica Life Insurance and Annuity Company certifies that this
amendment meets the requirements of Securities Act Rule 485(b) for the
effectiveness of this registration statement and that it has caused this
Post-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf in the City of Los Angeles, State of California, on the 22nd day of
December, 1997.
SEPARATE ACCOUNT VA-6 OF
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(REGISTRANT)
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(DEPOSITOR)
----------------------------------
Aldo Davanzo
Assistant Secretary
As required by the Securities Act of 1933, this Registration Statement has been
signed below on December 22, 1997 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* President and Director, December 22, 1997
Nooruddin S. Veerjee Chief Executive Officer
______________________* Director December 22, 1997
Robert Abeles
______________________* Chairman and Director December 22, 1997
Thomas J. Cusack
______________________* Director December 22, 1997
James W. Dederer
______________________* Director December 22, 1997
Richard H. Finn
______________________* Director December 22, 1997
David E. Gooding
______________________* Director December 22, 1997
Edgar H. Grubb
______________________* Director December 22, 1997
Frank C. Herrringer
______________________* Director December 22, 1997
Richard N. Latzer
______________________* Director December 22, 1997
Karen MacDonald
______________________* Director December 22, 1997
Gary U. Rolle'
______________________* Director December 22, 1997
T. Desmond Sugrue
______________________* Director December 22, 1997
Robert A. Watson
</TABLE>
_________________________ On December 22, 1997 as Attorney-in-Fact pursuant
*By: Aldo Davanzo to powers of attorney filed herewith.
<PAGE>
Exhibits
(8) Form of Participation Agreements.
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors.
(13) Performance Data Calculations.
<PAGE>
Exhibit (8) Form of Participation Agreements
<PAGE>
8
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this _____ day of ______________ , 1997, by and
among The Alger American Fund (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust, Fred Alger Management,
Inc., an investment adviser organized under the laws of the state of New York (
the "Adviser"), Transamerica Life Insurance Company of New York, a life
insurance company organized as a corporation under the laws of the State of New
York, (the "Company"), on its own behalf and on behalf of each segregated asset
account of the Company set forth in Schedule A, as may be amended from time to
time (the "Accounts"), and Fred Alger and Company, Incorporated, a Delaware
corporation, the Trust's distributor (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company may contract with an Administrator to perform
certain services with regard to the Contracts and, therefore, certain
obligations ans services of the Adviser and/or Trust should be directed to the
Administrator, as directed by the Company,
WHEREAS, the Company desires to use shares of the Portfolios
indicated on Schedule A as investment
vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company or its administrator shall
be the Trust's agent for the receipt from each account of purchase
orders and requests for redemption pursuant to the Contracts relating
to each Portfolio, provided that the Company or its administrator
notifies the Trust of such purchase orders and requests for redemption
by 9:30 a.m. Eastern time on the next following Business Day, as
defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next
computed after receipt of a purchase order by the Trust (or its
agent), as established in accordance
with the provisions of the then current prospectus of the
Trust describing Portfolio purchase
procedures. The Company or its administrator will transmit order
from time to time to the Trust for
the purchase and redemption of shares of the Portfolios. The Trustees
of the Trust (the "Trustees") may
refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or if,
in the sole discretion of the Trustees acting in good faith and in
light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in th
best interests of the shareholders
of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the
Company on behalf of an Account, at the net asset value next computed
after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance
with the provisions of the then
current prospectus of the Trust describing Portfolio redemption
procedures. The Trust shall make
payment for such shares in the manner established from time to
time by the Trust. Proceeds of
redemption with respect to a Portfolio will be paid to the Company
for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by
the Company by 2:00 p.m. Eastern time on the next Business Day
after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash
position so requires or if extraordinary market conditions exist,
but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The
Trust reserves the right to suspend
the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, two days before the ex-dividend date, notice
to the Company that an income dividend or capital gain distribution
will be paid on the shares of any Portfolio of the Trust. The Company
hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the prospectus(es) of the Portfolios indicated on Schedule A as set in
type or in camera-ready copy) and other assistance as is reasonably
necessary in order for the Company to print together in one document
the current prospectus for the Contracts issued by the Company and the
current prospectus for the Trust. The Trust shall bear the expense of
printing copies of its current prospectus that will be distributed to
existing Contract owners, and the Company shall bear the expense of
printing copies of the Trust's prospectus that are used in connection
with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports
to shareholders and other communications to shareholders in
such quantity as the Company shall
reasonably require for purposes of distributing to Contract
owners. The Trust, at the Company's
expense, shall provide the Company with copies of its periodic
reports to shareholders and other
communications to shareholders in such quantity as the Company
shall reasonably request for use in
connection with offering the Contracts issued by the Company.
If requested by the Company in lieu
thereof, the Trust shall provide such documentation (including
a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications
to shareholders, as set in type or
in camera-ready copy) and other assistance as reasonably
necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the
Trust or its designee a copy of each
Contract prospectus and/or statement of additional information
describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or
request for no-action letter in which the
Trust or the Distributor is named contemporaneously with the
filing of such document with the
Commission. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee
each piece of sales literature or other promotional material in
which the Trust or the Distributor is
named, at least five Business Days prior to its use. No such material
shall be used if the Trust or its
designee reasonably objects to such use within three Business Days
after receipt of such material.
2.8. The Company shall not give any information or make any
representations or statements on behalf of the
Trust or concerning the Trust or the Distributor in connection with
the sale of the Contracts other than
information or representations contained in and accurately derived
from the registration statement or
prospectus for the Trust shares (as such registration statement
and prospectus may be amended or
supplemented from time to time), annual and semi-annual reports of
the Trust, Trust-sponsored proxy
statements, or in sales literature or other promotional material
approved by the Trust or its designee,
except as required by legal process or regulatory authorities or
with the prior written permission of
the Trust, the Distributor or their respective designees. The
Trust and the Distributor agree to
respond to any request for approval on a prompt and timely basis.
The Company shall adopt and implement
procedures reasonably designed to ensure that "broker only"
materials including information therein
about the Trust or the Distributor are not distributed to existing or
prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give,
any information or make any representations or statements on
behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and
accurately derived from the registration statement or prospectus for
the Contracts (as such registration
statement and prospectus may be amended or supplemented from time to
time), or in materials approved by
the Company for distribution including sales literature or other
promotional materials, except as
required by legal process or regulatory authorities or with the
prior written permission of the
Company. The Company agrees to respond to any request for approval of
a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets
the 1940 Act to require pass-through
voting privileges for Contract owners, the Company will provide
pass-through voting privileges to
Contract owners whose cash values are invested, through the
registered Accounts, in shares of one or
more Portfolios of the Trust. The Trust shall require all
Participating Insurance Companies to
calculate voting privileges in the same manner and the Company
shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established
by the Trust. With respect to each
registered Account, the Company will vote shares of each Portfolio
of the Trust held by a registered
Account and for which no timely voting instructions from Contract
owners are received in the same
proportion as those shares for which voting instructions are
received. The Company and its agents will
in no way recommend or oppose or interfere with the solicitation of
proxies for Portfolio shares held to
fund the Contacts without the prior written consent of the Trust,
which consent may be withheld in the
Trust's sole discretion. The Company reserves the right, to the
extent permitted by law, to vote shares
held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of New
York and that it has legally and validly established each Account as a
segregated asset account under such law as of the date set forth in
Schedule A, and that _________________________________, the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust and Adviser represent and warrant that the investments of
each Portfolio complies and will comply with the diversification
requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Internal Revenue Code of
1986, as amended (the "Code"), and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5,
and will notify the Company immediately upon having a reasonable basis
for believing any Portfolio has ceased to comply or might not so comply
and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
3.7. The Trust and Adviser represent and warrant that each Portfolio is
currently qualified as a "regulated investment company" under
Subchapter M of the Code, that such qualification will be maintained
and the Trust or the Adviser will notify the Company immediately upon
having a reasonable basis for believing it has ceased to so qualify or
might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made
available for investment to other
Participating Insurance Companies. In such event, the Trustees wil
monitor the Trust for the existence
of any material irreconcilable conflict between the interests
of the contract owners of all
Participating Insurance Companies. A material irreconcilable
conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in
applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference
in voting instructions given by variable annuity contract and
variable life insurance contract owners;
or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust
shall promptly inform the Company of any determination by the
Trustees that a material irreconcilable
conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a
material irreconcilable conflict exists that affects the interests
of contract owners, the Company
shall, in cooperation with other Participating Insurance
Companies whose contract owners are also
affected, at its own expense and to the extent reasonably
practicable (as determined by the Trustees)
take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which
steps could include: (a) withdrawing the assets allocable to some
or all of the Accounts from the Trust
or any Portfolio and reinvesting such assets in a different
investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the
question of whether or not such
segregation should be implemented to a vote of all affected
Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract
owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in
favor of such segregation, or offering to the affected Contract
owners the option of making such a
change; and (b) establishing a new registered management investment
company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract
owner voting instructions and that decision represents a minority
position or would preclude a majority
vote, the Company may be required, at the Trust's election, to
withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to
such Account; provided, however
that such withdrawal and termination shall be limited to the extent
required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the
Trust gives written notice that this
provision is being implemented. Until the end of such six (6) month
period, the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision
applicable to the Company conflicts with the majority of other state
regulators, then the Company will
withdraw the affected Account's investment in the Trust and
terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the
Company in writing that the Trust has
determined that such decision has created a material irreconcilable
conflict; provided, however, that
such withdrawal and termination shall be limited to the extent
required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of
such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees
shall determine whether any proposed action adequately remedies
any material irreconcilable conflict,
but in no event will the Trust be required to establish a new
funding medium for any Contract. The
Company shall not be required to establish a new funding medium for
the Contracts if an offer to do so
has been declined by vote of a majority of Contract owners materially
adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine
that any proposed action does not
adequately remedy any material irreconcilable conflict, then the
Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six (6
months after the Trustees inform the
Company in writing of the foregoing determination; provided,
however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Adviser,
---------------------------------
Distributor, the Trust and each of its Trustees, officers, employee
and agents and each person, if any,
who controls the Trust within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified
Parties" for purposes of this Section 5.1) against any and all
losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
the Company, which consent shall not
be unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any
material fact contained in a registration statement o
prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or
approved by the Company on behalf of
the Contracts or Accounts (or any amendment or
supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of
this Article V), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if
such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written
information furnished to the Company by or on behalf of the
Trust for use in Company Documents
or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company or
administrator to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company or
administrator in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company or
administrator; or
(f) arise out of or result from the provision by the Company or
administrator to the Trust of insufficient or incorrect
information regarding the purchase or sale of shares of any
Portfolio, or the failure of the Company or administrator to
provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor, Adviser and
Trust each jointly and severally agree
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to indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents
and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of
the Distributor, which consent shall not be unreasonably withheld)
or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any
material fact contained in the registration statement or
prospectus for the Trust (or any amendment or supplement
thereto) (collectively, "Trust Documents" for the purposes of
this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and was accurately derived from
written information furnished to the Adviser, Distributor or
the Trust by or on behalf of the Company for use in Trust
Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Adviser, Distributor or persons under their control,
with respect to the sale or acquisition of the Contracts or
Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust, Adviser or Distributor; or
(d) arise out of or result from any failure by the Adviser,
Distributor or the Trust to provide the services or furnish
the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser,
Distributor or the Trust in this Agreement ( including a
failure, whether unintentional or in good faith or otherwise,
to comply with the diversification and subchapter M
requirements specified in Article III ) or arise out of or
result from any other material breach of this Agreement by the
Adviser Distributor or the Trust; or
(f) arise out of or result from the materially incorrect or materially
untimely calculation or reporting of the daily net asset value per share or
dividend or capital gain distribution rate.
5.3. None of the Company, the Adviser, the Trust or the Distributor shall be
liable under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4. None of the Company, the Adviser, Trust or the Distributor shall
be liable under the indemnification
provisions of Sections 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified
party unless such Indemnified Party shall have notified the other
party in writing within a reasonable
time after the summons, or other first written notification, giving
information of the nature of the
claim shall have been served upon or otherwise received by such
Indemnified Party (or after such
Indemnified Party shall have received notice of service upon or
other notification to any designated
agent), but failure to notify the party against whom indemnification
is sought of any such claim shall
not relieve that party from any liability which it may have to the
Indemnified Party in the absence of
Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party,
the indemnifying party shall be
entitled to participate, at its own expense, in the defense of such
action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named
in the action. After notice from the indemnifying party to the
Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to
the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred
by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice
to the other parties, unless a shorter time is agreed to by
the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the
Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Articles I,II,III,IV, and VII and
shall survive the termination of this Agreement as long as shares of
the Trust are held on behalf of Contract owners in accordance with
Section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust, its Adviser, or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Transamerica Life Insurance Company of New York
Corporate Secretary
100 Manhattanville Rd.
Purchase, NY 10577
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
<PAGE>
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By:________________________________
Name:
Title:
The Alger American Fund
By:_________________________________
Name:
Title:
Transamerica Life Insurance Company of New York
By:___________________________________
Name:
Title:
SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income & Growth Portfolio
<PAGE>
33
S:\DEPT550\DREW\AGREEMEN\PART-AGR.TR2
PARTICIPATION AGREEMENT
AMONG
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY,
TRANSAMERICA SECURITIES SALES CORPORATION,
ALLIANCE CAPITAL MANAGEMENT LP
AND
ALLIANCE FUND DISTRIBUTORS, INC.
DATED AS OF
DECEMBER 15, 1997
<PAGE>
6
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of December
1997 ("Agreement"), by and among Transamerica Life Insurance and Annuity
Company, a North Carolina life insurance company ("Insurer") (on behalf of
itself and its "Separate Account," defined below); Transamerica Securites Sales
Corporation, a Maryland corporation ("Contracts Distributor"), the principal
underwriter with respect to the Contracts referred to below; Alliance Capital
Management L.P., a Delaware limited partnership ("Adviser"), the investment
adviser of the Fund referred to below; and Alliance Fund Distributors, Inc., a
Delaware, corporation ("Distributor"), the Fund's principal underwriter
(collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and Alliance Variable Products Series
Fund, Inc. (the "Fund") desire that shares of the Fund's Premier Growth and
Growth and Income (the "Portfolios"; reference herein to the "Fund" includes
reference to each Portfolio to the extent the context requires) be made
available by Distributor to serve as underlying investment media for those
combination fixed and variable annuity contracts of Insurer that are the subject
of Insurer's Form N-4 registration statement filed with the Securities and
Exchange Commission (the "SEC"), File No. 333-9745 (the "Contracts"), to be
offered through Contracts Distributor and other registered broker-dealer firms
as agreed to by Insurer and Contracts Distributor; and
WHEREAS the Contracts provide for the allocation of net amounts
received by Insurer to separate series (the "Divisions"; reference herein to the
"Separate Account" includes reference to each Division to the extent the context
requires) of the Separate Account for investment in the shares of corresponding
Portfolios of the Fund that are made available through the Separate Account to
act as underlying investment media,
WHEREAS the Insurer may contract with an administrator (the
"Administrator") to perform certain services with respect to the Contracts and,
therefore, certain obligations of the Adviser may be directed to such
Administrator, if the Insurer so directs the Adviser;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and Distributor will make shares of the Portfolios
available to Insurer for this purpose at net asset value and with no sales
charges, all subject to the following provisions:
Section 1. Additional Portfolios
The Fund has and may, from time to time, add additional Portfolios,
which will become subject to this Agreement, if, upon the written consent of
each of the Parties hereto, they are made available as investment media for the
Contracts.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Adviser or its designated agent will provide closing net asset
value, dividend and capital gain information for each Portfolio to Insurer or
its Administrator, as directed by Insurer, at the close of trading on each day
(a "Business Day") on which the New York Stock Exchange is open for regular
trading. The Fund or its designated agent will use its best efforts to provide
this information by 6:00 p.m., Eastern time. Insurer will use these data to
calculate unit values, which in turn will be used to process transactions that
receive that same Business Day's Separate Account Division's unit values. Such
Separate Account processing will be done the same evening, and corresponding
orders with respect to Fund shares will be placed the morning of the following
Business Day. Insurer will use its best efforts to place such orders with the
Fund by 10:00 a.m., Eastern time.
If the Adviser provides material incorrect share net asset value
information, the Adviser shall make an adjustment to the number of shares
purchased or redeemed for the Separate Account to reflect the correct net asset
value per share. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gains information shall be reported
promptly upon discovery to the Insurer.
2.2 Timely Payments.
Insurer or its Administrator will transmit orders for purchases and
redemptions of Fund shares to Distributor, and will wire payment for net
purchases to a custodial account designated by the Fund on the day the order for
Fund shares is placed, to the extent practicable. Payment for net redemptions
will be wired by the Fund to an account designated by Insurer on the same day as
the order is placed, to the extent practicable, and in any event be made within
six calendar days after the date the order is placed in order to enable Insurer
to pay redemption proceeds within the time specified in Section 22(e) of the
Investment Company Act of 1940, as amended (the "1940 Act").
<PAGE>
2.3 Applicable Price.
The Parties agree that Portfolio share purchase and redemption orders
resulting from Contract owner purchase payments, surrenders, partial
withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that
Insurer receives such orders and processes such transactions, which, Insurer
agrees shall occur not earlier than the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. For the purposes of this section, Insurer and its Administrator shall be
deemed to be the agent of the Fund for receipt of such orders from holders or
applicants of contracts, and receipt by Insurer shall constitute receipt by the
Fund. All other purchases and redemptions of Portfolio shares by Insurer, will
be effected at the net asset values next computed after receipt by Distributor
of the order therefor, and such orders will be irrevocable. Insurer hereby
elects to reinvest all dividends and capital gains distributions in additional
shares of the corresponding Portfolio at the record-date net asset values until
Insurer otherwise notifies the Fund in writing, it being agreed by the Parties
that the record date and the payment date with respect to any dividend or
distribution will be the same Business Day. The Adviser shall give Insurer or
its Administrator, as directed by Insurer, two Business Days' notice of any
distributions.
<PAGE>
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 Registration.
The Fund will bear the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
Securities Act of 1933, as amended (the "1933 Act"), and keeping such
registrations current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
respecting the Fund and its shares and payment of all applicable registration or
filing fees with respect to any of the foregoing. Insurer will bear the cost of
registering the Separate Account as a unit investment trust under the 1940 Act
and registering units of interest under the Contracts under the 1933 Act and
keeping such registrations current and effective; including, without limitation,
the preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
respecting the Separate Account and its units of interest and payment of all
applicable registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related) Expenses.
The Fund will bear the costs of preparing, filing with the SEC and
setting for printing the Fund's prospectus, statement of additional information
and any amendments or supplements thereto (collectively, the "Fund Prospectus"),
periodic reports to shareholders, Fund proxy material and other shareholder
communications and any related requests for voting instructions from
Participants (as defined below). Insurer will bear the costs of preparing,
filing with the SEC and setting for printing, the Separate Account's prospectus,
statement of additional information and any amendments or supplements thereto
(collectively, the "Separate Account Prospectus"), any periodic reports to
owners, annuitants or participants under the Contracts (collectively,
"Participants"), and other Participant communications. The Fund and Insurer each
will bear the costs of printing in quantity and delivering to existing
Participants the documents as to which it bears the cost of preparation as set
forth above in this Section 3.3, it being understood that reasonable cost
allocations will be made in cases where any such Fund and Insurer documents are
printed or mailed on a combined or coordinated basis. If requested by Insurer,
the Fund will provide annual Prospectus text to Insurer on diskette for printing
and binding with the Separate Account Prospectus.
3.4 Other Sales-Related Expenses.
Expenses of distributing the Portfolio's shares and the Contracts will
be paid by Contracts Distributor and other parties, as they shall determine by
separate agreement.
3.5 Parties to Cooperate.
The Adviser, Insurer, Contracts Distributor, and Distributor each
agrees to cooperate with the others, as applicable, in arranging to print, mail
and/or deliver combined or coordinated prospectuses or other materials of the
Fund and Separate Account.
<PAGE>
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Adviser represents and warrants that each Portfolio will elect
to qualify as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall maintain such
qualification, and the Adviser or Distributor will notify Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
(b) Insurer represents that it believes, in good faith, that the
Contracts will be treated as life insurance or annuity contracts under sections
7702 or 72 of the Code and that it will make every effort to maintain such
treatment. Insurer will notify the Fund and Distributor immediately upon having
a reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(c) The Adviser represents and warants that it will maintain each
Portfolio's compliance with the diversification requirements set forth in
Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the
Code, and the Fund, Adviser or Distributor will notify Insurer immediately upon
having a reasonable basis for believing that a Portfolio has ceased to so comply
or that a Portfolio might not so comply in the future, and they will immediately
take all steps to adequately diversify the Portfolio to achieve compliance
within the grace period afforded by Treasury Regulation 1.817-5.
(d) Insurer represents that it believes, in good faith, that the
Separate Account is a "segregated asset account" and that interests in the
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section
817(h) of the Code and the regulations thereunder. Insurer will make every
effort to continue to meet such definitional requirements, and it will notify
the Fund and Distributor immediately upon having a reasonable basis for
believing that such requirements have ceased to be met or that they might not be
met in the future.
(e) The Adviser will manage the Fund as a RIC in compliance with
Subchapter M of the Code and with Section 817(h) of the Code and regulations
thereunder. The Fund has adopted and will maintain procedures for ensuring that
the Fund is managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder.
(f) Should the Distributor or Adviser become aware of a failure of
Fund, or any of its Portfolios, to be in compliance with Subchapter M of the
Code or Section 817(h) of the Code and regulations thereunder, they represent
and agree that they will immediately notify Insurer of such in writing.
4.2 Insurance and Certain Other Laws.
(a) The Adviser will use its best efforts to cause the Fund to comply
with any applicable state insurance laws or regulations, to the extent
specifically requested in writing by Insurer. If it cannot comply, it will so
notify Insurer in writing.
(b) Insurer represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under North Carolina Law, and
(iii) the Contracts comply in all material respects with all other applicable
federal and state laws and regulations.
(c) Insurer and Contracts Distributor represent and warrant that
Contracts Distributor is a business corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland and has
full corporate power, authority and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) Distributor represents and warrants that the Fund is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Maryland and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
(f) Adviser represents and warrants that it is a limited partnership,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
4.3 Securities Laws.
(a) Insurer represents and warrants that (i) interests in the Separate
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act and the Contracts will be duly authorized for
issuance and sold in compliance with [State] law, (ii) the Separate Account is
and will remain registered under the 1940 Act to the extent required by the 1940
Act, (iii) the Separate Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, (iv) the
Separate Account's 1933 Act registration statement relating to the Contracts,
together with any amendments thereto, will, at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, and (v)
the Separate Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(b) The Adviser and Distributor represent and warrant that (i) Fund
shares sold pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with Maryland law, (ii) the Fund is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will amend
the registration statement for its shares under the 1933 Act and itself under
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares, (iv) the Fund does and will comply in all material
respects with the requirements of the 1940 Act and the rules thereunder, (v) the
Fund's 1933 Act registration statement, together with any amendments thereto,
will at all times comply in all material respects with the requirements of the
1933 Act and rules thereunder, and (vi) the Fund Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) The Fund will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Fund, Insurer or any other life
insurance company utilizing the Fund.
(d) Distributor and Contracts Distributor each represents and warrants
that it is registered as a broker-dealer with the SEC under the Securities
Exchange Act of 1934, as amended, and is a member in good standing of the
National Association of Securities Dealers Inc. (the "NASD").
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) Distributor or the Fund shall immediately notify Insurer of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any circumstances in which
(x) the Fund's shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (y) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer. Distributor and the Fund will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) Insurer and Contracts Distributor shall immediately notify the Fund
of (i) the issuance by any court or regulatory body of any stop order, cease and
desist order or similar order with respect to the Separate Account's
registration statement under the 1933 Act relating to the Contracts or the
Separate Account Prospectus, (ii) any request by the SEC for any amendment to
such registration statement or Separate Account Prospectus, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of the Separate Account interests pursuant to the
Contracts, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Insurer and Contracts Distributor will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
<PAGE>
4.5 Insurer to Provide Documents.
Upon request, Insurer will provide the Fund and the Distributor one
complete copy of SEC registration statements, Separate Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and amendments to
any of the above, that relate to the Separate Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6 Fund to Provide Documents.
Upon request, the Fund will provide to Insurer one complete copy of SEC
registration statements, Fund Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
5.1 General.
The Fund has obtained an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that the Fund is available for investment
by certain other entities, including, without limitation, separate accounts
funding variable life insurance policies and separate accounts of insurance
companies unaffiliated with Insurer ("Mixed and Shared Funding Order"). The
Parties recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section 5.
5.2 Disinterested Directors.
The Fund agrees that its Board of Directors shall at all times consist
of directors a majority of whom (the "Disinterested Directors") are not
interested persons of Adviser or Distributor within the meaning of Section
2(a)(I 9) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Fund agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the interests of the
participants in all separate accounts of life insurance companies utilizing the
Fund, including the Separate Account. Insurer agrees to inform the Board of
Directors of the Fund of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Portfolio are
being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or by participants of
different life insurance companies utilizing the Fund; or
(f) a decision by a life insurance company utilizing the Fund to
disregard the voting instructions of participants.
Insurer will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably necessary for the Board of Directors to consider any issue raised,
including information as to a decision by Insurer to disregard voting
instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Insurer and the other life insurance
companies utilizing the Fund will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the
separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different
investment medium, including another
Portfolio of the Fund, or submitting the question whether
such segregation should be implemented
to a vote of all affected participants and, as appropriate,
segregating the assets of any
particular group (e.g., annuity contract owners or
participants, life insurance contract owners
or all contract owners and participants of one or more life
insurance companies utilizing the
Fund) that votes in favor of such segregation, or
offering to the affected contract owners
or participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a Management
Company.
(b) If the material irreconcilable conflict arises because of Insurer's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurer may be
required, at the Fund's election, to withdraw the Separate Account's investment
in the Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the Fund
gives notice to Insurer that this provision is being implemented, and until such
withdrawal Distributor and the Fund shall continue to accept and implement
orders by Insurer for the purchase and redemption of shares of the Fund.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Insurer conflicts with the
majority of other state regulators, then Insurer will withdraw the Separate
Account's investment in the Fund within six months after the Fund's Board of
Directors informs Insurer that it has determined that such decision has created
a material irreconcilable conflict, and until such withdrawal Distributor and
Fund shall continue to accept and implement orders by Insurer for the purchase
and redemption of shares of the Fund.
(d) Insurer agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Fund or Distributor be
required to establish a new funding medium for any Contracts. Insurer will not
be required by the terms hereof to establish a new funding medium for any
Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to Insurer.
The Fund will promptly make known in writing to Insurer the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
Insurer and the Fund will at least annually submit to the Board of
Directors of the Fund such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Fund of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which the Fund is serving an investment medium
for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to mixed and shared funding, the Parties agree that they will comply
with the terms and conditions thereof and that the terms of this Section 5 shall
be deemed modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is afforded by any
of said rules that are applicable.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of Insurer or Distributor upon at least six
months advance written notice to the
other Parties, or
(b) at the option of the Fund upon (i) at least sixty days advance
written notice to the other parties, and (ii) approval by (x) a majority of the
disinterested Directors upon a finding that a continuation of this Contract is
contrary to the best interests of the Fund, or (y) a majority vote of the shares
of the affected Portfolio in the corresponding Division of the Separate Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Trust shares in accordance with Participant instructions).
(c) at the option of the Fund upon institution of formal proceedings
against Insurer or Contracts Distributor by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Insurer's obligations
under this Agreement or related to the sale of the Contracts, the operation of
the Separate Account, or the purchase of the Fund shares, if, in each case, the
Fund reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Portfolio to be terminated; or
(d) at the option of Insurer upon institution of formal proceedings
against the Fund, Adviser, or Distributor by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding the Fund's, Adviser's
or Distributor's obligations under this Agreement or related to the operation or
management of the Fund or the purchase of Fund shares, if, in each case, Insurer
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Insurer, Contracts Distributor or the Division
corresponding to the Portfolio to be terminated; or
(e) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state and federal law or (ii) such law precludes
the use of such shares as an underlying investment medium of the Contracts
issued or to be issued by Insurer; or
(f) upon termination of the corresponding Division's investment in the
Portfolio pursuant to Section 5 hereof; or
(g) at the option of Insurer if the Portfolio ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions; or
(h) at the option of Insurer if the Portfolio fails to comply with
Section 817(h) of the Code or with successor or similar provisions; or
(i) at the option of Insurer if Insurer reasonably believes that any
change in a Fund's investment adviser or investment practices will materially
increase the risks incurred by Insurer.
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant-initiated
transactions, (ii) as required by state insurance laws or regulations, (iii) as
required pursuant to Section 5 of this Agreement, or (iv) with respect to any
Portfolio as to which this Agreement has terminated, Insurer shall not (x)
redeem Fund shares attributable to the Contracts, or (y) prevent Participants
from allocating payments to or transferring amounts from a Portfolio that was
otherwise available under the Contracts, until, in either case, 90 calendar days
after Insurer shall have notified the Fund or Distributor of its intention to do
so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 Continuance of Agreement for Certain Purposes.
Notwithstanding any termination of this Agreement, the Distributor
shall continue to make available shares of the Portfolios pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (the "Existing Contracts"), except as
otherwise provided under Section 5 of this Agreement. Specifically, and without
limitation, the Distributor shall facilitate the sale and purchase of shares of
the Portfolios as necessary in order to process premium payments, surrenders and
other withdrawals, and transfers or reallocations of values under Existing
Contracts.
Section 7. Parties to Cooperate Respecting Termination
The other Parties hereto agree to cooperate with and give reasonable
assistance to Insurer in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account owns no shares of a Portfolio
after the Final Termination Date with respect thereto.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 2 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Transamerica Life Insurance and Annuity
Company
Corporate Secretary
1150 South Olive Street
Los Angeles, California 90015
Transamerica Securities Sales Corporation
Transamerica Center
1150 South Olive Street
Los Angeles, California 90015
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
<PAGE>
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York NY 10105
Attn: Edmund P. Bergan
FAX: (212) 969-2290
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, Insurer will distribute all proxy material furnished by the Fund to
Participants and will vote Fund shares in accordance with instructions received
from Participants. Insurer will vote Fund shares that are (a) not attributable
to Participants or (b) attributable to Participants, but for which no
instructions have been received, in the same proportion as Fund shares for which
said instructions have been received from Participants. Insurer agrees that it
will disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies utilizing the Fund will be responsible
for calculating voting privileges in a manner consistent with that of Insurer,
as prescribed by this Section 10.
Section 11. Foreign Tax Credits
The Adviser agrees to consult in advance with Insurer concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to the Fund's shareholders.
Section 12. Indemnification
12.1 Of Fund, Distributor and Adviser by Insurer.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Insurer agrees to indemnify and hold harmless the Fund, Distributor and
Adviser, each of their directors and officers, and each person, if any, who
controls the Fund, Distributor or Adviser within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 12. 1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Insurer) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions are related to the sale, acquisition, or holding
of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material
fact contained in the Separate Account's 1933 Act registration
statement, the Separate Account
Prospectus, the Contracts or, to the extent prepared by Insurer or
Contracts Distributor, sales
literature or advertising for the Contracts (or any amendment or
supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein
not misleading; provided that this agreement to indemnify shall not
apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance
upon and in conformity with information furnished to Insurer or
Contracts Distributor by or on
behalf of the Fund, Distributor or Adviser for use in the Separate
Account's 1933 Act
registration statement, the Separate Account Prospectus, the
Contracts, or sales literature or
advertising (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or
representations contained in the Fund's 1933 Act registration
statement, Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or
supplement to any of the foregoing,
not supplied for use therein by or on behalf of Insurer or
Contracts Distributor) or the
negligent, illegal or fraudulent conduct of Insurer or
Contracts Distributor or persons under
their control (including, without limitation, their employee
and "Associated Persons," as that
term is defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale
or distribution of the Contracts or Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material
fact contained in the Fund's 1933 Act registration statement,
Fund Prospectus, sales literature
or advertising of the Fund, or any amendment or supplement to
any of the foregoing, or the
omission or alleged omission to state therein a material fact
required to be stated therein or
necessary to make the statements therein not misleading if
such a statement or omission was made
in reliance upon and in conformity with information furnished
to the Fund, Adviser or Distributor
by or on behalf of Insurer or Contracts Distributor for use
in the Fund's 1933 Act registration
statement, Fund Prospectus, sales literature or advertising
of the Fund, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by Insurer or Contracts
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement.
(b) Insurer shall not be liable under this Section 12.1 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of that Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to Distributor or to the Fund.
(c) Insurer shall not be liable under this Section 12.1 with respect to
any action against an Indemnified Party unless the Fund, Distributor or Adviser
shall have notified Insurer in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify Insurer of any such action shall not relieve
Insurer from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12. 1. In
case any such action is brought against an Indemnified Party, Insurer shall be
entitled to participate, at its own expense, in the defense of such action.
Insurer also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall not
be unreasonably withheld. After notice from Insurer to such Indemnified Party of
Insurer's election to assume the defense thereof, the Indemnified Party will
cooperate fully with Insurer and shall bear the fees and expenses of any
additional counsel retained by it, and Insurer will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 Indemnification of Insurer and Contracts Distributor by
Adviser and Distributor.
(a) Except to the extent provided in Sections 12.2(d) and 12.2(e),
below, Adviser and Distributor
agree to indemnify and hold harmless Insurer and Contracts Distributor, each of
their directors and officers, and each person, if any, who controls Insurer or
Contracts Distributor within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Adviser) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale, acquisition, or holding of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material
fact contained in the Fund's 1933 Act registration statement,
Fund Prospectus, sales literature
or advertising of the Fund or, to the extent not prepared by
Insurer or Contracts Distributor,
sales literature or advertising for the Contracts (or any
amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission o
the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein
not misleading; provided that this agreement to indemnify
shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance
upon and in conformity with information furnished to
Distributor, Adviser or the Fund by or on
behalf of Insurer or Contracts Distributor for use in the
Fund's 1933 Act registration statement,
Fund Prospectus, or in sales literature or advertising (or
any amendment or supplement to any of
the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or
representations contained in the Separate Account's 1933 Act
registration statement, Separate
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or
supplement to any of the foregoing, not supplied for use
therein by or on behalf of Distributor,
Adviser, or the Fund) or the negligent, illegal or fraudulent
conduct of the Fund, Distributor,
Adviser or persons under their control (including, without
limitation, their employees and
Associated Persons), in connection with the sale or
distribution of the Contracts or Fund shares;
or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material
fact contained in the Separate Account's 1933 Act
registration statement, Separate Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or
supplement to any of the foregoing, or the omission or
alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with
information furnished to Insurer or Contracts Distributor by
or on behalf of the Fund,
Distributor or Adviser for use in the Separate Account's 1933
Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any
amendment or supplement to any of the foregoing;
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement;
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser or
Distributor in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and Sub-Chapter M qualification
requirements specified in Section 4 of this Agreement) or
arise out of or result form any other material breach of this
Agreement by the Adviser or Distributor; or
(vi) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate.
(b) Except to the extent provided in Sections 12.2(d) and 12.2(e)
hereof, Adviser agrees to indemnify and hold harmless the Indemnified Parties
from and against any and all losses, claims, damages, liabilities (including
amounts paid in settlement thereof with, except as set forth in Section 12.2(c)
below, the written consent of Adviser) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses) to which the Indemnified
Parties may become subject directly or indirectly under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions directly or indirectly result from or arise out of the failure of any
Portfolio to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder and (ii) Section 817(h) of
the Code and regulations thereunder (except to the extent that such failure is
caused by Insurer), including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Contract owners or
Participants asserting liability against Insurer or Contracts Distributor
pursuant to the Contracts, the costs of any ruling and closing agreement or
other settlement with the Internal Revenue Service, and the cost of any
substitution by Insurer of shares of another investment company or portfolio for
those of any adversely affected Portfolio as a funding medium for the Separate
Account that Insurer deems necessary or appropriate as a result of the
noncompliance.
(c) The written consent of Adviser referred to in Section 12.2(b) above
shall not be required with respect to amounts paid in connection with any ruling
and closing agreement or other settlement with the Internal Revenue Service.
(d) Adviser shall not be liable under this Section 12.2 with respect to
any losses, claims; damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties under this Agreement or to Insurer, Contracts Distributor or the Separate
Account.
(e) Adviser shall not be liable under this Section 12.2 with respect to
any action against an Indemnified Party unless Insurer or Contracts Distributor
shall have notified Adviser in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify Adviser of any such action shall not relieve
Adviser from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12.2. In
case any such action is brought against an Indemnified Party, Adviser will be
entitled to participate, at its own expense, in the defense of such action.
Adviser also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the Internal Revenue Service),
with counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from Adviser to such
Indemnified Party of Adviser's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Adviser and shall bear the fees and
expenses of any additional counsel retained by it, and Adviser will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
<PAGE>
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1(c) or 12.2(e) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Fund Shares
Insurer agrees that the Fund will be permitted (subject to the other terms of
this
Agreement) to make its shares available to separate accounts of other
life insurance companies.
Section 18. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
By:
Name:
Title:
TRANSAMERICA SECURITIES SALES
CORPORATION
By:
Name:
Title:
ALLIANCE CAPITAL MANAGEMENT LP
By: Alliance Capital Management Corporation,
its General Partner
By:
Name:
Title:
ALLIANCE FUND DISTRIBUTORS, INC.
By:
Name:
Title:
S:\DEPT550\DREW\AGREEMEN\PART-AGR.TR2
<PAGE>
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this ____ day of __________, 199_, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), JANUS CAPITAL CORPORATION (the "Adviser"), a
Colorado Corporation and the investment adviser to the Trust, and TRANSAMERICA
LIFE INSURANCE AND ANNUITY COMPANY, a life insurance company organized under the
laws of the State of North Carolina (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A,
as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
<PAGE>
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
<PAGE>
-16-
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
WHEREAS, the Adviser is registered with the Securities and Exchange
Commission as an investment adviser under the Investment Advisers Act of 1940,
as amended;
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the
Accounts;
WHEREAS, the Company may contract with an Administrator to perform
certain administrative services with regard to the Contracts and Account(s) and,
therefore, certain obligations of the Trust and/or Adviser shall be directed to
the Administrator, as directed by the Company.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust and the Adviser shall make shares of the Trust's
Portfolios available to the Accounts at the net asset value next computed after
receipt of such purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust.
Shares of a particular Portfolio of the Trust shall be ordered in such
quantities and at such times as determined by the Company or its Administrator
to be necessary to meet the requirements of the Contracts. The Trustees of the
Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company or its Administrator on behalf of an
Account at the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading unless the Trust is not
required to calculate its net asset value on such a day pursuant to the rules of
the Securities and Exchange Commission ("SEC").
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order. The Trust shall
use its best efforts to make payment for redemption orders transmitted to the
Trust in accordance with Section 1.3 by 3:00 p.m. New York time on the same
Business Day that the Trust receives notice of the order, but in no event shall
payment be delayed for a greater period than is permitted by the 1940 Act.
Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company or its
Administrator, as specified by the Company, of any income dividends or capital
gain distributions payable on the Trust's shares prior to the payment of such
dividends. The Company hereby elects to receive all such income dividends and
capital gain distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company or its
Administrator, as specified by the Company, of the number of shares so issued as
payment of such dividends and distributions prior to the payment of such
dividends.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company or its Administrator, as specified by the
Company, on a daily basis every Business Day as soon as reasonably practical
after the net asset value per share is calculated and shall use its best efforts
to make such net asset value per share available by 6 p.m. New York time.
1.8 The Trust and the Adviser agree that the Trust's shares will be
sold only to Participating Insurance Companies and their separate accounts and
to certain qualified pension and retirement plans to the extent permitted by the
Exemptive Order. No shares of any Portfolio will be sold directly to the general
public. The Company agrees that Trust shares will be used only for the purposes
of funding the Contracts and Accounts listed in Schedule A, as amended from time
to time.
<PAGE>
1.9 The Trust and the Adviser agree that all Participating Insurance
Companies shall have the obligations and responsibilities regarding pass-through
voting and conflicts of interest corresponding to those contained in Section 2.8
and Article IV of this Agreement.
1.10 If the Trust provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Trust shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level and shall be made pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II
Obligations of the Parties
2.1 The Trust and the Adviser shall prepare and be responsible for
filing with the Securities and Exchange Commission and any state regulators
requiring such filing all shareholder reports, notices, proxy materials (or
similar materials such as voting instruction solicitation materials),
prospectuses, statements of additional information, and fund profiles (upon the
adoption of Rule 498 under the 1933 Act) of the Trust. The Trust shall bear the
costs of registration and qualification of its shares, preparation and filing of
the documents listed in this Section 2.1 and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the current
prospectus, annual report, semi-annual report, fund profiles and other
shareholder communications, including any amendments or supplements to any of
the foregoing, for the Trust's Portfolios in which the Accounts invest, as the
Company shall reasonably request; or (b) provide the Company with a camera ready
copy of such documents in a form suitable for printing. The Trust shall provide
the Company with a copy of its statement of additional information in a form
suitable for duplication by the Company. The Trust (at its expense) shall
provide the Company with copies of any Trust-sponsored proxy materials in such
quantity as the Company shall reasonably require for distribution to Contract
owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Adviser is the sole
owner of the name and mark "Janus" and that all use of any designation comprised
in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to
the benefit of the Adviser. Except as provided in Section 2.5, the Company shall
not use any Janus Mark on its own behalf or on behalf of the Accounts or
Contracts in any registration statement, advertisement, sales literature or
other materials relating to the Accounts or Contracts without the prior written
consent of the Adviser. Upon termination of this Agreement for any reason, the
Company shall cease all use of any Janus Mark(s) as soon as reasonably
practicable except with respect to shares of the Trust that continue to be made
available to Contract owners in accordance with Section 6.2.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or the Adviser is named prior to the filing of
such document with the Securities and Exchange Commission. The Company shall
furnish, or shall cause to be furnished, to the Trust or its designee, each
piece of sales literature or other promotional material in which the Trust or
the Adviser is named, at least fifteen Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
the Adviser in connection with the sale of the Contracts other than information
or representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
2.7 The Trust and the Adviser shall not give any information or make
any representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of North
Carolina and that it has legally and validly established each Account as a
segregated asset account under such law.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued in compliance in all material respects with all applicable federal and
state laws and the Company represents and warrants that it will make every
effort to see that the Contracts are sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements.
3.4 The Trust and the Adviser represent and warrant that the Trust is
duly organized and validly existing under the laws of the State of Delaware.
<PAGE>
3.5 The Trust and the Adviser represent and warrant that the Trust
shares offered and sold pursuant to this Agreement will be registered under the
1933 Act and the Trust shall be registered under the 1940 Act prior to any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
3.6 The Trust and the Adviser represent and warrant that the
investments of each Portfolio will comply with the diversification requirements
set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder, that the Trust and Adviser will notify
the Company immediately upon having a reasonable basis for believing that the
Trust or any Portfolio has ceased to meet such diversification requirements and
will immediately take steps to adequately diversify the Trust and/or Portfolio
to achieve compliance within the grace period afforded by Treas. Reg. Section
1.817-5.
3.7 the Trust and the Adviser represent and warrant that the Trust and
each Portfolio is currently qualified as a regulated investment company under
Subchapter M of the Code, that they will maintain that qualification and that
they will notify the Company immediately upon having a reasonable basis for
believing that the Trust has ceased to qualify or may not qualify in the future.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust, the Adviser, and each of their Trustees, Directors,
officers, employees and agents and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article V) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or expense
and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents"
for the purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 Indemnification By the Trust and the Adviser. The Trust and the
Adviser agree to indemnify and hold harmless the Company and each of its
directors, officers, employees and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust or the Adviser) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise, insofar
as such Losses:
<PAGE>
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any amendment or
supplement thereto), (collectively, "Trust Documents" for the purposes
of this Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Trust by or on behalf
of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
Adviser or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust or the Adviser;
or
(d) arise out of or result from any failure by the Trust or
the Adviser to provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust or the Adviser in this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the diversification or Sub-Chapter M
requirements of Article III of this Agreement) or arise out of or
result from any other material breach of this Agreement by the Trust or
the Adviser.
(f) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate.
5.3 Neither the Company nor the Trust or the Adviser shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party that
arise from such Indemnified Party's willful misfeasance, bad faith or negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4 Neither the Company nor the Trust or the Adviser shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated
(a) by any party for any reason by ninety (90) days' advance
written notice delivered to the other parties.
(b) at the option of the Company to the extent that the
Portfolios are not reasonably available to meet the requirements of the
Contracts or are not "appropriate funding vehicles" for the Contracts,
as reasonably determined by the Company. Without limiting the
generality of the foregoing, the Portfolios would not be "appropriate
funding vehicles" if, for example, such Portfolios did not meet the
diversification or other requirements referred to in Article III
hereof; or if the Company would be permitted to disregard Contract
owner voting instructions pursuant to Rule 6e-2 or 6e-3(T) under the
1940 Act. Prompt notice of the election to terminate for such cause and
an explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or the Adviser upon institution
of formal proceedings against the Company by the NASD, the SEC, or any
insurance department or other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the Contracts,
the operation of the Accounts, or the purchase of the shares of the
Portfolios; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or the Adviser's duties under this Agreement or
related to the sale of the shares of the Portfolios; or
(e) at the option of the Company, the Trust or the Adviser
upon receipt of any necessary regulatory approvals and/or the vote of
the Contract owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment company for
the corresponding Portfolio shares in accordance with the terms of the
Contracts for which those Portfolio shares had been selected to serve
as the underlying investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the date of any proposed
vote or other action taken to replace the Portfolio shares; or
(f) termination by either the Trust or the Adviser by written
notice to the Company, if either one or both of the Trust or the
Adviser respectively, shall determine, in their sole judgment exercised
in good faith, that the Company has suffered a material adverse change
in its business, operations, financial condition, or prospects since
the date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust
and the Adviser, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or the Adviser has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
6.2 Notwithstanding any termination of this Agreement, the Trust and
the Adviser shall, at the option of the Company, continue to make available
additional shares of the Trust (or any Portfolio) pursuant to the terms and
conditions of this Agreement for all Contracts in
<PAGE>
effect on the effective date of termination of this Agreement, provided
that the Company continues to pay the costs set forth in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Adviser:
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Corporate Secretary
<PAGE>
ARTICLE VIII
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of North
Carolina.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By:
Name:
Title:
JANUS CAPITAL CORPORATION
By:
Name:
Title:
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
By:
Name:
Title:
<PAGE>
-17-
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
Schedule A
Separate Accounts and Associated Contracts
Contracts Funded
Name of Separate Account By Separate Account
Separate Account VA-6 TCG-311-197
-------------
TCG-313-197
<PAGE>
4
THIS AGREEMENT, made and entered into as of the 15th day of
December , 1997 by and among TRANSAMERICA LIFE INSURANCE AND ANNUITY
COMPANY (hereinafter the "Company"), a North Carolina corporation, on
its own behalf and on behalf of each separate account of the Company
set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and
MORGAN STANLEY UNIVERSAL FUNDS, INC. (hereinafter the "Fund"), a
Maryland corporation, and MORGAN STANLEY ASSET MANAGEMENT INC. and
MILLER ANDERSON & SHERRERD, LLP (hereinafter collectively the
"Advisers" and individually the "Adviser"), a Delaware corporation and
a Pennsylvania limited liability partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Contracts enter into
participation agreements with the Fund and the Advisers (the "Participating
Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement, as may be amended from time to time by mutual agreement of the
parties hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios, set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Underwriter is
authorized to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company or its
administrator shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Eastern time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading.
1.2. The Fund, so long as this Agreement is in effect, agrees to make
its shares available indefinitely for purchase at the applicable net asset value
per share by the Company and its Accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Fund shall use reasonable efforts to calculate such net asset
value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, V,VI, VII and Section 2.5 of Article II of
this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company or its administrator shall be the designee of the Fund
for receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Variable Insurance
Products issued by the Company, under which amounts may be invested in the Fund
(hereinafter the "Contracts"), are listed on Schedule A attached hereto and
incorporated herein by reference, as such Schedule A may be amended from time to
time by mutual written agreement of all of the parties hereto. The Company will
give the Fund and the Adviser 45 days written notice of its intention to make
available in the future, as a funding vehicle under the Contracts, any other
investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company or its administrator of any
income, dividends or capital gain distributions payable on the Fund's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company or its administrator, as directed by the Company,
of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company or its administrator, as directed by the
Company, on a daily basis as soon as reasonably practical after the net asset
value per share is calculated (normally by 6:30 p.m. Eastern time) and shall use
its best efforts to make such net asset value per share available by 7:00 p.m.
Eastern time.
1.11. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company or its administrator
shall be entitled to an adjustment with respect to the Fund shares purchased or
redeemed to reflect the correct net asset value per share. The determination of
the materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level and shall be made pursuant to the SEC's
recommended guidelines. Any material error in the calculation or reporting of
net asset value per share, dividend or capital gain information shall be
reported promptly upon discovery to the Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued in
compliance in all material respects with all applicable federal and state laws.
The Company represents and warrants that it will make every effort to ensure
that the Contracts are sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts comply in
all material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under North Carolina Law and has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund.
2.3 The Fund and each Adviser represents with respect to the Portfolios
for which it acts as investment adviser, that the Portfolios to which this
agreement applies are currently qualified as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), that the Portfolios will maintain such qualification (under Subchapter
M or any successor or similar provision) and that they will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated as
life insurance policies or annuity contracts, under Sections 7702, 7702A or 72,
their amendments and successors thereto, of the Code and that it will maintain
such treatment and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5.. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.8. Each Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its directors, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus (relating to the Portfolios) and
statement of additional information as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies the Fund shall
provide camera-ready film or computer diskettes containing the Fund's prospectus
(relating to the Portfolios) and statement of additional information, and such
other assistance as is reasonably necessary in order for the Company once each
year (or more frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus (relating to the Portfolios) printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Contracts
printed together in one document. Alternatively, the Company may print the
Fund's prospectus and/or its statement of additional information in combination
with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing
and distributing Fund prospectuses and statements of additional information
shall be the expense of the Company. For prospectuses and statements of
additional information provided by the Company to its existing owners of
Contracts who currently own shares of one or more of the Fund's Portfolios, in
order to update disclosure as required by the 1933 Act and/or the 1940 Act, the
cost of printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus, the Fund will reimburse the Company in an amount equal to
the product of x and y where x is the number of such prospectuses distributed to
owners of the Contracts who currently own shares of one or more of the Fund's
Portfolios, and y is the Fund's per unit cost of typesetting and printing the
Fund's prospectus. The same procedures shall be followed with respect to the
Fund's statement of additional information. The Company agrees to provide the
Fund or its designee with such information as may be reasonably requested by the
Fund to assure that the Fund's expenses do not include the cost of printing any
prospectuses or statements of additional information other than those actually
distributed to existing owners of the Contracts.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract
owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions
have been received in the same proportion as
Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.7. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
3.8. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within ten Business Days after receipt
of such material. The Fund and the Adviser(s) shall use their best efforts to
review any such material within five Business Days of receipt from the Company.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material. The Company shall use its best
efforts to review any such material within five Business Days of receipt from
the Fund or the Fund's designee.
4.4. The Fund and the Advisers shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Contracts.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
6.1. The Advisers and the Fund each represent and warrant that they
will at all times invest money from the Contracts in such a manner as to ensure
that the Contracts will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will at all times comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5, and Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify immediately the Company of such breach
and (b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each member of the Board and officers, and each Adviser and each director and
officer of each Adviser, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Company, or persons under its control
and other than statements or representations authorized by the
Fund or an Adviser) or unlawful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of the
Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or
sale of the Fund shares or the Contracts or the operation of
the Fund.
8.2. Indemnification by the Advisers
8.2(a). Each Adviser agrees, with respect to each
Portfolio that it manages, to indemnify and hold harmless the
Company and each of its directors and officers and each
person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes
of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement
with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of shares
of the Portfolio that it manages or the Contracts and:
(i) arise out of or are based upon
any untrue statement or alleged untrue
statement of any material fact contained in
the registration statement or prospectus or
sales literature of the Fund (or any
amendment or supplement to any of the
foregoing), or arise out of or are based
upon the omission or the alleged omission to
state therein a material fact required to be
stated therein or necessary to make the
statements therein not misleading, provided
that this agreement to indemnify shall not
apply as to any Indemnified Party if such
statement or omission or such alleged
statement or omission was made in reliance
upon and in conformity with information
furnished to the Fund by or on behalf of the
Company for use in the registration
statement or prospectus for the Fund or in
sales literature (or any amendment or
supplement) or otherwise for use in
connection with the sale of the Contracts or
Portfolio shares; or
(ii) arise out of or as a result of
statements or representations (other than
statements or representations contained in
the registration statement, prospectus or
sales literature for the Contracts not
supplied by the Fund or persons under its
control and other than statements or
representations authorized by the Company)
or unlawful conduct of the Fund, Adviser(s)
or Underwriter or persons under their
control, with respect to the sale or
distribution of the Contracts or Portfolio
shares; or
(iii) arise out of or as a result of
any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature covering the Contracts, or any
amendment thereof or supplement thereto, or
the omission or alleged omission to state
therein a material fact required to be
stated therein or necessary to make the
statement or statements therein not
misleading, if such statement or omission
was made in reliance upon information
furnished to the Company by or on behalf of
the Fund; or
(iv) arise as a result of any
failure by the Fund to provide the services
and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any
material breach of any representation and/or
warranty made by the Adviser in this
Agreement or arise out of or result from any
other material breach of this Agreement by
the Adviser (including a failure, whether
unintentional or in good faith or otherwise,
to comply with the diversification
requirements of Article IV or the Subchapter
M qualification of Section 2.3 of this
Agreement); as limited by and in accordance
with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). An Adviser shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.2(c). An Adviser shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Adviser in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Adviser of any such claim
shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The
Adviser also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Adviser to such party of the Adviser's
election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in
connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the
Adviser of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection
with the issuance or sale of the Contracts or the operation of
each Account.
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company, and each of its directors and officers
and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.3) against
any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the
Fund) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or
any member thereof, are related to the operations of the Fund
and:
(i) arise as a result of
any failure by the Fund to provide the
services and furnish the materials under the
terms of this Agreement; or
(ii) arise out of or result
from any material breach of any
representation and/or warranty made by the
Fund in this Agreement or arise out of or
result from any other material breach of
this Agreement by the Fund (including a
failure, whether unintentional or in good
faith or otherwise, to comply with the
diversifictation requirements of Article IV
or the Subchapter M qualification of Section
2.3 of this Agreement);
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall
not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified
Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice
from the Fund to such party of the Fund's election to assume
the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the
Fund of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in
connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
<PAGE>
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the
laws of the State of New York.
9.2. This Agreement shall be subject to the
provisions of the 1933, 1934 and 1940 Acts, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the Securities
and Exchange Commission may grant (including, but not limited
to, the Shared Funding Exemptive Order) and the terms hereof
shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and
effect until the first to occur of:
(a) termination by any party for any reason by
ninety (90) days advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio
is not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered, issued
or sold in accordance with applicable state and/or federal law
or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio falls to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund by written notice
to the Company if the Fund shall determine, in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity, or
(g) termination by the Company by written notice to
the Fund and the Adviser, if the Company shall determine, in
its sole judgment exercised in good faith, that either the
Fund or the Adviser has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Adviser by written
notice to the Company, if the Company gives the Fund and the
Adviser the written notice specified in Section 1.6 hereof and
at the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five 45 days after
the notice specified in Section 1.6 was given.
10.2. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing,
Contracts"). Specifically, without limitation, the owners of
the Existing Contracts shall be permitted to direct
reallocation of investments in the Fund, redemption of
investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of
such Article VII terminations shall be governed by Article VII
of this Agreement.
10.3. The Company shall not redeem Fund shares
attributable to the Contracts (as distinct from Fund shares
attributable to the Company's assets held in the Account)
except (i) as necessary to implement Contract Owner initiated
or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an
order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Fund the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the
Fund) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund 90
days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address
of such party set forth below or at such other address as such
party may from time to time specify in writing to the other
party.
If to the Fund:
Morgan Stanley Universal Funds, Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Secretary
If to Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Corporate Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any
claims against the Fund as neither the Board, officers, agents
or shareholders assume any personal liability for obligations
entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process
and regulatory authority, each party hereto shall treat as
confidential the names and addresses of the owners of the
Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except
as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other
confidential information until such time as it may come into
the public domain without the express written consent of the
affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect
their construction or effect.
12.4. This Agreement may be executed simultaneously
in two or more counterparts, each of which taken together
shall constitute one and the same instrument.
12.5. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of the Agreement shall not be
affected thereby.
12.6. Each party hereto shall cooperate with each
other party and all appropriate governmental authorities
(including without limitation the Securities and Exchange
Commission, the National Association of Securities Dealers and
state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the
generality of the foregoing, each party hereto further agrees
to furnish the California Insurance Commissioner with any
information or reports in connection with services provided
under this Agreement which such Commissioner may request in
order to ascertain whether the insurance operations of the
Company are being conducted in a manner consistent with the
California Insurance Regulations and any other applicable law
or regulations.
12.7. The rights, remedies and obligations contained
in this Agreement are cumulative and are in addition to any
and all rights, remedies and obligations at law or in equity,
which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and
obligations hereunder may not be assigned by any party without
the prior written consent of all parties hereto; provided,
however, that an Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company
under common control with the Adviser, if such assignee is
duly licensed and registered to perform the obligations of the
Adviser under this Agreement.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as practical
and in any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy
statement, notice or report of the Company sent to
stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without
exhibits) and financial reports of the Company filed
with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the
Company by independent accountants in connection with
any annual, interim or special audit made by them of
the books of the Company, as soon as practical after
the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed in its name and on its
behalf by its duly authorized representative and its seal to
be hereunder affixed hereto as of the date specified above.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By: ______________________________
Name:
Title:
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: ______________________________
Name:
Title:
MORGAN STANLEY ASSET MANAGEMENT INC.
By: ______________________________
Name:
Title:
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Name:
Title:
<PAGE>
PartTrans.doc
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account Form Number and Name of Contract Funded by Separate
-------------------
Account
Sep Acct VA-6
Variable Annuity - Products A, B and C
(A) Policy Form No. TCG - 311-197
(B) Policy Form No. - Not yet assigned
(C) Policy Form No. TCG - 313-197
A-1
<PAGE>
SCHEDULE B
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS, INC.
Fixed Income Portfolio
High Yield Portfolio
International Magnum Portfolio
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to
call in the number of Customers to the Fund , as soon as possible, but
no later than two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
C-1
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of
votes (already on Cards as
printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company
will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that
requests Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
C-2
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance
company's internal procedure and has not been required by the Fund in
the past.
. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "John A.
Smith, Trustee," then that is the
exact legal name to be printed on the Card and is the signature needed
on the Card.
. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important
that the Fund receives the tabulations stated in terms of a percentage
and the number of shares.) The
Fund must review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
C-3
. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
C-4
<PAGE>
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
DATED AS OF
DECEMBER 15, 1997
PartTran.doc
<PAGE>
<PAGE>
10
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
And
OCC DISTRIBUTORS
And
OpCap Advisors
THIS AGREEMENT, made and entered into this 18th day of
December, 1997, by and among Transamerica Life Insurance and Annuity Company, a
North Carolina Corporation (hereinafter the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement, as may be amended from time to time (each account referred to as the
"Account"), OCC ACCUMULATION TRUST, an open-end diversified management
investment company organized under the laws of the State of Massachusetts
(hereinafter the "Fund"), OpCap Advisors (hereinafter the "Adviser") and OCC
DISTRIBUTORS, a Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company and was established for the purpose
of serving as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities &
Exchange Commission (alternatively referred to as the "SEC" or the
"Commission"), dated February 22, 1995 (File No. 812-9290), granting
Participating Insurance Companies and variable annuity separate accounts and
variable life insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and retirement plans (hereinafter the "Mixed and
Shared Funding Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity or life insurance contracts (the "Contracts") under the 1933
Act; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company under the insurance laws of the State of North Carolina, to set
aside and invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act;
and
WHEREAS, the Underwriter is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934, as amended (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios named
in Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as the Account
at net asset value;
WHEREAS, the Company may contract with an Administrator to
perform certain services with regard to the Contracts and, therefore, certain
obligations and services of the Adviser and/or Trust should be directed to the
Administrator, as directed by the Company;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which the Company or its Administrator orders on behalf of
the Account, executing such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order for
the shares of the Fund. For purposes of this Section 1.1, the Company or its
Administrator shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Eastern Time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading.
1.2. The Company shall pay for Fund shares on the next
Business Day after it places an order to purchase Fund shares in accordance with
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by Participating
Insurance Companies and their separate accounts each Business Day; provided,
however, that the Board of Trustees of the Fund (hereinafter the "Directors")
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Directors, acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the
Fund shall be sold only to Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such other persons as are
permitted under applicable provisions of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code"), and regulations promulgated thereunder,
the sale to which will not impair the tax treatment currently afforded the
contracts. No shares of any Portfolio shall be sold to the general public.
1.5. The Fund and the Underwriter shall not sell Fund shares
to any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VI and VII of this
Agreement are in effect to govern such sales. The Fund shall make available upon
written request from the Company (i) a list of all other Participating Insurance
Companies and (ii) a copy of the Participation Agreement executed by any other
Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its agent of the request for
redemption. For purposes of this Section 1.6, the Company or its Administrator
shall be the designee of the Fund for receipt of requests for redemption from
each Account and receipt by such designee shall constitute receipt by the Fund;
provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day. Payment shall be in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time, on the same Business Day the Fund receives notice
of the redemption order from the Company except that the Fund reserves the right
to delay payment of redemption proceeds, but in no event may such payment be
delayed longer than the period permitted under Section 22(e) of the 1940 Act.
Neither the Fund nor the Underwriter shall bear any responsibility whatsoever
for the proper disbursement or crediting of redemption proceeds to Contract
owners; the Company alone shall be responsible for such action. If notification
of redemption is received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the Contracts shall be invested in the
Fund, or in the Company's general account; provided that such amounts may also
be invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
the Portfolios of the Fund named in Schedule 2; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents in writing to the use of such other investment company.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish notice to Company or its
Administrator by Company, two days prior to the distribution of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Portfolio shares in the form of additional shares of that
Portfolio. The Company reserves the right to revoke this election and to receive
all such dividends and distributions in cash. The Fund shall notify the Company
of the number of shares so issued as payment of such dividends and distributions
the day of distribution when it reports the Portfolio's NAV pursuant to Section
1.10.
1.10. The Fund shall report the net asset value per share for
each Portfolio to the Company or its Administrator, as directed by Company, on a
daily basis as soon as reasonably practical after the net asset value per share
is calculated and shall use its best efforts to make such net asset value per
share available by 5:30 p.m., Eastern Time, each business day. If the Fund
provides materially incorrect share net asset value information, the Fund shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material error in
the calculation or reporting of net asset value per share, dividend or capital
gains information shall be reported promptly upon discovery to the Company.
<PAGE>
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act and that the Contracts will be
issued and sold in compliance with all applicable federal and state laws. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account as a segregated asset account under applicable
state law and has registered each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as segregated investment
accounts for the Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently
and at the time of issuance will be treated as life insurance or annuity
contracts under Sections 7702 or 72 of the Internal Revenue Code and that it
will maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund and Adviser represent and warrant that Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law and that the
Fund is and shall remain registered under the 1940 Act for as long as the Fund
shares are sold. The Fund shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Fund shall register and
qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund or the Underwriter.
2.4. The Fund and Adviser represent and warrant that the Fund
and each of the Portfolios is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code, and that they will
maintain such qualification (under Subchapter M or any successor or similar
provision) (or correct any failure during the applicable grace period) and that
they will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.5. The Fund represents that its investment objectives,
policies and restrictions comply with applicable state investment laws as they
may apply to the Fund. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws and regulations of any
state. The Company alone shall be responsible for informing the Fund of any
insurance restrictions imposed by state insurance laws which are applicable to
the Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with the aforementioned state insurance
laws upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the National Association of Securities Dealers, Inc.,
("NASD") and is registered as a broker-dealer with the SEC. The Underwriter
further represents that it will sell and distribute the Fund shares in
accordance with all applicable federal and state securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of Massachusetts and that it does and will
comply with applicable provisions of the 1940 Act.
2.9. The Underwriter and the Adviser represent and warrant
that Adviser is and shall remain duly registered under all applicable federal
and state securities laws and that the Adviser will perform its obligations to
the Fund in accordance with the laws of Massachusetts and any applicable state
and federal securities laws.
2.10. The Fund, Adviser and Underwriter represent and warrant
that all of their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less than $5 million. The aforesaid includes coverage for
larceny and embezzlement and is issued by a reputable bonding company. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the
Company's expense, with as many copies of the current prospectuses for the
Portfolios listed on Schedule 2 as the Company may reasonably request for use
with prospective contractowners and applicants. The Underwriter shall print and
distribute, at the Fund's or Underwriter's expense, as many copies of said
prospectuses as necessary for distribution to existing contractowners or
participants. If requested by the Company in lieu thereof, the Fund shall
provide such documentation including a final copy of a current prospectus set in
type at the Fund's expense and other assistance as is reasonably necessary in
order for the Company at least annually (or more frequently if the said
prospectuses are amended more frequently) to have the new prospectus for the
Contracts and the Portfolios' new prospectuses printed together in one document.
In such case the Fund shall bear its share of expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of proxy material, if any, reports to shareholders and other
communications to shareholders with regard to the Portfolios listed in Schedule
2 in such quantity as the Company shall reasonably require and shall bear the
costs of distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract
owners or participants;
(ii) vote the Fund shares held in the Account in
accordance with instructions received from
contractowners or participants; and
(iii) vote Fund shares held in the Account for
which no timely instructions have been
received, in the same proportion as Fund
shares of such Portfolio for which
instructions have been received from the
Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or the Underwriter, each piece of sales literature or
other promotional material in which the Fund or the Fund's adviser or the
Underwriter is named, at least five business days prior to its use. No such
material shall be used if the Fund or the Underwriter reasonably objects in
writing to such use within fifteen business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to
contractowners or participants, or in sales literature or other promotional
material approved by the Company, except with the permission of the Company. The
Company agrees to respond to any request for approval on a prompt and timely
basis.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then, subject to obtaining any required exemptive orders
or other regulatory approvals, the Underwriter may make payments to the Company
or to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement, Fund
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
contractowners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
5.3 Adviser will quarterly reimburse the Company certain of
the administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Contract owners of shares
of the Portfolios of the Fund, equal to 0.15% per annum of the average daily net
assets of the Fund attributable to variable life or variable annuity contracts
offered by the Company or its affiliates up to $300 million and 0.20% per annum
of the average daily net assets of the Fund attributable to such contracts in
excess of $300 million but less than $600 million and 0.25% per annum of the
average daily net assets of the Fund attributable to such contracts in excess of
$600 million. In no event shall such fee be paid by the Fund, its shareholders
or by the contract holders.
ARTICLE VI. Diversification
6.1. The Fund and the Adviser represent and warrant that the
Fund will at all times invest money from the Contracts in such a manner as to
ensure that the Contracts will be treated as variable contracts under the
Internal Revenue Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will comply with Section 817(h) of the
Internal Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable conflict among
the interests of the contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are disregarded. The Fund Board shall
record in its minutes or other appropriate records, all reports received by it
and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of contractowner voting instructions, and the
Company's judgment represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
Account's investment in the Fund and terminate this Agreement with respect to
such Account. Any such withdrawal and termination must take place within 60 days
after the Fund gives written notice to the Company that this provision is being
implemented. Until the end of such 60 day period the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state insurance
regulators, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement with respect to such Account. Any such withdrawal
and termination must take place within 60 days after the Fund gives written
notice to the Company that this provision is being implemented. Until the end of
such 60 day period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Fund Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund or Quest Advisors be required
to establish a new funding medium for the Contracts. The Company shall not be
required by Section 7.3 to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of contractowners
materially adversely affected by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund
Board such reports, materials or data as the Fund Board may reasonably request
so that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Mixed and Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Fund Board.
7. 8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the Mixed
and Shared Funding Exemptive Order, (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted,
to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2,
7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent
that terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, the Underwriter, and each of the Fund's or the Underwriter's
directors, officers, employees or agents and each person, if any, who controls
or is associated with the Fund or the Underwriter within the meaning of such
terms under the federal securities laws (collectively, the "indemnified parties"
for purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including reasonable legal and other expenses), to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements or alleged
untrue
statements of any material fact contained in the registration
statement,
prospectus or statement of additional information for the Contracts
or
contained in the Contracts or sales literature or other promotional
material
for the Contracts (or any amendment or supplement to any of the foregoing),
or
arise out of or are based upon the omission or the alleged omission to
state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading in light of the circumstances in which
they
were made; provided that this agreement to indemnify shall not apply as to
any
indemnified party if such statement or omission or such alleged statemen
or
omission was made in reliance upon and in conformity with
information
furnished to the Company by or on behalf of the Fund for use in
the
registration statement, prospectus or statement of additional information
for
the Contracts or in the Contracts or sales literature or other
promotional
material for the Contracts (or any amendment or supplement) or otherwise
for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the
Company (other than statements or
representations contained in the Fund
registration statement, Fund prospectus,
Fund statement of additional information or
sales literature or other promotional
material of the Fund not supplied by the
Company or persons under its control) or
wrongful conduct of the Company or persons
under its control, with respect to the sale
or distribution of the Contracts or Fund
shares; or
(iii)
arise out of any untrue statement or alleged untrue statement of a material
fact contained in the Fund registration statement, Fund prospectus, statement
of additional information or sales literature or other promotional material of
the Fund or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances in which they were made, if such a statement or omission was
made in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control; or
(iv) arise as a result of any failure by the
Company to provide the services and furnish
the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any
representation and/or warranty made by the
Company in this Agreement or arise out of or
result from any other material breach by the
Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.
8.2. Indemnification By the Underwriter
(a) The Underwriter and Adviser, on their own behalf and on
behalf of the Fund, joint and severally agree to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter or Adviser) or litigation (including
reasonable legal and other expenses) to which the indemnified parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
agreement to indemnify shall not apply as to any indemnified party if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Fund or in sales
literature or other promotional material of the Fund (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii)
arise out of or as a result of statements or representations (other than
statements or representations contained in the Contracts or in the Contract or
Fund registration statement, the Contract or Fund prospectus, statement of
additional information, or sales literature or other promotional material for
the Contracts or of the Fund not supplied by the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund respectively) or
wrongful conduct of the Underwriter or the Fund or persons under the control
of the Underwriter or the Fund respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, statement of additional
information or sales literature or other
promotional material covering the Contracts
(or any amendment thereof or supplement
thereto), or the omission or alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statement or statements therein
not misleading in light of the circumstances
in which they were made, if such statement
or omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Underwriter
or the Fund or persons under the control of
the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund
to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional
or in good faith or otherwise, to comply
with the diversification requirements and
procedures related thereto specified in
Article VI or the Sub-Chapter M
qualification specified in Section 2.4 of
this Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by the Underwriter or the Fund in this
Agreement or arise out of or result from any
other material breach of this Agreement by
the Underwriter or the Fund; or
(vi) arise out of or result from the materially
incorrect or untimely calculation or
reporting of the daily net asset value per
share or dividend or capital gain
distribution rate;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the
Underwriter of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.3) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. Contribution
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advanc
written notice to the other
parties unless otherwise agreed in a separate written agreement among the
parties; or
(b) at the option of the Company if shares of the
Portfolios delineated in Schedule
2 are not reasonably available to meet the requirements of the Contracts as
determined by the Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the
Company by the NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the Contracts, the operation
of the Account, or the purchase of the Fund shares, which would have a material
adverse effect on the Company's ability to perform its obligations under this
Agreement; or
(d) at the option of the Company upon institution of
formal proceedings against the
Fund or the Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, which would have a material
adverse effect on the Fund's or the Underwriter's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company or the Fund upon
receipt of any necessary regulatory
approvals and/or the vote of the contractowners having an interest in the
Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares had been selected to
serve as the underlying investment media. The Company will give 30 days prior
written notice to the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the
Fund Board, or a majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the interests of (i) all
contractowners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases
to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails
to meet the diversification
requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement,
upon another party's material
breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company
determines in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse publicity which
is likely to have a material adverse impact upon the business and operations of
the Company; or
(k) at the option of the Fund or Underwriter, if the
Fund or Underwriter respectively,
shall determine in its sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Fund or Underwriter; or
(l) at the option of the Fund in the event any of the
Contracts are not issued or sold
in accordance with applicable federal and/or state law. Termination shall be
effective immediately upon such occurrence without notice.
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions
of Article VII, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions
of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating the Agreement to the non-terminating parties, with said termination
to be effective upon receipt of such notice by the non-terminating parties.
(c) In the event that any termination of this
Agreement is based upon the provisions
of Sections 10.1(j) or 10.1(k), prior written notice of the election to
terminate this Agreement for cause shall be furnished by the party terminating
this Agreement to the non-terminating parties. Such prior written notice shall
be given by the party terminating this Agreement to the non-terminating parties
at least 30 days before the effective date of termination.
10.3. It is understood and agreed that the right to terminate
this Agreement pursuant to Section 10.1(a) may be exercised for any reason or
for no reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this
Agreement pursuant to Section 10.1 of
this Agreement, and subject to Section 1.3 of this Agreement, the Company may
require the Fund and the Underwriter to, continue to make available additional
shares of the Fund for so long after the termination of this Agreement as the
Company desires pursuant to the terms and conditions of this Agreement as
provided in paragraph (b) below, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
(b) If shares of the Fund continue to be made
available after termination of this
Agreement pursuant to this Section 10.4, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter the Fund, the
Underwriter, or the Company may terminate the Agreement, as so continued
pursuant to this Section 10.4, upon written notice to the other party, such
notice to be for a period that is reasonable under the circumstances but, if
given by the Fund or Underwriter, need not be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated
or approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent contractowners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
90 days after the Company shall have notified the Fund or Underwriter of its
intention to do so.
ARTICLE XI. Notices
Any notice shall be deemed duly given only if sent by hand, evidenced
by written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
[Name]
[Title]
[Co. Name]
[Address]
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party
hereto shall treat as confidential all information reasonably identified as such
in writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit each other and
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as applicable,
by such party and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.
12.9. The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or relating to the
Contracts, the Accounts or the Portfolios of the Fund.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
Company:
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
SEAL By: ______________________________
Fund:
OCC ACCUMULATION TRUST
SEAL By: ______________________________
Underwriter:
OCC DISTRIBUTORS
By: ______________________________
Adviser:
OpCap Advisors
By:_______________________________
<PAGE>
Schedule 1
Participation Agreement
Among
OCC Accumulation Trust, Transamerica Life Insurance and Annuity Company
and
OCC Distributors
The following separate accounts of Transamerica Life Insurance and
Annuity Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
Separate Account VUL-1
[Date]
<PAGE>
Schedule 2
Participation Agreement
Among
OCC Accumulation Trust, Transamerica Life Insurance and Annuity Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
[Date]
Oppenheimer Capital Managed
Oppenheimer Capital Value Equity
<PAGE>
Exhibit (10)(a)
Consent of Counsel
<PAGE>
Sutherland, Asbill & Brennan, L.L.P
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
202-383-0126
fax: 202-637-3593
December 22, 1997
Board of Directors
Transamerica Life Insurance and Annuity Company
1150 South Olive
Los Angeles, CA 90015-2211
Re: Separate Account VA-6, Form N-4 Registration Statement, File No.
333-9745
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 1 to the
above-referenced registration statement. In giving this consent, we do not admit
that we are in the category of entities whose consent is required by Section 7
of the Securities Act of 1933.
Sutherland, Asbill & Brennan, L.L.P.
By /s/ Frederick R. Bellamy
<PAGE>
Exhibit 10(b)
Consent of Independent Auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Accountants" and to
the use of our report dated February 12, 1997 on the consolidated financial
statements of Transamerica Life insurance and Annuity Company contained in the
Registration Statement (Form N-4 No. 333- 9745) and related prospectus and
Statement of Additional Information of Transamerica Life Insurance and Annuity
Company Separate Account VA-6.
ERNST & YOUNG LLP
Los Angeles, California
December 19, 1997
<PAGE>
Exhibit 13 Performance Data Calculations
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Alger American Income & Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------- ----------------
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/14/88 $1,000 8.1342 10.00 100.00 0%
----------------------------------------------------------------------------------
----------------------------------------------------- -------------
1/1/96 $1,000 1 17.9732 55.64 6%
----------------------------------------------------- -------------
------------------------- ---------------------------------------------
12/31/96 21.2801
----------------------------------------------------------------------------------
</TABLE>
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9732 = 55.64 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 21.2801 x 100) - 0 - 0 = 2128.01 ,
from inception
ERV = ( 21.2801 x (1000 / 17.9732)) - 0 - 0.85 x .06 x
1000
= 1132.99 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2128.01 / 1000) ^ (1 /
8.1342) - 1
= 9.73% , from
inception
T = (ERV / P) - 1
= (1132.99 /
1000) - 1
= 13.30% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11/14/88 $1,000 8.1342 10.00 100.00
---------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 17.9732 55.64
-----------------------------------------------------
------------------------- --------------------------------
12/31/96 21.2801
---------------------------------------------------------------------
</TABLE>
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9732 = 55.64 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 21.2801 x 100) - 0 = 2128.01 , from
inception
ERV = ( 21.2801 x (1000 /
17.9732)) - 0
= 1183.99 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2128.01 / 1000) ^ (1 /
8.1342) - 1
= 9.73% , from inception
T = (ERV / P) - 1
= (1183.99 /
1000) - 1
= 18.40% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------- ----------------
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/14/88 $1,000 8.1342 10.00 100.00 0%
----------------------------------------------------------------------------------
----------------------------------------------------- -------------
1/1/96 $1,000 1 17.9092 55.84 6%
----------------------------------------------------- -------------
------------------------- ---------------------------------------------
12/31/96 21.1938
----------------------------------------------------------------------------------
</TABLE>
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9092 = 55.84 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 21.1938 x 100) - 0 - 0 = 2119.38 ,
from inception
ERV = ( 21.1938 x (1000 / 17.9092)) - 0 - 0.85 x .06 x
1000
= 1132.40 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2119.38 / 1000) ^ (1 /
8.1342) - 1
= 9.67% , from
inception
T = (ERV / P) - 1
= (1132.40 /
1000) - 1
= 13.24% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
---------------------------------------------------------------------
11/14/88 $1,000 8.1342 10.00 100.00
---------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 17.9092 55.84
-----------------------------------------------------
------------------------- --------------------------------
12/31/96 21.1938
---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9092 = 55.84 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 21.1938 x 100) - 0 = 2119.38 , from
inception
ERV = ( 21.1938 x (1000 /
17.9092)) - 0
= 1183.40 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= (2119.38 / 1000) ^ (1 /
8.1342) - 1
=
9.67%
T = (ERV / P) - 1
= (1183.40 /
1000) - 1
= 18.34% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Alger American Income & Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
11/14/88 $1,000 8.1342 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 17.9732 55.64 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 21.2801
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9732 = 55.64 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 21.2801 x 100) - 0 - 0 = 2128.01 ,
from inception
ERV = ( 21.2801 x (1000 / 17.9732)) - 0 - 0.85 x .06 x
1000
= 1132.99 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= (2128.01
/ 1000) - 1
= 112.80% , from
inception
CTR = (ERV / P) - 1
= (1132.99
/ 1000) - 1
= 13.30% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 8.13425 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.9732 55.64
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 21.2801
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9732 = 55.64 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 21.2801 x 100) - 0 = 2128.01 , from
inception
ERV = ( 21.2801 x (1000 /
17.9732)) - 0
= 1183.99 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2128.01 /
1000) - 1
=
112.80%
CTR = (ERV / P) - 1
= (1183.99 /
1000) - 1
=
18.40%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
11/14/88 $1,000 8.13425 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 17.9092 55.84 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 21.1938
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9092 = 55.84 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 21.1938 x 100) - 0 - 0 = 2119.38 ,
from inception
ERV = ( 21.1938 x (1000 / 17.9092)) - 0 - 0.85 x .06 x
1000
= 1132.40 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2119.38
/ 1000) - 1
= 111.94%
CTR = (ERV / P) - 1
= (1132.40 /
1000) - 1
= 13.24%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 8.13425 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.9092 55.84
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 21.1938
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.9092 = 55.84 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 21.1938 x 100) - 0 = 2119.38 , from
inception
ERV = ( 21.1938 x (1000 /
17.9092)) - 0
= 1183.40 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2119.38
/ 1000) - 1
= 111.94%
CTR = (ERV / P) - 1
= ( 1183.40
/ 1000) - 1
= 18.34%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Janus Aspen Series Worldwide Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T =
Average Annual Total Return n = Number of Years ERV =
Ending Redeemable Value of the hypothetical initial
payment
The following example shows the calculation for the returns
since inception of the portfolio and also in one year
duration. To calculate the ERV, we adjust the fund daily
values including dividends and capital gains for all contract
charges including contract fees.
-------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------- -----------------
-------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
------------------------------------------------------------------------------
------------------------------------------------ ------------
1/1/96 $1,000 1 15.0043 66.65 6%
------------------------------------------------- ------------
------------------------- ----------------------------------------
12/31/96 18.9658
------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.0043 = 66.65 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual
basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted
to daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken
under the policy.
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = ( 18.9658 x 100) - 0 - 0.85 x .05 x 1000 = 1854.08 ,
from inception
ERV = ( 18.9658 x (1000 / 15.0043)) - 0 -
0.85 x .06 x 1000
= 1213.02 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= (1854.08/ 1000) ^ (1 /
3.3041) - 1
= 20.55% , from inception
T = (ERV / P) - 1
= (1213.02 /
1000) - 1
= 21.30% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T =
Average Annual Total Return n = Number of Years ERV =
Ending Redeemable Value of the hypothetical initial
payment
The following example shows the calculation for the returns
since inception of the portfolio and also in one year
duration. To calculate the ERV, we adjust the fund daily
values including dividends and capital gains for all contract
charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- -----------------
- ------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- ------------------------------------------------------------------------
- -------------------------------------------------------
1/1/96 $1,000 1 15.0043 66.65
- -------------------------------------------------------
- ------------------------- ----------------------------------
12/31/96 18.9658
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.0043 = 66.65 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual
basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted
to daily adjustment.
The ERV can now be calculated as:
ERV = ( 18.9658 x 100) - 0 = 1896.58 , from
inception
ERV = ( 18.9658 x (1000 /
15.0043)) - 0
= 1264.02 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= (1896.58 / 1000) ^ (1 /
3.3041) - 1
= 21.37% , from inception
T = (ERV / P) - 1
= (1264.02 /
1000) - 1
= 26.40% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T =
Average Annual Total Return n = Number of Years ERV =
Ending Redeemable Value of the hypothetical initial
payment
The following example shows the calculation for the returns
since inception of the portfolio and also in one year
duration. To calculate the ERV, we adjust the fund daily
values including dividends and capital gains for all contract
charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- -----------------
- --------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
- --------------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 14.9870 66.72 6%
- --------------------------------------------------- ------------
- --------------------- ----------------------------------------------
12/31/96 18.9345
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 14.9870 = 66.72 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual
basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted
to daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken
under the policy.
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = ( 18.9345 x 100) - 0 - 0.85 x .05 x 1000 = 1850.95 ,
from inception
ERV = ( 18.9345 x (1000 / 14.9870)) - 0 -
0.85 x .06 x 1000
= 1212.39 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= (1850.95 / 1000) ^ (1 /
3.3041) - 1
= 20.48% , from inception
T = (ERV / P) - 1
= (1212.39 /
1000) - 1
= 21.24% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T =
Average Annual Total Return n = Number of Years ERV =
Ending Redeemable Value of the hypothetical initial
payment
The following example shows the calculation for the returns
since inception of the portfolio and also in one year
duration. To calculate the ERV, we adjust the fund daily
values including dividends and capital gains for all contract
charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- -----------------
- ------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- ------------------------------------------------------------------------
- -------------------------------------------------------
1/1/96 $1,000 1 14.9870 66.72
- -------------------------------------------------------
- ------------------------- ----------------------------------
12/31/96 18.9345
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 14.9870 = 66.72 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual
basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted
to daily adjustment.
The ERV can now be calculated as:
ERV = ( 18.9345 x 100) - 0 = 1893.45 , from
inception
ERV = ( 1893.45 x (1000 /
14.9870)) - 0
= 1263.39 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= (18.9345 / 1000) ^ (1 /
3.3041) - 1
=
21.31%
T = (ERV / P) - 1
= (1263.39 /
1000) - 1
= 26.34% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Janus Aspen Series Worldwide Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR
= Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- -----------------
- --------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
- --------------------------------------------------------------------------------
- --------------------------------------------------- -------------
1/1/96 $1,000 1 15.0043 66.65 6%
- --------------------------------------------------- -------------
- --------------------- ----------------------------------------------
12/31/96 18.9658
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.0043 = 66.65 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken
under the policy.
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = ( 18.9658 x 100) - 0 - 0.85 x .05 x 1000 = 1854.08 ,
from inception
ERV = ( 18.9658 x (1000 / 15.0043)) - 0 -
0.85 x .06 x 1000
= 1213.02 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= (1854.08
/ 1000) - 1
= 85.41% , from
inception
CTR = (ERV / P) - 1
= (1213.02
/ 1000) - 1
= 21.30% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR
= Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- -----------------
- -----------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- -----------------------------------------------------------------------
- -------------------------------------------------------
1/1/96 $1,000 1 15.0043 66.65
- -------------------------------------------------------
- ------------------------- ---------------------------------
12/31/96 18.9658
- -----------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.0043 = 66.65 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 18.9658 x 100) - 0 = 1896.58 , from
inception
ERV = ( 18.9658 x (1000 /
15.0043)) - 0
= 1264.02 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= (1896.58 /
1000) - 1
=
89.66%
CTR = (ERV / P) - 1
= (1264.02 /
1000) - 1
=
26.40%
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR
= Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- -----------------
- --------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
- --------------------------------------------------------------------------------
- --------------------------------------------------- -------------
1/1/96 $1,000 1 14.9870 66.72 6%
- --------------------------------------------------- -------------
- ------------------------- ------------------------------------------
12/31/96 18.9345
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 14.9870 = 66.72 , for one year
duration
C = the policy fee amount calculated on an annual
basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken
under the policy.
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = ( 18.9345 x 100) - 0 - 0.85 x .05 x 1000 = 1850.95 ,
from inception
ERV = ( 18.9345 x (1000 / 14.9870)) - 0 -
0.85 x .06 x 1000
= 1212.39 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= (1850.95 /
1000) - 1
= 85.10%
CTR = (ERV / P) - 1
= (1212.39 /
1000) - 1
= 21.24%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR
= Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- -----------------
- -----------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- -----------------------------------------------------------------------
- -------------------------------------------------------
1/1/96 $1,000 1 14.9870 66.72
- -------------------------------------------------------
- ------------------------- ---------------------------------
12/31/96 18.9345
- -----------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 14.9870 = 66.72 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 18.9345 x 100) - 0 = 1893.45 , from
inception
ERV = ( 1893.45 x (1000 /
14.9870)) - 0
= 1263.39 , for one year
duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= (1893.45 /
1000) - 1
= 89.35%
CTR = (ERV / P) - 1
= ( 1263.39
/ 1000) - 1
= 26.34%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Janus Aspen Series Balanced Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 13.0564 76.59 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 14.9566
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0564 = 76.59 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 14.9566 x 100) - 0 - 0.85 x .05 x 1000 = 1453.16 ,
from inception
ERV = ( 1495.66 x (1000 / 1305.64)) - 0 - 0.85 x .06 x
1000
= 1094.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1453.16 / 1000) ^ (1 /
3.3041) - 1
= 11.98% , from inception
T = (ERV / P) - 1
= (1094.54 /
1000) - 1
= 9.45% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 13.0564 76.59
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 14.9566
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0564 = 76.59 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 14.9566 x 100) - 0 = 1495.66 , from
inception
ERV = ( 14.9566 x (1000 /
13.0564)) - 0
= 1145.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1495.66 / 1000) ^ (1 /
3.3041) - 1
= 12.96% , from inception
T = (ERV / P) - 1
= (1145.54 /
1000) - 1
= 14.55% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- -------------------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00 5%
- -------------------------------------------------------------------------------
- ----------------------------------------------------- -----------
1/1/96 $1,000 1 13.0414 76.68 6%
- ----------------------------------------------------- -----------
- ------------------------- ------------------------------------------
12/31/96 14.9319
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0414 = 76.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 14.9319 x 100) - 0 - 0.85 x .05 x 1000 = 1450.69 ,
from inception
ERV = ( 14.9319 x (1000 / 13.0414)) - 0 - 0.85 x .06 x
1000
= 1093.96 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1450.69 / 1000) ^ (1 /
3.3041) - 1
= 11.92% , from inception
T = (ERV / P) - 1
= (1093.96 /
1000) - 1
= 9.40% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
9/12/93 $1,000 3.3041 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 13.0414 76.68
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 14.9319
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0414 = 76.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 14.9319 x 100) - 0 = 1493.19 , from
inception
ERV = ( 14.9319 x (1000 /
13.0414)) - 0
= 1144.96 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1493.19 / 1000) ^ (1 /
3.3041) - 1
=
12.9%
T = (ERV / P) - 1
= (1144.96 /
1000) - 1
= 14.50% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Janus Aspen Series Balanced Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
11/14/88 $1,000 3.3041 10.00 100.00 5%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 13.0564 76.59 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 14.9566
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0564 = 76.59 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 14.9566 x 100) - 0 - 0.85 x .05 x 1000 = 1453.16
, from inception
ERV = ( 1495.66 x (1000 / 1305.64)) - 0 - 0.85 x .06 x
1000
= 1094.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1453.16 / 1000) -
1
= 45.32% , from
inception
CTR = (ERV / P) - 1
= (1094.54
/ 1000) - 1
= 9.45% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 3.30411 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 13.0564 76.59
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 14.9566
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0564 = 76.59 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 14.9566 x 100) - 0 = 1495.66 , from
inception
ERV = ( 14.9566 x (1000 /
13.0564)) - 0
= 1145.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1495.66 /
1000) - 1
=
49.57%
CTR = (ERV / P) - 1
= (1145.54 /
1000) - 1
=
14.55%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
11/14/88 $1,000 3.30411 10.00 100.00 5%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 13.0414 76.68 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 14.9319
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0414 = 76.68 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 5% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 14.9319 x 100) - 0 - 0.85 x .05 x 1000 = 1450.69
, from inception
ERV = ( 14.9319 x (1000 / 13.0414)) - 0 - 0.85 x .06 x
1000
= 1093.96 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1450.69
/ 1000) - 1
= 45.07%
CTR = (ERV / P) - 1
= (1093.96 /
1000) - 1
= 9.40%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 3.30411 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 13.0414 76.68
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 14.9319
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 13.0414 = 76.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 14.9319 x 100) - 0 = 1493.19 , from
inception
ERV = ( 14.9319 x (1000 /
13.0414)) - 0
= 1144.96 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1493.19
/ 1000) - 1
= 49.32%
CTR = (ERV / P) - 1
= ( 1144.96
/ 1000) - 1
= 14.50%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
DREYFUS CAP APPRECIATION
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ----------------------- ----------------
- --------------------------------------------------------------------------------
4/27/93 $1,000 3.6822 12.50 80.00 5.00%
- --------------------------------------------------------------------------------
- ---------------------------------------------------- ------------
1/1/96 $1,000 1 17.8207 56.11 6%
- ---------------------------------------------------- ------------
- ----------------------- --------------------------------------------
12/31/96 21.8758
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.8207 = 56.11 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV= 1707.564 from inception
ERV= 1176.55 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T = 15.64% from inception
T = (ERV / P) - 1
T= 17.65% for one year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
4/27/93 $1,000 3.6822 12.50 80.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 17.8207 56.11
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 21.8758
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.8207 = 56.11 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 1750.064 since inception
ERV 1227.55 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 16.41% since inception
T = (ERV / P) - 1
T= 22.75% for one year duration
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since inception of
the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including dividends and
capital
gains for
all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------------- ----------------
- -------------------------------------------------------------------------------
4/27/93 $1,000 3.6822 12.50 80.00 5.00%
- -------------------------------------------------------------------------------
- -------------------------------------------------------- ------------
1/1/96 $1,000 1 17.7968 56.19 6%
- -------------------------------------------------------- ------------
- --------------------------- ---------------------------------------
12/31/96 21.8356
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.7956 = 56.19 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = 1704.348 since inception
ERV = 1175.94 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 15.58% from inception
T = (ERV / P) - 1
T= 17.59%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
4/27/93 $1,000 3.6822 12.50 80.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 17.7968 56.19
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 21.8356
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.7956 = 56.19 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 1746.848 since inception
ERV = 1226.94 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 15.58% from inception
T = (ERV / P) - 1
T= 17.59% one year
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
DREYFUS CAP APPRECIATION
For the period from inception and for one year ending 12/31/1996 I.
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- -----------------------------------------------------------------------------
4/27/93 $1,000 3.6822 12.50 80.00 5%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 17.8207 56.11 6%
- -------------------------------------------------- ------------
- --------------------- -------------------------------------------
12/31/96 21.8758
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 17.8207 = 56.11 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV= 1707.56 since inception
ERV= 1176.55 for one year
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 70.76%
CTR = (ERV / P) -
1
CRT= 17.65%
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
8/30/90 $1,000 3.68219 12.50 80.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.8207 56.11
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 21.8758
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.8207 = 56.11 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 1750.06 since inception
ERV 1227.55 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 75.01%
CTR = (ERV / P) -
1
CTR = 22.75%
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also for a one year duration. D = the
Contingent Deferred Sales Load removed upon surrender, taking into
account all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
8/30/90 $1,000 3.68219 12.50 80.00 5%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 17.7968 56.19 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 21.8356
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.7956 = 56.19 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = 1704.35 since inception
ERV = 1175.94 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CRT = 70.43%
CTR = (ERV / P) -
1
CRT = 17.59%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also a one year duration To calculate
the ERV, we adjust the fund daily values including dividends and
capital gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 3.68219 12.50 80.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.7968 56.19
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 21.8356
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 12.50 = 80 ,
from inception
= 1000 / 17.7956 = 56.19 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 1746.85 since inception
ERV = 1226.94 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 74.68%
CTR = (ERV / P) -
1
CTR = 22.69% one year duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
DREYFUS SMALL CAP
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ----------------------- ----------------
- --------------------------------------------------------------------------------
8/30/90 $1,000 6.3425 10.00 100.00 2.00%
- --------------------------------------------------------------------------------
- ---------------------------------------------------- ------------
1/1/96 $1,000 1 98.6787 10.13 6%
- ---------------------------------------------------- ------------
- ----------------------- --------------------------------------------
12/31/96 113.5845
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 98.6787 = 10.13 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV= 11341.45 from inception
ERV= 1100.054 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T = 46.65% from inception
T = (ERV / P) - 1
T= 10.01% for one year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
--------------------------- ----------------
------------------------------------------------------------------------
8/30/90 $1,000 6.3425 10.00 100.00
------------------------------------------------------------------------
--------------------------------------------------------
1/1/96 $1,000 1 98.6787 10.13
--------------------------------------------------------
--------------------------- --------------------------------
12/31/96 113.5845
------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 98.6787 = 10.13 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 11358.45 since inception
ERV 1151.054 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 46.69% since inception
T = (ERV / P) - 1
T= 15.11% for one year duration
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ----------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------------- ----------------
- ------------------------------------------------------------------------
8/30/90 $1,000 6.3425 10.00 100.00 2.00%
- --------------------------------------------------------------------------------
- -------------------------------------------------------- --------
1/1/96 $1,000 1 98.4156 10.16 6%
- -------------------------------------------------------- -------
- --------------------------- ---------------------------------------
12/31/96 113.2252
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 98.4156 = 10.16 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = 11305.52 since inception
ERV = 1099.48 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 46.58% from inception
T = (ERV / P) - 1
T= 9.95%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
8/30/90 $1,000 6.3425 10.00 100.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 98.4156 10.16
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 113.2252
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 98.4156 = 10.16 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 11322.52 since inception
ERV = 1150.48 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 46.58% from inception
T = (ERV / P) - 1
T= 9.95% one year
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
DREYFUS SMALL CAP
For the period from inception and for one year ending 12/31/1996 I.
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
8/30/90 $1,000 6.3425 10.00 100.00 2%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 98.6787 10.13 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 113.5845
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 98.6787 = 10.13 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV= 11341.5 since inception
ERV= 1100.05 for one year
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = #######
CTR = (ERV / P) -
1
CRT= 10.01%
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
8/30/90 $1,000 6.34247 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 98.6787 10.13
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 113.5845
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 98.6787 = 10.13 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 11358.5 since inception
ERV 1151.05 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = #######
CTR = (ERV / P) -
1
CTR = 15.11%
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also for a one year duration. D = the
Contingent Deferred Sales Load removed upon surrender, taking into
account all contract charges including contract fees.
-------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------ ----------------
-------------------------------------------------------------------------------
8/30/90 $1,000 6.34247 10.00 100.00 2%
-------------------------------------------------------------------------------
---------------------------------------------------- ------------
1/1/96 $1,000 1 98.4156 10.16 6%
---------------------------------------------------- ------------
------------------------ ------------------------------------------
12/31/96 113.2252
-------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 98.4156 = 10.16 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 2% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = 11305.5 since inception
ERV = 1099.48 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CRT = #######
CTR = (ERV / P) -
1
CRT = 9.95%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also a one year duration To calculate
the ERV, we adjust the fund daily values including dividends and
capital gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 6.34247 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 98.4156 10.16
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 113.2252
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 98.4156 = 10.16 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 11322.5 since inception
ERV = 1150.48 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = #######
CTR = (ERV / P) -
1
CTR = 15.05% one year duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Alliance Variable Products Series Fund, Inc. Growth & Income Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00 4%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 15.8208 63.21 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 19.2467
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.8208 = 63.21 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 19.2467 x 100) - 0 - 0.85 x .04 x 1000 = 1890.67 ,
from inception
ERV = ( 19.2467 x (1000 / 15.8208)) - 0 - 0.85 x .06 x
1000
= 1165.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1890.67 / 1000) ^ (1 /
5.9671) - 1
= 11.26% , from inception
T = (ERV / P) - 1
= (1165.54 /
1000) - 1
= 16.55% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 15.8208 63.21
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 19.2467
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.8208 = 63.21 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 19.2467 x 100) - 0 = 1924.67 , from
inception
ERV = ( 19.2467 x (1000 /
15.8208)) - 0
= 1216.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1924.67 / 1000) ^ (1 /
5.9671) - 1
= 11.60% , from inception
T = (ERV / P) - 1
= (1216.54 /
1000) - 1
= 21.65% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00 4%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- -----------
1/1/96 $1,000 1 15.7815 63.37 6%
- ----------------------------------------------------- -----------
- ------------------------- -------------------------------------------
12/31/96 19.1894
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.7815 = 63.37 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 19.1894 x 100) - 0 - 0.85 x .04 x 1000 = 1884.94 ,
from inception
ERV = ( 19.1894 x (1000 / 15.7815)) - 0 - 0.85 x .06 x
1000
= 1164.94 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1884.94 / 1000) ^ (1 /
5.9671) - 1
= 11.21% , from inception
T = (ERV / P) - 1
= (1164.94 /
1000) - 1
= 16.49% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 15.7815 63.37
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 19.1894
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.7815 = 63.37 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 19.1894 x 100) - 0 = 1918.94 , from
inception
ERV = ( 19.1894 x (1000 /
15.7815)) - 0
= 1215.94 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1918.94 / 1000) ^ (1 /
5.9671) - 1
=
11.54%
T = (ERV / P) - 1
= (1215.94 /
1000) - 1
= 21.59% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Alliance Variable Products Series Fund, Inc. Growth & Income Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00 4%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 15.8208 63.21 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 19.2467
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.8208 = 63.21 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 19.2467 x 100) - 0 - 0.85 x .04 x 1000 = 1890.67
, from inception
ERV = ( 19.2467 x (1000 / 15.8208)) - 0 - 0.85 x .06 x
1000
= 1165.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1890.67 / 1000) -
1
= 89.07% , from
inception
CTR = (ERV / P) - 1
= (1165.54
/ 1000) - 1
= 16.55% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 15.8208 63.21
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 19.2467
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.8208 = 63.21 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 19.2467 x 100) - 0 = 1924.67 , from
inception
ERV = ( 19.2467 x (1000 /
15.8208)) - 0
= 1216.54 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1924.67 /
1000) - 1
=
92.47%
CTR = (ERV / P) - 1
= (1216.54 /
1000) - 1
=
21.65%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
1/14/91 $1,000 5.967 10.00 100.00 4%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 15.7815 63.37 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 19.1894
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.7815 = 63.37 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 19.1894 x 100) - 0 - 0.85 x .04 x 1000 = 1884.94
, from inception
ERV = ( 19.1894 x (1000 / 15.7815)) - 0 - 0.85 x .06 x
1000
= 1164.94 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1884.94
/ 1000) - 1
= 88.49%
CTR = (ERV / P) - 1
= (1164.94 /
1000) - 1
= 16.49%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
1/14/91 $1,000 5.9671 10.00 100.00
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 15.7815 63.37
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 19.1894
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 15.7815 = 63.37 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 19.1894 x 100) - 0 = 1918.94 , from
inception
ERV = ( 19.1894 x (1000 /
15.7815)) - 0
= 1215.94 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1918.94
/ 1000) - 1
= 91.89%
CTR = (ERV / P) - 1
= ( 1215.94
/ 1000) - 1
= 21.59%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
MFS Variable Investment Trust Emerging Growth Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00 6%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 11.6534 85.81 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 13.4582
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6534 = 85.81 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.4582 x 100) - 0 - 0.85 x .06 x 1000 = 1294.82 ,
from inception
ERV = ( 13.4582 x (1000 / 11.6534)) - 0 - 0.85 x .06 x
1000
= 1103.87 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1294.82 / 1000) ^ (1 /
1.4438) - 1
= 19.60% , from inception
T = (ERV / P) - 1
= (1103.87 /
1000) - 1
= 10.39% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 11.6534 85.81
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 13.4582
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6534 = 85.81 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.4582 x 100) - 0 = 1345.82 , from
inception
ERV = ( 13.4582 x (1000 /
11.6534)) - 0
= 1154.87 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1345.82 / 1000) ^ (1 /
1.4438) - 1
= 22.84% , from inception
T = (ERV / P) - 1
= (1154.87 /
1000) - 1
= 15.49% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00 6%
- -------------------------------------------------------------------------------
- --------------------------------------------------- -------------
1/1/96 $1,000 1 11.6508 85.83 6%
- --------------------------------------------------- -------------
- ------------------------- ---------------------------------------------
12/31/96 13.4485
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6508 = 85.83 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals.
This assumes no withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.4485 x 100) - 0 - 0.85 x .06 x 1000 = 1293.85 ,
from inception
ERV = ( 13.4485 x (1000 / 11.6508)) - 0 - 0.85 x .06 x
1000
= 1103.30 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1293.85 / 1000) ^ (1 /
1.4438) - 1
= 19.53% , from inception
T = (ERV / P) - 1
= (1103.30 /
1000) - 1
= 10.33% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 11.6508 85.83
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 13.4485
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6508 = 85.83 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.4485 x 100) - 0 = 1344.85 , from
inception
ERV = ( 13.4485 x (1000 /
11.6508)) - 0
= 1154.30 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1344.85 / 1000) ^ (1 /
1.4438) - 1
=
22.78%
T = (ERV / P) - 1
= (1154.30 /
1000) - 1
= 15.43% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
MFS Variable Investment Trust Emerging Growth Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00 6%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 11.6534 85.81 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 13.4582
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6534 = 85.81 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.4582 x 100) - 0 - 0.85 x .06 x 1000 = 1294.82
, from inception
ERV = ( 13.4582 x (1000 / 11.6534)) - 0 - 0.85 x .06 x
1000
= 1103.87 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1294.82 / 1000) -
1
= 29.48% , from
inception
CTR = (ERV / P) - 1
= (1103.87
/ 1000) - 1
= 10.39% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 11.6534 85.81
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 13.4582
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6534 = 85.81 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.4582 x 100) - 0 = 1345.82 , from
inception
ERV = ( 13.4582 x (1000 /
11.6534)) - 0
= 1154.87 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1345.82 /
1000) - 1
=
34.58%
CTR = (ERV / P) - 1
= (1154.87 /
1000) - 1
=
15.49%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00 6%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 11.6508 85.83 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 13.4485
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6508 = 85.83 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.4485 x 100) - 0 - 0.85 x .06 x 1000 = 1293.85
, from inception
ERV = ( 13.4485 x (1000 / 11.6508)) - 0 - 0.85 x .06 x
1000
= 1103.30 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1293.85
/ 1000) - 1
= 29.39%
CTR = (ERV / P) - 1
= (1103.30 /
1000) - 1
= 10.33%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
7/23/95 $1,000 1.4438 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 11.6508 85.83
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 13.4485
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.6508 = 85.83 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.4485 x 100) - 0 = 1344.85 , from
inception
ERV = ( 13.4485 x (1000 /
11.6508)) - 0
= 1154.30 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1344.85
/ 1000) - 1
= 34.49%
CTR = (ERV / P) - 1
= ( 1154.30
/ 1000) - 1
= 15.43%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
MFS Variable Investment Trust Growth with Income Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00 6%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 10.7187 93.29 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 13.0418
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7187 = 93.29 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.0418 x 100) - 0 - 0.85 x .06 x 1000 = 1253.18 ,
from inception
ERV = ( 13.0418 x (1000 / 10.7187)) - 0 - 0.85 x .06 x
1000
= 1165.73 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1253.18 / 1000) ^ (1 /
1.2329) - 1
= 20.09% , from inception
T = (ERV / P) - 1
= (1165.73 /
1000) - 1
= 16.57% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 10.7187 93.29
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 13.0418
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7187 = 93.29 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.0418 x 100) - 0 = 1304.18 , from
inception
ERV = ( 13.0418 x (1000 /
10.7187)) - 0
= 1216.73 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1304.18 / 1000) ^ (1 /
1.2329) - 1
= 24.04% , from inception
T = (ERV / P) - 1
= (1216.73 /
1000) - 1
= 21.67% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- -------------------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00 6%
- -------------------------------------------------------------------------------
- -------------------------------------------------- -------------
1/1/96 $1,000 1 10.7174 93.31 6%
- -------------------------------------------------- -------------
- ---------------------- ---------------------------------------------
12/31/96 13.0338
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7174 = 93.31 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.0338 x 100) - 0 - 0.85 x .06 x 1000 = 1252.38 ,
from inception
ERV = ( 13.0338 x (1000 / 10.7174)) - 0 - 0.85 x .06 x
1000
= 1165.13 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1252.38 / 1000) ^ (1 /
1.2329) - 1
= 20.03% , from inception
T = (ERV / P) - 1
= (1165.13 /
1000) - 1
= 16.51% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 10.7174 93.31
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 13.0338
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7174 = 93.31 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.0338 x 100) - 0 = 1303.38 , from
inception
ERV = ( 13.0338 x (1000 /
10.7174)) - 0
= 1216.13 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1303.38 / 1000) ^ (1 /
1.2329) - 1
=
23.98%
T = (ERV / P) - 1
= (1216.13 /
1000) - 1
= 21.61% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
MFS Variable Investment Trust Growth with Income Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00 6%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 10.7187 93.29 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 13.0418
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7187 = 93.29 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.0418 x 100) - 0 - 0.85 x .06 x 1000 = 1253.18
, from inception
ERV = ( 13.0418 x (1000 / 10.7187)) - 0 - 0.85 x .06 x
1000
= 1165.73 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1253.18 / 1000) -
1
= 25.32% , from
inception
CTR = (ERV / P) - 1
= (1165.73
/ 1000) - 1
= 16.57% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 10.7187 93.29
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 13.0418
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7187 = 93.29 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.0418 x 100) - 0 = 1304.18 , from
inception
ERV = ( 13.0418 x (1000 /
10.7187)) - 0
= 1216.73 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1304.18 /
1000) - 1
=
30.42%
CTR = (ERV / P) - 1
= (1216.73 /
1000) - 1
=
21.67%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
10/8/95 $1,000 1.233 10.00 100.00 6%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 10.7174 93.31 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 13.0338
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7174 = 93.31 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.0338 x 100) - 0 - 0.85 x .06 x 1000 = 1252.38
, from inception
ERV = ( 13.0338 x (1000 / 10.7174)) - 0 - 0.85 x .06 x
1000
= 1165.13 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1252.38
/ 1000) - 1
= 25.24%
CTR = (ERV / P) - 1
= (1165.13 /
1000) - 1
= 16.51%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
10/8/95 $1,000 1.2329 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 10.7174 93.31
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 13.0338
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 10.7174 = 93.31 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.0338 x 100) - 0 = 1303.38 , from
inception
ERV = ( 13.0338 x (1000 /
10.7174)) - 0
= 1216.13 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1303.38
/ 1000) - 1
= 30.34%
CTR = (ERV / P) - 1
= ( 1216.13
/ 1000) - 1
= 21.61%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
MFS Variable Investment Trust Research Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00 6%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 11.0025 90.89 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 13.2581
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0025 = 90.89 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.2581 x 100) - 0 - 0.85 x .06 x 1000 = 1274.81 ,
from inception
ERV = ( 13.2581 x (1000 / 11.0025)) - 0 - 0.85 x .06 x
1000
= 1154.01 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1274.81 / 1000) ^ (1 /
1.4384) - 1
= 18.39% , from inception
T = (ERV / P) - 1
= (1154.01 /
1000) - 1
= 15.40% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 11.0025 90.89
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 13.2581
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0025 = 90.89 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.2581 x 100) - 0 = 1325.81 , from
inception
ERV = ( 13.2581 x (1000 /
11.0025)) - 0
= 1205.01 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1325.81 / 1000) ^ (1 /
1.4384) - 1
= 21.66% , from inception
T = (ERV / P) - 1
= (1205.01 /
1000) - 1
= 20.50% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00 6%
- -------------------------------------------------------------------------------
- ----------------------------------------------------- ----------
1/1/96 $1,000 1 11.0000 90.91 6%
- ----------------------------------------------------- ----------
- ------------------------- ------------------------------------------
12/31/96 13.2486
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0000 = 90.91 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.2486 x 100) - 0 - 0.85 x .06 x 1000 = 1273.86 ,
from inception
ERV = ( 13.2486 x (1000 / 11.0000)) - 0 - 0.85 x .06 x
1000
= 1153.42 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1273.86 / 1000) ^ (1 /
1.4384) - 1
= 18.33% , from inception
T = (ERV / P) - 1
= (1153.42 /
1000) - 1
= 15.34% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
---------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00
---------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 11.0000 90.91
-----------------------------------------------------
------------------------- --------------------------------
12/31/96 13.2486
---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0000 = 90.91 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.2486 x 100) - 0 = 1324.86 , from
inception
ERV = ( 13.2486 x (1000 /
11.0000)) - 0
= 1204.42 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 1324.86 / 1000) ^ (1 /
1.4384) - 1
=
21.60%
T = (ERV / P) - 1
= (1204.42 /
1000) - 1
= 20.44% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
MFS Variable Investment Trust Research Series
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00 6%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 11.0025 90.89 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 13.2581
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0025 = 90.89 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.2581 x 100) - 0 - 0.85 x .06 x 1000 = 1274.81
, from inception
ERV = ( 13.2581 x (1000 / 11.0025)) - 0 - 0.85 x .06 x
1000
= 1154.01 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1274.81 / 1000) -
1
= 27.48% , from
inception
CTR = (ERV / P) - 1
= (1154.01
/ 1000) - 1
= 15.40% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 11.0025 90.89
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 13.2581
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0025 = 90.89 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.2581 x 100) - 0 = 1325.81 , from
inception
ERV = ( 13.2581 x (1000 /
11.0025)) - 0
= 1205.01 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1325.81 /
1000) - 1
=
32.58%
CTR = (ERV / P) - 1
= (1205.01 /
1000) - 1
=
20.50%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
7/25/95 $1,000 1.438 10.00 100.00 6%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 11.0000 90.91 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 13.2486
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0000 = 90.91 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 6% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 13.2486 x 100) - 0 - 0.85 x .06 x 1000 = 1273.86
, from inception
ERV = ( 13.2486 x (1000 / 11.0000)) - 0 - 0.85 x .06 x
1000
= 1153.42 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1273.86
/ 1000) - 1
= 27.39%
CTR = (ERV / P) - 1
= (1153.42 /
1000) - 1
= 15.34%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
7/25/95 $1,000 1.4384 10.00 100.00
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 11.0000 90.91
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 13.2486
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 11.0000 = 90.91 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 13.2486 x 100) - 0 = 1324.86 , from
inception
ERV = ( 13.2486 x (1000 /
11.0000)) - 0
= 1204.42 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 1324.86
/ 1000) - 1
= 32.49%
CTR = (ERV / P) - 1
= ( 1204.42
/ 1000) - 1
= 20.44%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
OCC MANAGED
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ----------------------- ----------------
- --------------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 0.00%
- --------------------------------------------------------------------------------
- ---------------------------------------------------- ------------
1/1/96 $1,000 1 34.4488 29.03 6%
- ---------------------------------------------------- ------------
- ----------------------- --------------------------------------------
12/31/96 41.4944
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 34.3388 = 29.03 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV= 4149.44 from inception
ERV= 1153.524 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T = 18.40% from inception
T = (ERV / P) - 1
T= 15.35% for one year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 34.4488 29.03
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 41.4944
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 34.3388 = 29.03 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 4149.44 since inception
ERV 1204.524 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 18.40% since inception
T = (ERV / P) - 1
T= 20.45% for one year duration
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------------- ----------------
- -------------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 ...0.00%
- -------------------------------------------------------------------------------
- -------------------------------------------------------- -------
1/1/96 $1,000 1 34.3212 29.14 6%
- -------------------------------------------------------- -------
- --------------------------- ---------------------------------------
12/31/96 41.3201
- -------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 34.3212 = 29.14 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = 4132.01 since inception
ERV = 1152.924 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 18.34% from inception
T = (ERV / P) - 1
T= 15.29% for one year
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 34.3212 29.14
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 41.3201
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 34.3212 = 29.14 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 4132.01 since inception
ERV = 1203.924 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 18.34% from inception
T = (ERV / P) - 1
T= 15.29% one year
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
OCC MANAGED
For the period from inception and for one year ending 12/31/1996 I.
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 34.4488 29.03 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 41.4944
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 34.3388 = 29.03 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV= 4149.44 since inception
ERV= 1153.52 for one year
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 314.94%
CTR = (ERV / P) -
1
CRT= 15.35%
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
7/31/88 $1,000 8.42466 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 34.4488 29.03
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 41.4944
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 34.3388 = 29.03 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 4149.44 since inception
ERV 1204.52 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 314.94%
CTR = (ERV / P) -
1
CTR = 20.45%
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also for a one year duration. D = the
Contingent Deferred Sales Load removed upon surrender, taking into
account all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
7/31/88 $1,000 8.42466 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 34.3212 29.14 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 41.3201
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 34.3212 = 29.14 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = 4132.01 since inception
ERV = 1152.92 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CRT = 313.20%
CTR = (ERV / P) -
1
CRT = 15.29%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also a one year duration To calculate
the ERV, we adjust the fund daily values including dividends and
capital gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 8.42466 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 34.3212 29.14
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 41.3201
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 34.3212 = 29.14 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 4132.01 since inception
ERV = 1203.92 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 313.20%
CTR = (ERV / P) -
1
CTR = 20.39% one year duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
OCC SMALL CAP
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ----------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------------- ----------------
- -------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 0.00%
- -------------------------------------------------------------------------------
- ---------------------------------------------------- ------------
1/1/96 $1,000 1 24.0657 41.55 6%
- ---------------------------------------------------- ------------
- --------------------------- ----------------------------------------
12/31/96 28.1279
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 24.0657 = 41..55 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no
withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV= 2812.79 from inception
ERV= 1117.796 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T = 13.06% from inception
T = (ERV / P) - 1
T= 11.78% for one year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns
since inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 24.0657 41.55
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 28.1279
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 24.0657 = 41..55 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 2812.79 since inception
ERV 1168.796 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 13.06% since inception
T = (ERV / P) - 1
T= 16.88% for one year duration
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------------- ----------------
- -----------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 0.00%
- -------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 23.9765 41.71 6%
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 28.0097
- ----------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 23.9765 = 41.71 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes
no withdrawals have
been taken
= ($1,000 - 15% x $1,000) x
CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year duration
The ERV can now be calculated as:
ERV = 2800.97 since inception
ERV = 1117.215 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 13.00% from inception
T = (ERV / P) - 1
T= 11.72% for one year
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the
portfolio and
one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital
gains for
all contract charges including contract fees.
- ------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- --------------------------- ----------------
- ------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00
- ------------------------------------------------------------------------
- --------------------------------------------------------
1/1/96 $1,000 1 23.9765 41.71
- --------------------------------------------------------
- --------------------------- --------------------------------
12/31/96 28.0097
- ------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning of
period0
= 1000 / 10 = 100 , from
inception
= 1000 / 23.9765 = 41.71 , for one year
duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 /
40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 2800.97 since inception
ERV = 1168.215 one year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^ (1/n)
- 1
T= 13.00% from inception
T = (ERV / P) - 1
T= 11.72% one year
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
OCC SMALL CAP
For the period from inception and for one year ending 12/31/1996 I.
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
7/31/88 $1,000 8.4247 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 24.0657 41.55 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 28.1279
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 24.0657 = 41..55 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV= 2812.79 since inception
ERV= 1117.8 for one year
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 181.28%
CTR = (ERV / P) -
1
CRT= 11.78%
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and one year duration. To calculate the
ERV, we adjust the fund daily values including dividends and capital
gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
7/31/88 $1,000 8.42466 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 24.0657 41.55
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 28.1279
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 24.0657 = 41..55 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV= 2812.79 since inception
ERV 1168.8 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 181.28%
CTR = (ERV / P) -
1
CTR = 16.88%
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also for a one year duration. D = the
Contingent Deferred Sales Load removed upon surrender, taking into
account all contract charges including contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------ ----------------
- --------------------------------------------------------------------------------
7/31/88 $1,000 8.42466 10.00 100.00 0%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 23.9765 41.71 6%
- ----------------------------------------------------- ------------
- ------------------------ -------------------------------------------
12/31/96 28.0097
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 23.9765 = 41.71 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account
penalty free withdrawals. This assumes no withdrawals
have been taken
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = 2800.97 since inception
ERV = 1117.21 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CRT = 180.10%
CTR = (ERV / P) -
1
CRT = 11.72%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
CTR = ( ERV / P )
- 1
where:
P = A hypothetical initial payment of $1,000 ERV = Ending
Redeemable Value of the hypothetical initial payment CTR =
Cumulative Total Return, net of sub-account recurring
charges for the period
The following example shows the calculation for the returns since
inception of the portfolio and also a one year duration To calculate
the ERV, we adjust the fund daily values including dividends and
capital gains for
all contract charges including contract
fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------ ----------------
- --------------------------------------------------------------------
11/14/88 $1,000 8.42466 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 23.9765 41.71
- -----------------------------------------------------
- ------------------------ -------------------------------
12/31/96 28.0097
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 23.9765 = 41.71 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = 2800.97 since inception
ERV = 1168.21 one year duration
Applying the formula to calculate the value of T (the average annual
total return):
CTR = (ERV / P) -
1
CTR = 180.10%
CTR = (ERV / P) -
1
CTR = 16.82% one year duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Alliance Variable Products Series Fund, Inc. Premier Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00 4%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 17.3330 57.69 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 20.7363
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3330 = 57.69 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.7363 x 100) - 0 - 0.85 x .04 x 1000 = 2039.63 ,
from inception
ERV = ( 20.7363 x (1000 / 17.3330)) - 0 - 0.85 x .06 x
1000
= 1145.35 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2039.63 / 1000) ^ (1 /
4.5178) - 1
= 17.09% , from inception
T = (ERV / P) - 1
= (1145.35 /
1000) - 1
= 14.53% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.3330 57.69
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 20.7363
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3330 = 57.69 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.7363 x 100) - 0 = 2073.63 , from
inception
ERV = ( 20.7363 x (1000 /
17.3330)) - 0
= 1196.35 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2073.63 / 1000) ^ (1 /
4.5178) - 1
= 17.52% , from inception
T = (ERV / P) - 1
= (1196.35 /
1000) - 1
= 19.63% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ----------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- ----------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00 4%
- -------------------------------------------------------------------------------
- ----------------------------------------------------- ----------
1/1/96 $1,000 1 17.3026 57.79 6%
- ----------------------------------------------------- ----------
- ------------------------- -------------------------------------------
12/31/96 20.6896
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3026 = 57.79 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.6896 x 100) - 0 - 0.85 x .04 x 1000 = 2034.96 ,
from inception
ERV = ( 20.6896 x (1000 / 17.3026)) - 0 - 0.85 x .06 x
1000
= 1144.75 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 2034.96 / 1000) ^ (1 /
4.5178) - 1
= 17.03% , from inception
T = (ERV / P) - 1
= (1144.75 /
1000) - 1
= 14.48% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.3026 57.79
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 20.6896
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3026 = 57.79 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.6896 x 100) - 0 = 2068.96 , from
inception
ERV = ( 20.6896 x (1000 /
17.3026)) - 0
= 1195.75 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 20.6896 / 1000) ^ (1 /
4.5178) - 1
=
17.46%
T = (ERV / P) - 1
= (1195.75 /
1000) - 1
= 19.58% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Alliance Variable Products Series Fund, Inc. Premier Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
-----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
---------------------- ----------------
-----------------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00 4%
-----------------------------------------------------------------------------
-------------------------------------------------- ------------
1/1/96 $1,000 1 17.3330 57.69 6%
-------------------------------------------------- ------------
---------------------- -------------------------------------------
12/31/96 20.7363
-----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3330 = 57.69 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.7363 x 100) - 0 - 0.85 x .04 x 1000 = 2039.63
, from inception
ERV = ( 20.7363 x (1000 / 17.3330)) - 0 - 0.85 x .06 x
1000
= 1145.35 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2039.63 / 1000) -
1
= 103.96% , from
inception
CTR = (ERV / P) - 1
= (1145.35
/ 1000) - 1
= 14.53% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 17.3330 57.69
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 20.7363
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3330 = 57.69 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.7363 x 100) - 0 = 2073.63 , from
inception
ERV = ( 20.7363 x (1000 /
17.3330)) - 0
= 1196.35 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2073.63 /
1000) - 1
=
107.36%
CTR = (ERV / P) - 1
= (1196.35 /
1000) - 1
=
19.63%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ------------------------- ----------------
- --------------------------------------------------------------------------------
6/26/92 $1,000 4.518 10.00 100.00 4%
- --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------
1/1/96 $1,000 1 17.3026 57.79 6%
- ----------------------------------------------------- ------------
- ------------------------- -------------------------------------------
12/31/96 20.6896
- --------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3026 = 57.79 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 4% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.6896 x 100) - 0 - 0.85 x .04 x 1000 = 2034.96
, from inception
ERV = ( 20.6896 x (1000 / 17.3026)) - 0 - 0.85 x .06 x
1000
= 1144.75 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2034.96
/ 1000) - 1
= 103.50%
CTR = (ERV / P) - 1
= (1144.75 /
1000) - 1
= 14.48%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
6/26/92 $1,000 4.5178 10.00 100.00
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 17.3026 57.79
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 20.6896
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 10 = 100 ,
from inception
= 1000 / 17.3026 = 57.79 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.6896 x 100) - 0 = 2068.96 , from
inception
ERV = ( 20.6896 x (1000 /
17.3026)) - 0
= 1195.75 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 2068.96
/ 1000) - 1
= 106.90%
CTR = (ERV / P) - 1
= ( 1195.75
/ 1000) - 1
= 19.58%
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Average Annual Returns for
Transamerica variable Insurance Fund Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- --------------------- ----------------
- ------------------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56 0%
- ------------------------------------------------------------------------------
- ------------------------------------------------- -------------
1/1/96 $1,000 1 16.4792 60.68 6%
- ------------------------------------------------- -------------
- --------------------- ---------------------------------------------
12/31/96 20.8281
- ------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.4792 = 60.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.8281 x (1000 / 1.8)) - 0 - 0 = 11571.17 , from
inception
ERV = ( 20.8281 x (1000 / 16.4792)) - 0 - 0.85 x .06 x
1000
= 1212.90 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 11571.17 / 1000) ^ (1 /
16.0932) - 1
= 16.43% , from inception
T = (ERV / P) - 1
= (1212.90 /
1000) - 1
= 21.29% , for one year
duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 16.4792 60.68
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 20.8281
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.4792 = 60.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.8281 x (1000 / 1.8)) - 0 = 11571.17 , from
inception
ERV = ( 20.8281 x (1000 /
16.4792)) - 0
= 1263.90 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 11571.17 / 1000) ^ (1 /
16.0932) - 1
= 16.43% , from inception
T = (ERV / P) - 1
= (1263.90 /
1000) - 1
= 26.39% , for one year
duration
C. Using the standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
------------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------- ----------------
-------------------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56 0%
-------------------------------------------------------------------------------
------------------------------------------------- -------------
1/1/96 $1,000 1 16.3553 61.14 6%
-------------------------------------------------- -------------
---------------------- ---------------------------------------------
12/31/96 20.6613
-------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.3553 = 61.14 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.6613 x (1000 / 1.8)) - 0 - 0 = 11478.50 ,
from
inception
ERV = ( 20.6613 x (1000 / 16.3553)) - 0 - 0.85 x .06 x
1000
= 1212.28 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 11478.50 / 1000) ^ (1 /
16.0932) - 1
= 16.37% , from inception
T = (ERV / P) - 1
= (1212.28 /
1000) - 1
= 21.23% , for one year
duration
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the
formula
P x (1+T) ^ (n) = ERV
where:
P = A hypothetical initial payment of $1,000 T = Average
Annual Total Return n = Number of Years ERV = Ending
Redeemable Value of the hypothetical initial payment
The following example shows the calculation for the returns since
inception of the portfolio and also in one year duration. To
calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- ---------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- ---------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56
- ---------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 16.3553 61.14
- -----------------------------------------------------
- ------------------------- --------------------------------
12/31/96 20.6613
- ---------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming $1,000
initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.3553 = 61.14 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.6613 x (1000 / 1.8)) - 0 = 11478.50 , from
inception
ERV = ( 20.6613 x (1000 /
16.3553)) - 0
= 1263.28 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
T = (ERV / P) ^
(1/n) - 1
= ( 11478.50 / 1000) ^ (1 /
16.0932) - 1
=
16.37%
T = (ERV / P) - 1
= (1263.28 /
1000) - 1
= 26.33% , for one year
duration
<PAGE>
EXHIBIT 13
Transamerica Life Insurance & Annuity Company
Transamerica Classic Variable Annuity
Sub-Account Cumulative Total Returns for
Transamerica variable Insurance Fund Growth Portfolio
I. For the period from inception and for one year ending 12/31/1996
A. Using the standard format without Living
Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- -----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
- ---------------------- ----------------
- -----------------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56 0%
- -----------------------------------------------------------------------------
- -------------------------------------------------- ------------
1/1/96 $1,000 1 16.4792 60.68 6%
- -------------------------------------------------- ------------
- ---------------------- -------------------------------------------
12/31/96 20.8281
- -----------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.4792 = 60.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.8281 x (1000 / 1.8)) - 0 - 0 = 11571.17 , from
inception
ERV = ( 20.8281 x (1000 / 16.4792)) - 0 - 0.85 x .06 x
1000
= 1212.90 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 11571.17 / 1000)
- 1
= 1057.12% , from
inception
CTR = (ERV / P) - 1
= (1212.90
/ 1000) - 1
= 21.29% , for one
year duration
B. Using the Non-standard format without Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
- --------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
- ------------------------- ----------------
- --------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56
- --------------------------------------------------------------------
- -----------------------------------------------------
1/1/96 $1,000 1 16.4792 60.68
- -----------------------------------------------------
- ------------------------- -------------------------------
12/31/96 20.8281
- --------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.4792 = 60.68 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.8281 x (1000 / 1.8)) - 0 = 11571.17,from
inception
ERV = ( 20.8281 x (1000 /
16.4792)) - 0
= 1263.90 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 11571.17 /
1000) - 1
= 1057.12%
CTR = (ERV / P) - 1
= (1263.90 /
1000) - 1
=
26.39%
C. Using the standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
----------------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units CDSL
------------------------- ----------------
-----------------------------------------------------------------------------
12/1/80 $1,000 16.093 1.80 555.56 0%
-----------------------------------------------------------------------------
-------------------------------------------------- ------------
1/1/96 $1,000 1 16.3553 61.14 6%
--------------------------------------------------- ------------
----------------------- -------------------------------------------
12/31/96 20.6613
-------------------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C - D
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.3553 = 61.14 , for one
year duration
C = the policy fee amount calculated on an
annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
D = the Contingent Deferred Sales Load removed upon
surrender, taking into account any
penalty free withdrawals. This assumes no
withdrawals have been taken under the
policy.
= ($1,000 - 15% x $1,000)
x CDSL
= 0.85 x 1000 x 0% , for period since
inception
= 0.85 x 1000 x 6% , for one year
duration
The ERV can now be calculated as:
ERV = ( 20.6613 x (1000 / 1.8)) - 0 - 0 = 11478.50 , from
inception
ERV = ( 20.6613 x (1000 / 16.3553)) - 0 - 0.85 x .06 x
1000
= 1212.28 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 11478.50 / 1000) -
1
= 1047.85%
CTR = (ERV / P) - 1
= (1212.28 /
1000) - 1
= 21.23%
D. Using the Non-standard format with Living Benefits rider:
This calculation uses the formula
CTR = ( ERV / P ) -
1
where:
P = A hypothetical initial payment of $1,000 ERV =
Ending Redeemable Value of the hypothetical initial
payment CTR = Cumulative Total Return, net of
sub-account recurring charges for the period
The following example shows the calculation for the returns
since inception of the portfolio and also in one year duration.
To calculate the ERV, we adjust the fund daily values including
dividends and capital gains for all contract charges including
contract fees.
--------------------------------------------------------------------
Accumulation
Number Unit Cumulative
Date Premium of Years Value (AUV) Units
------------------------- ----------------
--------------------------------------------------------------------
12/1/80 $1,000 16.0932 1.80 555.56
--------------------------------------------------------------------
-----------------------------------------------------
1/1/96 $1,000 1 16.3553 61.14
-----------------------------------------------------
------------------------- -------------------------------
12/31/96 20.6613
--------------------------------------------------------------------
The ERV is calculated according to the following formula:
ERV = (A x B) - C
where:
A = the cumulative units in the contract, assuming
$1,000 initial premium is received
= 1000 / (AUV at beginning
of period0
= 1000 / 1.8 = 555.56 , from inception
= 1000 / 16.3553 = 61.14 , for one
year duration
B = the Accumulation Unit Value
(AUV)
C = the policy fee amount calculated on an annual basis
= ($1,000 / Ave size) x
policy fee
= (1,000 / 40,000) x $30
=
$0.75
C = 0 , in ERV calculation, since this was converted to
daily adjustment.
The ERV can now be calculated as:
ERV = ( 20.6613 x (1000 / 1.8)) - 0 = 11478.50 , from
inception
ERV = ( 20.6613 x (1000 /
16.3553)) - 0
= 1263.28 , for one
year duration
Applying the formula to calculate the value of T (the average
annual total return):
CTR = (ERV / P) - 1
= ( 11478.50 / 1000) -
1
= 1047.85%
CTR = (ERV / P) - 1
= ( 1263.28
/ 1000) - 1
= 26.33%
