As filed with the Securities and Exchange Commission on April 21, 1997
Registration No. 33-54116
811-5649
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-4
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No.7
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.20
INTRAMERICA VARIABLE ANNUITY ACCOUNT
(Formerly named First Charter Variable Annuity Account)
INTRAMERICA LIFE INSURANCE COMPANY
(Name of Depositor)
9 Ramland Road Orangeburg, New York 10962
(Address of Depositor's Principal Executive Offices)
(Depositor's Telephone Number, including Area Code) (914) 398-4440
Richard G. Petitt
Intramerica Life Insurance Company
9 Ramland Road
Orangeburg, New York 10962
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N. W.
Washington, D. C. 20004-2404
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 1, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
___ on ______________ pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on _____________ pursuant to paragraph (a)(ii) 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.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933. The Registrant filed the Rule 24f-2
Notice for the year ended December 31, 1996 on February 21, 1997.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-4
___________________________________________________________________________
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page..................... Cover Page
2. Definitions.................... Definitions
3. Synopsis or Highlights......... Summary; Fee Table
4. Condensed Financial
Information.................... Condensed Financial Information;
Calculation of Yields and Total
Returns; Other Performance Data
5. General Description of Registrant,
Depositor, and Portfolio Companies
(a) Depositor................. Intramerica Life Insurance
Company
(b) Registrant................ Summary; Intramerica Variable
Annuity Account
(c) Portfolio Company........ Summary; Scudder Variable Life
Investment Fund
(d) Fund Prospectus.......... Scudder Variable Life Investment
Fund
(e) Voting Rights............ Voting Rights
(f) Administrators........... Records and Reports; Written
Notices and Requests; Other
Inquiries
6. Deductions and Expenses....... Summary; Charges and Deductions
(a) General................. Summary; Mortality and Expense
Risk Charge; Contract
Administration Charge; Records
Maintenance Charge; Premium
Taxes; Other Taxes; Transfer
Charges
(b) Sales Load............... Summary; Charges and Deductions
(c) Special Purchase Plan.... Employment-Related Benefit Plans
(d) Commissions.............. Distribution of the Contract
(e) Expenses - Registrant.... Summary; Other Taxes
(f) Fund Expenses............ Summary; Scudder Variable Life
Investment Fund;
(g) Organizational Expenses N/A
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Item of Form N-4 Prospectus Caption
7. General Description of the Variable
Annuity Contracts
(a) Persons with Rights...... Summary; The Contract;
Distributions Under the Contract;
Voting Rights
(b) (i) Allocation of
Premium Payments Summary; Allocation of Net
Payments
(ii) Transfers........ Summary; Transfers
(iii) Exchanges........ N/A
(c) Changes................... Addition, Deletion, or
Substitution
of Investments; The Contract
(d) Inquiries................. Records and Reports; Written
Notices and Requests; Owner
Inquiries
8. Annuity Period................. Summary; Annuity Payments;
Maturity Date; Annuity Income
Options
9. Death Benefit.................. Summary; Death Benefit; Death of
Owner; Employment-Related Benefit
Plans; Annuity Income Options
10. Purchases and Contract Value
(a) Purchases................. Contract Application and Issuance
of Contracts; Payments;
Allocation of Net Payments;
Account Value; Contract Ownership
(b) Valuation................. Account Value
(c) Daily Calculation......... Account Value
(d) Underwriter............... Distribution of the Contract
11. Redemptions
(a) By Owner.................. Summary; Full and Partial
Surrender Privileges; Death
Benefit; Annuity Payments;
Annuity Income Options
(b) Texas ORP................. N/A
(c) Check Delay............... Deferment of Payment and
Transfers
(d) Lapse..................... Contract Expiration
(e) Free Look................. Examination Period
12. Taxes.......................... Summary; Certain Federal Income
Tax Consequences
13. Legal Proceedings.............. Legal Proceedings
14. Table of Contents of the
Statement of Additional Index to Statement of Additional
Information.................... Information
PART B
Statement of Additional
Item of Form N-4 Information Caption
15. Cover Page..................... Cover Page
16. Table of Contents.............. Table of Contents
17. General Information State...... Regulation of Intramerica
and History
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Statement of Additional
Item of Form N-4 Information Caption
18. Services
(a) Fees and Expenses
of Registrant............. N/A
(b) Management Contracts...... N/A
(c) Custodian................. Safekeeping of the Variable
Account's Assets
Independent Accountants... Financial Statements; Independent
Accountants
(d) Assets of Registrant...... N/A
(e) Affiliated Persons........ N/A
(f) Principal Underwriter..... Part A - Distribution of the
Contract
19. Purchase of Securities
Being Offered.................. Part A - The Contract;
Distribution of the Contract
20. Underwriters................... Part A - Distribution of the
Contract
21. Calculation of Performance Data Calculation of Yields and Total
Returns
22. Annuity Payments............... Part A - Annuity Payments;
Annuity Income Options
23. Financial Statements........... Financial Statements
PART C
Item of Form N-4 Part C Caption
24. Financial Statements and
Exhibits...................... Financial Statements and Exhibits
(a) Financial Statements..... (a) Financial Statements
(b) Exhibits................. (b) 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 Underwriters
30. Location of Accounts.......... Location of Accounts and Records
and Records
31. Management Services........... Management Services
32. Undertakings.................. Undertakings
Signatures.................... Signatures
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SCUDDER HORIZON PLAN
PROSPECTUS FOR
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
This Prospectus describes the no sales load Flexible Premium Variable
Deferred Annuity (the "Contract") offered by Intramerica Life Insurance
Company ("Intramerica"), 9 Ramland Road, Orangeburg, New York 10962. The
Contract is designed to provide for accumulation of capital on a tax-deferred
basis for retirement or other long-term purposes. The Contract is
available to individuals as well as to certain retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment. The Contract also may be purchased for use as an Individual
Retirement Annuity that qualifies for special federal income tax treatment
applicable to "IRAs."
The Contract currently may be purchased for a minimum initial payment
of $2,500. No commission or sales charge is deducted from the purchase
payments or from amounts payable upon surrender of the Contract. The Owner
of a Contract (the "Owner") may make additional payments subject to certain
conditions and limitations.
The Owner may direct that payments accumulate on a completely variable
basis, a completely fixed basis or a combination thereof. To the extent
the Owner elects to have payments invested on a variable basis, he or she
may allocate all or a portion of the payments to one or more subaccounts
(the "Subaccounts") of the Intramerica Variable Annuity Account (the
"Variable Account"). Each Subaccount invests exclusively in mutual fund
portfolios of the Scudder Variable Life Investment Fund (the "Fund"), an
investment company registered under the Investment Company Act of 1940, as
amended. The Fund offers one class of shares for the Money Market
Portfolio and two classes of shares (Class A and Class B shares) for the
other portfolios. The Subaccounts invest exclusively in the Money Market
Portfolio and Class A shares of the Bond Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, the Growth and Income Portfolio, the
International Portfolio, and the Global Discovery Portfolio. (Continued on
next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of This Prospectus is May 1, 1997
<PAGE>
(Continued from cover page)
Class B shares are subject to a 12b-1 fee or charge equal to an annual rate
of up to 0.25% of the average daily net asset value of its Class B shares
of the applicable portfolio. Class A shares are not subject to such
charges. A more complete description of Class A and Class B shares is set
forth in the attached prospectus for the Fund. Scudder, Stevens & Clark,
Inc. acts as sole investment adviser to the Fund. The Owner bears the
complete investment risk for all payments allocated to the Variable
Account.
This Prospectus sets forth the information that a prospective investor
should know before investing in the Contract. Please read it carefully and
retain it for future reference. A Statement of Additional Information
about the Contract and the Variable Account, which has the same date as
this Prospectus, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional
Information is available at no cost by writing to Intramerica Life
Insurance Company, 9 Ramland Road, Orangeburg, New York 10962 or by calling
(800) 833-0194. The table of contents of the Statement of Additional
Information is included at the end of this Prospectus.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS 1
SUMMARY 4
FEE TABLE 8
CONDENSED FINANCIAL INFORMATION 10
Financial Statements for the Variable Account
and Intramerica 11
CALCULATION OF YIELDS AND TOTAL RETURNS 11
OTHER PERFORMANCE DATA 12
INTRAMERICA AND THE VARIABLE ACCOUNT 13
Intramerica Life Insurance Company 13
Intramerica Variable Annuity Account 13
SCUDDER VARIABLE LIFE INVESTMENT FUND 14
Addition, Deletion, or Substitution
of Investments 16
THE CONTRACT 17
Contract Application and Issuance of the Contract 17
Examination Period 18
Payments 18
Allocation of Net Payments 20
Transfers 21
Account Value 23
Contract Ownership 25
Assignment of the Contract 25
DISTRIBUTIONS UNDER THE CONTRACT 26
Full and Partial Surrender Privileges 26
Annuity Payments 28
Annuity Income Options 29
Maturity Date 30
Death Benefit 31
Beneficiary Provisions 31
Death of Owner 31
Employment-Related Benefit Plans 32
CHARGES AND DEDUCTIONS 32
Mortality and Expense Risk Charge 32
Contract Administration Charge 33
Records Maintenance Charge 33
Premium Taxes 33
Other Taxes 33
Transfer Charges 34
Charges Against the Fund 34
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TABLE OF CONTENTS
Page
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 34
Tax Status of the Contract 35
Taxation of Annuities 38
Taxation of Intramerica 41
GENERAL PROVISIONS 41
The Contract 41
Deferment of Payment and Transfers 41
Contract Expiration 42
Misstatement of Age or Sex 42
Nonparticipating Contract 42
Written Notices and Requests:
Owner Inquiries 42
Records and Reports 42
DISTRIBUTION OF THE CONTRACT 43
THE GENERAL ACCOUNT 43
VOTING RIGHTS 44
LEGAL PROCEEDINGS 45
ADDITIONAL INFORMATION 45
TABLE OF CONTENTS FOR STATEMENT
OF ADDITIONAL INFORMATION 46
If you have any questions about your Contract, please call or write our
home office at 9 Ramland Road, Orangeburg, New York 10962, (800) 833-0194.
The Contract is available only in the State of New York.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON.
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DEFINITIONS
Account Value -- The total on any Valuation Date of the amount(s) in
the Subaccount(s) and the General Account of a Contract. The Account Value
is referred to as the Accumulated Value in the Contract.
Age -- The Annuitant's age on his or her birthday nearest to the
Contract Anniversary.
Annuitant -- The person whose life is used to determine the duration
and amount of any Annuity Payments and upon whose death, if it occurs prior
to the Maturity Date, a Death Benefit under the Contract is paid.
Annuity Income Option -- One of the ways the Owner may elect to
receive Annuity Payments.
Annuity Payments -- A series of payments made under an Annuity Income
Option if the Annuitant is living on the Maturity Date and the Contract is
in force at such time.
Beneficiary -- The person(s) designated under the Contract to receive
the benefits of the Contract if no Owner is living.
Code -- The Internal Revenue Code of 1986, as amended, or any
successor provision or provisions.
Contract -- The no sales load Flexible Premium Variable Deferred
Annuity offered by Intramerica and described in this Prospectus. It
includes the Contract, any endorsements and amendments, application, and
financial questionnaire.
Contract Anniversary -- The same date in each year as the Contract
Date.
Contract Date -- The date set forth in the Contract that is used to
determine Contract Months, Contract Years and Contract Anniversaries. The
Contract Date will be the same as the Effective Date unless the Effective
Date is the 29th, 30th, or 31st of a month, in which case the Contract Date
will be the 28th of the same month.
Contract Month -- A period beginning on a Monthly Anniversary and
ending on the day immediately preceding the next Monthly Anniversary.
Contract Year -- A period beginning on a Contract Anniversary and
ending on the day immediately preceding the next Contract Anniversary.
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Death Benefit -- An amount equal to the greater of the Account Value
or the Guaranteed Death Benefit of the Contract, payable in the event of
the death of the Annuitant prior to the Maturity Date.
Declaration Period -- A period of time specified by Intramerica of not
less than one year or more than five, during which specified rates of
interest will be paid on amounts allocated to the General Account.
Effective Date -- A date within two business days after a completed
application and the full initial Payment have been received by Intramerica.
Examination Period -- The period of time during which the Owner may
cancel the Contract and receive a refund of the initial Payment plus or
minus any gains or losses on investments in the selected Subaccount(s)
and/or interest earned on amounts allocated to the General Account. The
Owner may cancel the Contract within thirty days after receiving such
Contract.
Fund -- The Scudder Variable Life Investment Fund, an open-end,
diversified management investment company in which the Subaccounts invest.
General Account -- The account containing assets of Intramerica other
than those allocated to the Variable Account or any other separate account.
It provides for a minimum rate of accumulation that will be fixed and
guaranteed for a period of not less than one year or more than five.
Guaranteed Death Benefit -- The sum of the Payments made less any
partial surrenders.
Home Office -- The principal office of Intramerica, located at 9
Ramland Road, Orangeburg, New York 10962.
Intramerica -- Intramerica Life Insurance Company.
Joint Annuitant -- If Annuity Income Option 2 is selected, the person
designated by the Owner whose life, in addition to the life of the
Annuitant, is used to determine the amount and duration of Annuity
Payments.
Joint Owner -- The person sharing the privileges of ownership as
stated in the Contract. If a Joint Owner is named, Intramerica will
presume ownership to be as joint tenants with right of survivorship.
Maturity Date -- The date on which Annuity Payments are scheduled to
begin if the Annuitant is living.
Monthly Anniversary -- The same date in each month as the Contract
Date.
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Net Payment -- The Payment less any applicable premium taxes.
Nonqualified Contract -- A Contract other than a Qualified Contract.
Owner -- The person having the privileges of ownership stated in the
Contract, including the right to receive Annuity Payments if the Annuitant
is living on the Maturity Date and the Contract is in force.
Payment -- Any initial or subsequent investment in the Contract.
Payments are referred to as Premiums in the Contract.
Portfolio -- One of the separate investment portfolios of the Fund in
which the Variable Account invests. They are: the Money Market Portfolio
and Class A shares of the Bond Portfolio, the Capital Growth Portfolio, the
Balanced Portfolio, the Growth and Income Portfolio, the International
Portfolio, and the Global Discovery Portfolio.
Proof of Death -- One of the following: (i) a certified copy of a
death certificate, (ii) a copy of a certified decree of a court of
competent jurisdiction as to the finding of death, or (iii) any other proof
satisfactory to Intramerica.
Qualified Contract -- A Contract that qualifies as an individual
retirement annuity under Section 408(b) of the Code or a Contract purchased
and held by a retirement plan or as an individual retirement account that
qualifies for special federal income tax treatment under Section 401(a) or
408(a) of the Code.
SEC -- Securities and Exchange Commission.
Subaccount -- An investment division of the Variable Account. Each
Subaccount invests in shares of a different Fund Portfolio.
Unit Value -- The value of each unit which is calculated each
Valuation Period. It is similar to the net asset value of a mutual fund.
The Unit Value for each Subaccount is stated in the section of the
prospectus entitled "CONDENSED FINANCIAL INFORMATION" under the heading
"Accumulation Unit Value".
Valuation Date -- Each day on which valuation of the assets of the
Variable Account is required by applicable law, which currently is each day
that the New York Stock Exchange is open for trading.
Valuation Period -- The period that begins at the close of one
Valuation Date and ends at the close of the next succeeding Valuation Date.
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Variable Account -- Intramerica Variable Annuity Account, which is a
separate account of Intramerica consisting of assets allocated under the
Contract to the Variable Account and assets allocated under other variable
annuity contracts issued by Intramerica.
Written Notice (or Written Request) -- A notice or request made in
writing by the Owner or other person to Intramerica. Such notice or
request must be on the form provided by Intramerica and/or contain such
information as Intramerica requires to process the notice or request. All
written notices and requests must be sent to Intramerica at its Home
Office.
1940 Act -- The Investment Company Act of 1940, as amended.
SUMMARY
This summary contains certain basic information about the Contract.
The following questions and answers should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus.
Why should a person consider purchasing the Contract?
The Contract is designed to provide for accumulation of capital on a
tax-deferred basis for retirement or other long-term purposes.
How can the Contract be purchased?
The Contract currently may be purchased for a minimum initial Payment
of $2,500. No commission or sales charge is deducted from the purchase
price or from amounts payable upon surrender of the Contract. An Owner may
make additional Payments under the Contract, subject to certain conditions
and limitations, and will not be charged a commission or sales charge for
such additional Payments invested in the Contract. (See "Contract
Application and Issuance of the Contract," p. 18 and "Payments," p. 19)
Can this Contract be used as an IRA?
Yes, the Contract is available to individuals purchasing individual
retirement annuities. It is also available to certain retirement plans and
retirement accounts that qualify for special federal income tax treatment.
Intramerica requires that persons purchase separate Contracts if they
desire to invest moneys qualifying for different annuity tax treatment
under the Code.
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What investments are available under the Contract?
Currently, the Owner may invest in the following Subaccounts for a
variable rate of return or the General Account for a fixed rate of return.
The Subaccounts are: Money Market, Bond, Capital Growth, Balanced, Growth
and Income, International, and Global Discovery. Each Subaccount invests
in Class A shares of the corresponding mutual fund Portfolio. All
Portfolios are part of the Scudder Variable Life Investment Fund. The
assets of each Portfolio are held separately from the other Portfolios and
each has separate investment objectives and policies which are described
more fully in the accompanying prospectus for the Fund. The investment
adviser for the Portfolios is Scudder, Stevens & Clark, Inc. (See "Scudder
Variable Life Investment Fund," p. 14)
How are Payments allocated under the Contract?
Payments may be allocated to one or more Subaccounts and/or the
General Account, as selected by the Owner. Each Subaccount invests in a
separate mutual fund Portfolio with distinct investment objectives and
policies. The Account Value will vary with the investment performance of
the selected Subaccount(s) and the corresponding mutual fund Portfolio(s).
The Owner bears the complete investment risk for all Payments invested in
the Subaccount(s). Payments allocated to the General Account will earn
interest at rates declared and guaranteed by Intramerica. (See "Allocation
of Net Payments," p. 20, "Intramerica Variable Annuity Account," p. 13 and
"The General Account," p. 45)
What is the purpose of the Variable Account?
The Variable Account was established under the laws of the State of
New York, to invest payments received under variable annuities including
the Contract. Under New York law, the assets in the Variable Account
associated with the Contract generally are not chargeable with the
liabilities arising out of any other business conducted by Intramerica. To
the extent that an Owner allocates amounts to the Variable Account, the
Account Value will vary in accordance with the investment performance of
the selected Subaccounts. Therefore, the Owner bears the entire investment
risk under the Contract for amounts allocated to the Variable Account.
(See "Intramerica Variable Annuity Account," p. 13)
The Variable Account was originally established on June 8, 1988 by
First Charter Life Insurance Company ("First Charter"). On November 1,
1992, the Variable Account was transferred from First Charter Life
Insurance Company to Intramerica pursuant to a merger of First Charter with
and into Intramerica. See "Intramerica and the Variable Account," p. 13.
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Can assets be transferred within the Contract?
Yes. The Owner has the flexibility to transfer assets among the
Subaccounts and from the Subaccounts to the General Account at any time.
Amounts may be transferred within the General Account and from the General
Account to the Subaccounts at the end of a Declaration Period. Currently,
no charge is being imposed for any transfers among the Subaccounts or to
the General Account. Intramerica, at its sole discretion, may at any time
in the future impose a transfer charge of $20 for the third and each
subsequent transfer request made during a Contract Year. (See "Transfers,"
p. 21)
What are the current charges and deductions associated with the Contract?
Deductions will be made from the Contract's Account Value in the
Subaccounts on a daily basis for (i) costs incurred by Intramerica in
administering the Contract at an annual rate of .30% of the value of net
assets in each Subaccount and (ii) the assumption by Intramerica of certain
mortality and expense risks in connection with the Contract at an annual
rate of .40% of the value of net assets in each Subaccount. These charges
are not imposed on amounts allocated to the General Account. (See "Charges
and Deductions," p. 33)
Currently, Intramerica does not charge an annual maintenance fee.
However, the Contract permits Intramerica to deduct an amount up to $40.
(See "Records Maintenance Charge," p. 34)
No premium tax currently is payable by Intramerica under New York law.
Intramerica reserves the right to deduct any premium taxes payable in
respect of any future Payments. (See "Premium Taxes," p. 35)
The charges noted above are those currently being deducted by
Intramerica. For a more detailed discussion, including maximum level
charges set forth in the Contract, see "Charges and Deductions," p. 33.
The net asset values of the Subaccounts reflect the investment
advisory fee and other expenses incurred by the Fund. (See "Charges
Against the Fund," p. 35)
What are the annuity benefits under the Contract?
If the Annuitant is living on the Maturity Date and the Contract is in
force, Annuity Payments will be made to the Owner in accordance with the
terms of the Contract and the Annuity Income Option selected by the Owner.
Three Annuity Income Options are currently available: (i) a life annuity
with installment refund, (ii) joint and survivor life annuity with
installment refund and (iii) installments for life. In addition, the Owner
may select any other Annuity Income Option which is offered by Intramerica
on the Maturity Date of the Contract. The amount of the Annuity Payments
under the selected Annuity Income Option will be fixed at the Maturity
Date.
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What other distributions can be made under the Contract?
A full or partial surrender of the Contract may be made at any time,
subject to certain conditions. No commission or surrender charge is
deducted from the Account Value upon a full or partial surrender. No full
or partial surrender may be made after the Maturity Date or the Annuitant's
death. (See "Full and Partial Surrender Privileges," p. 27) If the
Annuitant dies before the Maturity Date, the greater of the Account Value
or the Guaranteed Death Benefit will be paid to the Owner. (See "Death
Benefit," p. 32) If the Owner of a Nonqualified Contract dies before the
Maturity Date and prior to the Annuitant's death, the Account Value will be
paid in a lump sum no later than five years following the Owner's death.
(See "Death of Owner," p. 32)
What are the federal income tax consequences of investment in the Contract?
With respect to Owners who are natural persons, there should be no
federal income tax payable on increases in the Account Value until there is
a distribution (e.g., a Surrender or Annuity Payment) or deemed
distribution (e.g., a pledge or assignment of the Contract) under the
Contract. Generally, a portion of any distribution or deemed distribution
will be taxable as ordinary income. The taxable portion of certain
distributions will be subject to withholding unless the taxpayer elects
otherwise. In addition, a penalty tax may apply to distributions or deemed
distributions under certain circumstances. (See "Certain Federal Income
Tax Consequences," p. 36)
Can the Contract be returned after it is delivered?
Yes. The Contract contains a provision for an Examination Period
which permits the Owner to cancel a Contract by returning it within thirty
days after receipt. Upon return of the Contract to our Home Office,
Intramerica will refund the initial Payment plus or minus any investment
experience on amounts allocated to the Subaccounts and interest earned on
amounts allocated to the General Account. (See "Examination Period," p.
18)
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FEE TABLE
This Fee Table illustrates the current charges and deductions under
the Contract, including fees and expenses of the Fund for the 1996 calendar
year. The purpose of this table is to assist in understanding the various
cost and expenses that the Owner will bear directly and indirectly.
Information pertaining to the Fund has been provided by the Fund. For more
information on the charges described in this Table, see "CHARGES AND
DEDUCTIONS" and the Fund's prospectus, a current copy of which accompanies
this Prospectus.
Contract Owner Transaction Expenses
Sales Load Imposed on Payments NONE
Deferred Sales Load NONE
Surrender Fee NONE
Transfer Charge (transfers made between Subaccounts
and/or to the General Account during a Contract Year) NONE
Annual Records Maintenance Charge NONE
Variable Account Annual Expenses (as a percentage of Account Value)
Contract Administration Charge 0.30%
Mortality and Expense Risk Charge 0.40%
Total Variable Account Annual Expenses 0.70%
Fund Annual Expenses (as a percentage of average net assets for the 1996
calendar year)
Total
Portfolio
Management Other Operating
Fees Expenses Expenses
Money Market Portfolio 0.370% 0.090% 0.460%
Bond Portfolio 0.475% 0.135% 0.610%
Capital Growth Portfolio 0.475% 0.055% 0.530%
Balanced Portfolio 0.475% 0.125% 0.600%
International Portfolio 0.863% 0.187% 1.050%
Growth and Income Portfolio 0.475% 0.185% 0.660%
Global Discovery Portfolio 0.155% 1.345% 1.500%*
* Scudder, Stevens & Clark. Inc. (the Adviser) voluntarily did not impose
part of its management fee in 1996. Had the fee been imposed, the
management fee would have been 0.975% and the ratio of operating expenses
to average net assets for the year ended 12/31/96 would have been 2.32% for
the Global Discovery Portfolio.
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Example
The following example illustrates the expenses the Owner would pay on a
$1,000 investment, assuming 5% annual return on assets, if the Owner
continued the Contract, surrendered or annuitized at the end of each
period:
1 Year 3 Years 5 Years 10 Years
Money Market Subaccount $12 $37 $64 $141
Bond Subaccount $13 $42 $72 $158
Capital Growth Subaccount $13 $39 $68 $149
Balanced Subaccount $13 $41 $71 $157
International Subaccount $18 $55 $95 $206
Growth and Income Subaccount $14 $43 $74 $164
Global Discovery Subaccount $22 $69 N/A N/A
The fee table and example set forth above are based upon the current
level of charges deducted by Intramerica. Intramerica reserves the right
to increase the Mortality and Expense Risk Charge to .70% per year,
establish a Records Maintenance Charge of up to $40 per year and impose a
transfer charge of $20 for the third and each subsequent transfer request
made during a Contract Year. For a more detailed description of all charges
set forth in the Contract, see "CHARGES AND DEDUCTIONS."
Intramerica, as well as other insurance companies whose separate
accounts invest in the Fund, has agreed to reimburse the Fund to the extent
that the total operating expenses exceed .75% for each Portfolio except for
the International and Global Discovery Portfolios, where total operating
expenses are to be reimbursed to the extent they exceed 1.50%.
This example should not be considered representative of past or future
expenses, performance or returns. Actual expenses may be greater or less
than those shown. The assumed 5% annual return is hypothetical; actual
annual returns may be more or less than the assumed return.
9
<PAGE>
<TABLE>
C O N D E N S E D F I N A N C I A L I N F O R M A T I O N
The following condensed financial information is derived from the financial statements of the
Variable Account. The data should be read in conjunction with the financial statements, related
notes and other financial information included in the Statement of Additional Information.
The following table sets forth certain information regarding the Subaccounts for a Contract for
the period from commencement of business operations through December 31, 1996.
<CAPTION>
Accumulation unit value:
Year Ended December 31, Commencement
Subaccount 1996 1995 1994 1993 1992 1991 1990 Date*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market $18.056 $17.300 $16.494 $16.019 $15.729 $15.331 $14.598 $14.167
Bond $22.979 $22.508 $19.181 $20.287 $18.179 $17.109 $14.653 $13.877
Capital Growth $33.863 $28.388 $22.222 $24.773 $20.638 $19.514 $14.096 $15.820
Balanced $28.326 $25.496 $20.270 $20.840 $19.531 $18.389 $14.592 $15.401
International $30.987 $27.188 $24.641 $25.027 $18.287 $19.003 $17.174 $20.228
Growth and Income $20.713 $17.075 $13.053 N/A N/A N/A N/A $12.500
Global Discovery $13.126 N/A N/A N/A N/A N/A N/A $12.500
* The Money Market, Bond, Capital Growth, Balanced and International Subaccounts commenced
operations on July 11, 1990. The Growth and Income Subaccount commenced operations on May 1, 1994.
The Global Discovery Subaccount commenced operations on May 1, 1996.
</TABLE>
<TABLE>
<CAPTION>
Number of units outstanding at end of period:
Year Ended December 31,
Subaccount 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market 238,274 243,859 268,339 131,078 125,768 47,824 26,377
Bond 85,140 96,927 94,625 98,676 96,098 62,249 6,283
Capital Growth 275,153 288,084 282,635 245,368 207,556 57,599 15,167
Balanced 143,029 139,688 127,222 148,473 119,541 37,971 7,381
International 305,834 302,226 339,372 261,484 84,950 36,962 12,741
Growth and Income 381,681 279,098 145,245 N/A N/A N/A N/A
Global Discovery 115,344 N/A N/A N/A N/A N/A N/A
</TABLE>
10
<PAGE>
<PAGE>
Financial Statements for the Variable Account and Intramerica
The financial statements and reports of independent certified public
accountants for the Variable Account and Intramerica are contained in the
Statement of Additional Information.
C A L C U L A T I O N O F Y I E L D S A N D
T O T A L R E T U R N S
From time to time, Intramerica may advertise yields and average annual
total returns for the Subaccounts. In addition, Intramerica may advertise
the effective yield of the Money Market Subaccount for the Contract. These
figures will be based on historical earnings and are not intended to
indicate future performance.
The yield of the Money Market Subaccount for the Contract refers to
the annualized income generated by an investment in the Subaccount 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 the Subaccount 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 Subaccount (except the Money Market Subaccount) for the
Contract refers to the annualized income generated by an investment in the
Subaccount 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 average annual total return of a Subaccount for the Contract
refers to return quotations assuming an investment has been held in the
Subaccount for various periods of time including, but not limited to, a
period measured from the date the Subaccount commenced operations. When a
Subaccount has been in operation for one, five and ten years, respectively,
the average annual total return for these periods will be provided. The
total return quotations for the Contract will represent the average annual
compounded rates of return that would equate an initial investment of
$1,000 under the Contract to the redemption value of that investment as of
the last day of each of the periods for which total return quotations are
provided.
The yield and total return calculations for the Contract do not
reflect the effect of any premium taxes that may be applicable to a
particular Contract. To the extent that a premium tax is applicable to a
particular Contract, the yield and/or total return of that Contract will be
reduced. Because charges differ
11
<PAGE>
under different variable annuity contracts funded by the Subaccounts, the
yield and total return calculations for the Subaccounts will be different
for the Contract than for other such variable annuity contracts. For
additional information regarding yields and total returns calculated using
the standard formats briefly described above, please refer to the Statement
of Additional Information, a copy of which may be obtained from
Intramerica.
O T H E R P E R F O R M A N C E D A T A
Intramerica may from time to time disclose average annual total return
in non-standard formats and cumulative total return for Contracts funded by
the Subaccounts.
Intramerica may from time to time also disclose yields, standard total
returns and non-standard total returns for the Fund's Portfolios, including
such disclosures for periods prior to the date the Variable Account
commenced operations. For periods prior to the date the Variable Account
commenced operations, performance information for Contracts funded by the
Subaccounts will be calculated based on the performance of the Fund's
Portfolios and the assumption that the Subaccounts were in existence for
the same periods as those indicated for the Fund's Portfolios, with the
level of Contract charges equal to those that were in effect at the
inception of the Subaccounts for the Contracts.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For
additional information regarding the calculation of other performance data,
please refer to the Statement of Additional Information, a copy of which
may be obtained from Intramerica.
Performance and expense information for the Contract and each
Subaccount may be compared in advertising, sales literature, and other
communications to performance and expense information of other variable
annuity contracts tracked by independent services such as Lipper Analytical
Services, Inc. ("Lipper"), Morningstar and Variable Annuity Research Data
Service ("V.A.R.D.S."), which monitor and rank the performance and expenses
of variable annuity issuers on an industry-wide basis. From time to time,
Intramerica may also compare performance information for the Contract to
other indices that measure performance, such as Standard & Poor's 500
Composite ("S & P 500") or the Dow Jones Industrial Average ("Dow").
Unmanaged indices may assume reinvestment of dividends that generally do
not reflect deductions for administrative and management costs and
expenses.
Intramerica may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns or returns in
general, which may be illustrated by tables, graphs, or charts. All income
and capital gains derived from Subaccount investments are reinvested and
compound tax-deferred until distributed. Such tax-deferred compounding can
lead to substantial long-term accumulation of assets, provided that the
underlying Portfolio's investment experience is positive.
12
<PAGE>
I N T R A M E R I C A A N D
T H E V A R I A B L E A C C O U N T
Intramerica Life Insurance Company
Intramerica is a stock life insurance company incorporated under the
laws of the State of New York on March 24, 1966, and offers graded death
benefit life insurance in New York and New Jersey on a direct marketing
basis. Intramerica had assets of $129.4 million as of December 31, 1996.
The principal offices of Intramerica are located at 9 Ramland Road,
Orangeburg, New York 10962, and its telephone number at that address is
(800) 833-0194.
In 1991, Charter National Life Insurance Company ("Charter") purchased
the Colonial Penn Group, Inc., which indirectly owns Intramerica, a New
York domestic life insurer. On November 1, 1992, First Charter Life
Insurance Company ("First Charter"), a subsidiary of Charter, was merged
with and into Intramerica. As the company surviving the merger,
Intramerica acquired legal ownership of all of First Charter's assets,
including the Variable Account, and became responsible for all of First
Charter's liabilities and obligations. As a result of the merger, all
Contracts issued by First Charter before the merger became Contracts issued
by Intramerica after the merger.
Charter is a wholly owned subsidiary of Leucadia National Corporation
("Leucadia"), a New York corporation. Leucadia is a diversified holding
company, the common stock of which is listed on the New York and Pacific
Stock Exchanges under the symbol ("LUK"). Campet, Inc., a Leucadia
subsidiary, owns all of the outstanding stock of CNL, Inc. ("CNL"), the
principal underwriter for the Contract. See "DISTRIBUTION OF THE
CONTRACT."
Intramerica Variable Annuity Account
The Variable Account was established by First Charter on June 8, 1988,
as a separate investment account under the laws of the State of New York.
It became a separate investment account of Intramerica on November 1, 1992
when First Charter was merged into Intramerica (see "Intramerica Life
Insurance Company" above). The name of the Variable Account was changed to
the "Intramerica Variable Annuity Account" in connection with the merger
described above. The Account was not otherwise changed. The Variable
Account will receive and invest the Payments under the Contract. In
addition, the Variable Account may receive and invest payments for other
variable annuity contracts offered by Intramerica.
Under New York law, the assets of the Variable Account are the
property of Intramerica and the obligations of the Contract are obligations
of Intramerica. Assets in the Variable Account attributable to the Contract
generally are not chargeable with liabilities arising out of any other
business
13
<PAGE>
conducted by Intramerica. However, assets of the Variable Account will be
available to cover the liabilities of the General Account of Intramerica to
the extent that the assets of the Variable Account exceed its liabilities
arising under the contracts it supports. The obligations under the
Contracts are obligations of Intramerica.
The Variable Account currently is divided into Subaccounts. Each
Subaccount invests exclusively in shares of one of the Portfolios of the
Fund. Income, gains and losses from the assets of each Subaccount, whether
or not realized, are credited to or charged against such Subaccount without
regard to income, gains or losses from any other Subaccount or arising out
of any other business conducted by Intramerica.
The Variable Account is registered with the SEC as a unit investment
trust under the 1940 Act and meets the definition of a "separate account"
under the Federal securities laws. Registration with the SEC does not
involve supervision of the management or investment practices or policies
of the Variable Account or Intramerica by the SEC.
S C U D D E R V A R I A B L E L I F E
I N V E S T M E N T F U N D
The Variable Account will invest exclusively in shares of the Scudder
Variable Life Investment Fund (the "Fund"). The Fund is registered with
the SEC under the 1940 Act as an open-end, diversified management
investment company. Scudder, Stevens & Clark, Inc. is the sole investment
adviser to the Fund. The registration of the Fund does not involve
supervision of its management or investment practices or policies by the
SEC. The Fund is designed to provide an investment vehicle for variable
annuity contracts and variable life insurance policies. Therefore, shares
of the Fund are sold only to insurance company separate accounts, including
the Variable Account. Intramerica cannot guarantee that the Fund will
always be available for the Contract, but in the unlikely event that it is
not available, Intramerica will do everything reasonably necessary to
secure the availability of a comparable fund.
In addition to the Variable Account, shares of the Fund are being sold
to variable life insurance and variable annuity separate accounts of other
insurance companies, including an insurance company affiliated with
Intramerica. In the future, it may be disadvantageous for the Variable
Account and variable annuity separate accounts of other life insurance
companies, or for both variable life insurance separate accounts and
variable annuity separate accounts, to invest simultaneously in the Fund.
Currently, neither Intramerica nor the Fund foresees any such disadvantages
to either variable annuity owners or variable life insurance owners. The
management of the Fund intends to monitor events in order to identify any
material conflicts between and among variable annuity owners and variable
life insurance owners and to determine
14
<PAGE>
what action, if any, should be taken in response. In addition, if
Intramerica believes that the Fund's response to any of those events or
conflicts insufficiently protects Owners, it will take appropriate action
on its own. For more information, see "Investment Concept of the Fund" in
the Fund's prospectus, a current copy of which accompanies this Prospectus.
The Fund currently consists of the following Portfolios: the Money
Market Portfolio and Class A shares of the Bond Portfolio, the Capital
Growth Portfolio, the Balanced Portfolio, the Growth and Income Portfolio,
the International Portfolio, and the Global Discovery Portfolio. The
Global Discovery Portfolio commenced operations on May 1, 1996. Each
Portfolio represents, in effect, a separate mutual fund with its own
distinct investment objectives and policies. The income or losses of one
Portfolio generally have no effect on the investment performance of any
other Portfolio.
The investment objectives and policies of the Portfolios available
under the Contract are summarized below:
Money Market Portfolio: This Portfolio seeks to maintain stability of
capital and, consistent therewith, to maintain liquidity of capital and to
provide current income. This Portfolio seeks to maintain a constant net
asset value of $1.00 per share. It will invest in money market securities
such as U.S. Treasury obligations, commercial paper, certificates of
deposit and bankers' acceptances of domestic and foreign banks, including
foreign branches of domestic banks, and will enter into repurchase
agreements.
Bond Portfolio: This Portfolio pursues a policy of investing for a
high level of income consistent with a high-quality portfolio of debt
securities. It primarily invests in U.S. Government, corporate, and other
notes and bonds.
Capital Growth Portfolio: This Portfolio seeks long-term capital
appreciation and, consistent therewith, current income through a broad and
flexible investment program. The Portfolio seeks to achieve these
objectives by investing primarily in income-producing, publicly traded
equity securities, including common stocks and securities convertible into
common stocks.
Balanced Portfolio: This Portfolio seeks a balance of growth and
income from a diversified portfolio of equity and fixed income securities.
The Portfolio also seeks long-term preservation of capital through a
quality-oriented investment approach that is designed to reduce risk.
Growth and Income Portfolio: This Portfolio seeks long-term growth of
capital, current income and growth of income. It primarily invests in
common stocks, preferred stocks, and securities convertible into common
stocks of companies which offer the prospect for growth of earnings while
paying higher than average current dividends.
15
<PAGE>
International Portfolio: This Portfolio seeks long-term growth of
capital primarily through diversified holdings of marketable foreign equity
investments. It invests in companies, wherever organized, which do
business primarily outside the United States. The Portfolio intends to
diversify investments among several countries and not to concentrate
investments in any particular industry.
Global Discovery Portfolio: This Portfolio seeks above-average capital
appreciation over the long term. It primarily invests in equity securities
of small companies located around the world.
There is no assurance that any Portfolio will achieve its stated
objective. More detailed information, including a description of risks
involved in investing in each of the Portfolios, is contained in the
prospectus for the Fund, a current copy of which accompanies this
Prospectus. Information contained in the Fund's prospectus should be read
carefully before investing in the Contract.
Scudder, Stevens & Clark, Inc. (the "Adviser"), an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, manages
daily investments and business affairs of the Fund, subject to the policies
established by the Trustees of the Fund. For rendering advisory services
to the Portfolios, the Adviser receives compensation monthly at annual
rates equal to .370%, .475%, .475%, .475%, .475%, .875%, and .975% of the
average daily net asset values of the Money Market Portfolio, Bond
Portfolio, Capital Growth Portfolio, Balanced Portfolio, Growth and Income
Portfolio, International Portfolio, and the Global Discovery Portfolio,
respectively. For additional information, see the Fund's prospectus, a
current copy of which accompanies this Prospectus.
Addition, Deletion, or Substitution of Investments
Subject to any applicable law, Intramerica retains the right to make
certain changes in the Variable Account and its investments. Intramerica
reserves the right to eliminate the shares of any Portfolio and to
substitute shares of another Portfolio of the Fund or of another registered
open-end management investment company, if the shares of the Portfolio are
no longer available for investment or if, in Intramerica'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,
substitutions or eliminations of shares attributable to an Owner's interest
in a Subaccount will not be made without prior notice to the Owner and the
prior approval of the SEC. 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 annuity contracts on the basis of
requests made by Owners.
16
<PAGE>
New Subaccounts may be established when marketing, tax, investment or
other conditions warrant such additions. Any new Subaccounts may be made
available to existing Owners on a basis to be determined by Intramerica.
Each additional Subaccount will purchase shares in a Portfolio of the Fund
or in another mutual fund or investment vehicle. Intramerica may also
eliminate one or more Subaccounts if, in its sole discretion, marketing,
tax, investment or other conditions warrant such elimination. In the event
any Subaccount is eliminated, Intramerica will notify Owners and request a
reallocation of the amounts invested in the eliminated Subaccount. If the
Owner provides no such reallocation, Intramerica will reinvest the amounts
invested in the eliminated Subaccount in the Subaccount that invests in the
Money Market Portfolio (the "Money Market Subaccount").
In the event of any such substitution, change, or elimination,
Intramerica may, by appropriate endorsement, make such changes in the
Contract as may be necessary or appropriate to reflect such substitution,
change or elimination. Furthermore, if deemed to be in the best interests
of persons having voting rights under the Contract, the Variable Account
may be (i) operated as a management company under the 1940 Act or any
other form permitted by law, (ii) deregistered under the 1940 Act, in the
event such registration is no longer required or (iii) combined with one or
more other separate accounts. To the extent permitted by applicable law,
Intramerica also may transfer the assets of the Variable Account associated
with the Contract to another separate account.
The investment policy of the Variable Account will not be changed
unless the change has been approved by the Superintendent of Insurance of
the State of New York.
T H E C O N T R A C T
The description of the Contract contained in this Prospectus is
qualified in its entirety by reference to the Contract for the Flexible
Premium Variable Deferred Annuity, a copy of which has been filed as an
exhibit to the Registration Statement for the Contract and which is
available upon request from Intramerica.
Contract Application and Issuance of the Contract
The Contract is available to certain retirement plans and individual
retirement accounts that qualify for special federal income tax treatment,
to individuals purchasing individual retirement annuities that qualify for
special federal income tax treatment and to individuals and entities that
do not qualify for such special tax treatment. The Contract is not
available for use as a "Tax-sheltered Annuity" qualifying under Section
403(b) of the Code. An Owner who purchases a Contract which qualifies as
an individual retirement annuity under Section 408(b) of the Code should be
aware that the Code requires that
17
<PAGE>
such a Contract contain certain restrictive terms. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- Tax Status of the Contract."
In order to comply with New York law, the Annuitant must be between
the ages of 1 and 80. Before it will issue a Contract, Intramerica must
receive a properly completed Contract application and a minimum initial
Payment of $2,500. (See "Initial Payment," below.) Upon request, a
Premium Receipt form will be mailed to the Owner. The Annuitant must be
named in the Contract application. In the case of a Contract qualifying as
an individual retirement annuity under Section 408(b) of the Code, the
Owner must be the Annuitant. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES
- -- Tax Status of the Contract." Acceptance of an application is subject to
Intramerica's sole discretion and Intramerica reserves the right to decline
an application for any reason. In the event an application is declined,
the initial Payment will be refunded in full.
After underwriting is completed and the Contract is delivered to the
Owner, the term of the Contract will be deemed to have commenced as of the
Effective Date. The Effective Date is a date within two business days
after a completed application and the full initial Payment are received by
Intramerica. The Contract Date will be the same as the Effective Date
unless the Effective Date is the 29th, 30th or 31st of the month, in which
case the Contract Date will be the 28th day of the same month. The
Contract Date is the date used to determine Contract Months, Contract Years
and Contract Anniversaries.
Examination Period
The Contract contains a provision for an Examination Period which
permits the Owner to cancel a Contract within thirty days after receipt of
such Contract. Upon return of the Contract in accordance with its terms,
Intramerica will refund the initial Payment plus or minus any investment
experience on amounts allocated to the Subaccount(s) plus interest earned
on amounts allocated to the General Account. Intramerica will calculate
such refund as of the date the Contract is mailed to Intramerica. The
amount refunded may be more or less than the initial Payment, depending
upon the investment performance of the selected Subaccount(s). See "THE
CONTRACT --Payments," "THE CONTRACT -- Allocation of Net Payments," and
"THE CONTRACT -- Account Value."
Payments
Initial Payment. Currently, the minimum initial Payment needed to
purchase a Contract is $2,500. The Contract permits Intramerica, at its
sole discretion, to increase the minimum initial Payment to $5,000 at any
time. The initial Payment is the only Payment required to be made under
the Contract. At the time the initial Payment is made, a prospective Owner
must specify whether the purchase will be a Nonqualified or Qualified
Contract. If the initial Payment is derived from an exchange or surrender
of another annuity
18
<PAGE>
contract, Intramerica may require that the prospective purchaser provide
information with regard to the federal income tax status of the previous
annuity contract. Intramerica will require that persons purchase separate
Contracts if they desire to invest moneys qualifying for different annuity
tax treatment under the Code. Each such separate Contract would require a
minimum initial Payment of $2,500. The Company reserves the right to waive
the minimum initial Payment amount and accept less than $2,500 at its
discretion.
The initial Net Payment will be credited to the Contract within two
business days after receipt of the Payment if a properly completed Contract
application is received by Intramerica with such Payment, or within two
business days after a Contract application which was incomplete upon
receipt by Intramerica is made complete. If, for any reason, the initial
Net Payment is not credited to the prospective purchaser's Contract within
five business days after receipt by Intramerica because the application is
incomplete, the initial Net Payment will be returned immediately to the
prospective purchaser unless such prospective purchaser, after receiving
notice of the delay from Intramerica, specifically requests that the
Payment not be returned.
Additional Payments. While the Annuitant is living and prior to the
Maturity Date, the Owner may, subject to the limitations discussed below,
make additional Payments. Currently, there is no minimum additional
Payment amount nor is there a maximum number of additional Payments that
may be made per Contract Year. Under the Automatic Investment Plan, the
Owner is able to make regular investments in any of the variable
Subaccounts from a checking account ($50 minimum). The Automatic
Investment Plan cannot be used to invest in the General Account. Call
Intramerica at (800) 833-0194 for more information and an Automatic
Investment Plan application.
The Contract gives Intramerica the right to require that each
additional Payment be at least $1,000 and to limit the frequency of
additional Payments to a maximum of four per Contract Year. Intramerica,
at its discretion, may require that additional Payments comply with the
limitations it is permitted to impose under the Contract. Any additional
Payments will be credited to the Contract upon receipt at Intramerica's
Home Office.
Additional Payments with respect to a Contract must qualify for the
same federal income tax treatment as the initial Payment made under the
Contract. Intramerica will not accept an additional Payment if the federal
income tax treatment of such Payment will be different from that of the
initial Payment.
Limitations on Payments. Intramerica reserves the right to reject any
Payment. Intramerica normally will require a prospective purchaser to
complete a financial questionnaire for Payments in excess of $250,000.
Intramerica also may reject any Payment or additional Payment that would
cause the total Payments made by the Owner to exceed $1,000,000. With
respect to a Contract that qualifies as an individual retirement annuity
under Section 408(b) of the Code, the total Payments (including the initial
Payment),
19
<PAGE>
with respect to any calendar year, may not exceed $2,000 unless the portion
of such Payments in excess of $2,000 qualifies as a rollover amount or
contribution under Section 402(a)(5) or 408(d)(3) or other applicable
provisions of the Code. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Tax
Status of the Contract."
All checks or drafts should be made payable to Scudder Horizon Plan.
A Payment can also be made by requesting on the application that Scudder
Insurance Agency of New York, Inc. redeem shares in an existing Scudder
Fund Account and apply the proceeds towards a Contract.
Allocation of Net Payments
The Owner must allocate the Net Payments to one or more of the
Subaccounts, to the General Account or to any combination thereof. If any
portion of a Net Payment is allocated to the General Account, the Owner
must specify the Declaration Period to which the Net Payment is to be
allocated. See "THE GENERAL ACCOUNT." The Owner must indicate the initial
allocation in the Contract application. Upon receipt by Intramerica, the
Net Payment will be allocated as directed by the Owner. All allocations
must be made in whole percentages and must total 100%. If the allocations
do not total 100%, Intramerica will recompute the allocations
proportionately by dividing the percentage in each Subaccount selected, as
indicated on the application, by the sum of the percentages indicated.
This new percentage will be applied to the Net Payment. The following
example illustrates how this recomputation will be made:
Example
Indicated Actual
Allocation Allocation
Subaccount #1 25% 25% / 105% = 24%
Subaccount #2 40% 40% / 105% = 38%
Subaccount #3 40% 40% / 105% = 38%
Total 105% 100%
All Net Payments will be allocated at the time they are credited to the
Owner's Contract.
Additional Net Payments made directly by the Owner will be allocated
in the same proportion as the initial Net Payment unless Written Notice to
the contrary is received with such additional Net Payments. Once a change
in allocation is made, all future Net Payments will be allocated in
accordance with the new allocation unless contrary instructions are
received with such additional Net Payments. However, if the Owner has
funds deducted from a checking account and applied under the Automatic
Investment Plan option, the Owner must provide Intramerica with written
notice to change the allocation of future additional Net Payments.
20
<PAGE>
Transfers
Subject to certain conditions and charges, amounts may be transferred
among the Subaccounts and from one or more of the Subaccounts to the
General Account at any time. Transfers also may be made between different
Declaration Periods in the General Account and from the General Account to
one or more of the Subaccounts, but only at the end of the applicable
Declaration Period(s). Transfer of amounts from a Subaccount to the
General Account may be made only if such transfer would not cause a
Contract's value in the General Account to exceed $250,000. See "THE
GENERAL ACCOUNT."
Currently, no charge is being imposed for any transfers among
Subaccounts or from the Subaccounts to the General Account. The Contract,
however, permits Intramerica to deduct $20 for the third and each
subsequent transfer request made during a Contract Year. Intramerica, at
its sole discretion, may impose the transfer charge at any time. For a
discussion of transfer charges, see "CHARGES AND DEDUCTIONS -- Transfer
Charges."
Transfer requests must be by Written Notice or by telephone if elected
by a currently valid telephone transfer request form on file with
Intramerica. Intramerica employs 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. Intramerica, however, may be liable for such
losses if it does not follow those reasonable procedures. The procedures
Intramerica follows for telephone transfers include confirming the correct
name, contract number and personal code for each telephone transfer. See
"GENERAL PROVISIONS -- Written Notices and Requests: Owner Inquiries."
Transfers will be deemed effective, and values in connection with transfers
will be determined, as of the end of the Valuation Period during which the
transfer request is received. However, Intramerica may be permitted to
delay the effective date of a transfer in certain circumstances. See
"GENERAL PROVISIONS --Deferment of Payment and Transfers."
Asset Rebalancing Option. In order to maintain a particular
percentage allocation among the Subaccounts, the Owner may select the asset
rebalancing option. With asset rebalancing, Intramerica automatically
reallocates the Account Value in the Subaccounts quarterly to the
allocation selected by the Owner. Over a period of time, this method of
investing may help an Owner buy low and sell high although there can be no
assurance of this. This investment method does not assure profits and does
not protect against loss in declining markets.
To elect the asset rebalancing option, the Account Value in the
Contract must be at least $2,500 and a completed Asset Rebalancing Option
form must be received at Intramerica's Home Office. The Owner must
designate the applicable Subaccounts and the percentage allocations for
each of the applicable Subaccounts to be rebalanced quarterly. If the
asset rebalancing
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option is elected, all amounts allocated to the variable Subaccounts must
be included in the asset rebalancing option. The Owner may not participate
in dollar cost averaging and asset rebalancing at the same time. The
General Account is not available for the asset rebalancing option.
Selection of asset rebalancing will result in the transfer of funds to
one or more of the Subaccounts on the date specified by the Owner. If the
Owner has specified, or the form is received on the 29th, 30th or 31st,
Intramerica will consider the effective date to be the first Valuation Date
of the following month. If no date is specified or if the request is
received after the specified date, Intramerica will transfer funds on the
date of receipt of the Asset Rebalancing Option form and on the quarterly
anniversary of the applicable date thereafter. The amounts transferred
will receive the Unit Values for the affected Subaccounts at the end of the
Valuation Date on which the transfers occur. If the effective date is not
a Valuation Date, the transfer will occur on the next Valuation Date.
The Owner may terminate this option at any time by Written Notice. In
the event of a transfer by written request or telephone instructions, this
option will terminate automatically. In either event, the amounts in the
Subaccounts that have not been transferred will remain in those Subaccounts
regardless of the percentage allocation unless the Owner instructs
otherwise. If the Owner wishes to resume the asset rebalancing option
after it has been canceled, a new Asset Rebalancing Option form must be
completed and sent to Intramerica's Home Office. Intramerica may
discontinue, modify, or suspend the asset rebalancing option at any time.
Dollar Cost Averaging. Dollar cost averaging is a systematic method
of investing in which units are purchased in fixed dollar amounts so that
the cost is averaged over time. The Owner may dollar cost average their
allocations in the Subaccounts under the Contract by authorizing
Intramerica to make periodic transfers from any one Subaccount to one or
more other Subaccounts. Amounts transferred will purchase units in those
Subaccounts at the Unit Value of that Subaccount as of the Valuation Date
the transfer occurs. Since the value of the units will vary, the amounts
transferred to a Subaccount will result in the purchase of a greater number
of units when the Unit Value is low and the purchase of a lesser number of
units when the Unit Value is high. Similarly, the amounts transferred to a
Subaccount will result in the liquidation of a greater number of units when
the Unit Value is low and the liquidation of a fewer number of units when
the Unit Value is high. Dollar cost averaging does not assure a profit and
does not protect against loss in declining markets.
To elect dollar cost averaging, the Account Value in the Contract must
be at least $2,500 and a completed Dollar Cost Averaging form must be
received at Intramerica's Home Office. The Owner must designate the
frequency and period of time of the transfers, the Subaccount from which
transfers are to be made and the Subaccounts and allocation percentages to
which funds are to be transferred. The Owner may not participate in dollar
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cost averaging and asset rebalancing at the same time. The General Account
is not available for the dollar cost averaging option.
After Intramerica has received a completed Dollar Cost Averaging form,
Intramerica will transfer the amounts designated by the Owner from the
Subaccount from which transfers are to be made to the Subaccount or
Subaccounts chosen by the Owner. The minimum amount that may be
transferred is $50. Each transfer will occur on the date specified by the
Owner. If the Owner has specified, or the form is received on the 29th,
30th or 31st, Intramerica will consider the effective date to be the first
Valuation Date of the following month. If no date is specified, funds will
be transferred on the monthly, quarterly, semiannual or annual anniversary,
(whichever corresponds to the frequency selected by the Owner), of the date
of receipt of a completed Dollar Cost Averaging form. The amounts
transferred will receive the Unit Values for the affected Subaccounts at
the end of the Valuation Date on which the transfers occur. If the
anniversary is not a Valuation Date, the transfer will occur on the next
Valuation Date. Dollar cost averaging will terminate when the total amount
elected has been transferred, or when the value in the Subaccount from
which transfers are made is insufficient to transfer the requested amount.
The Owner may terminate this option at any time by Written Notice.
Upon receipt of Written Notice, the value in the Subaccount from which
transfers were being made will remain in that Subaccount unless the Owner
instructs otherwise. If the Owner wishes to continue transferring on a
dollar cost averaging basis after the expiration of the applicable period,
or the amount in the Subaccount elected is insufficient to transfer the
total requested amount, or after the dollar cost averaging option has been
canceled, a new Dollar Cost Averaging Option form must be completed and
sent to Intramerica's Home Office. Intramerica may discontinue, modify, or
suspend the dollar cost averaging option at any time.
Account Value
On the Effective Date, the Account Value equals the initial Net
Payment. Thereafter, the Account Value equals the Account Value from the
previous Valuation Date increased by: (i) any additional Net Payments
received by Intramerica, (ii) any increase in the Account Value due to
investment results of the selected Subaccount(s) and (iii) any interest
earned on that portion of the Account Value held in the General Account
during the Valuation Period; and reduced by: (i) any decrease in the
Account Value due to investment results of the selected Subaccount(s), (ii)
a daily charge to cover the mortality and expense risks assumed by
Intramerica and the cost of administering the Contract, (iii) any amounts
charged against the Account Value for records maintenance, (iv) amounts
deducted for partial surrenders, and (v) amounts deducted, if any, for
transfer charges with respect to transfers that occurred during the
Valuation Period. See "CHARGES AND DEDUCTIONS."
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The Account Value is expected to change from Valuation Period to
Valuation Period, reflecting the investment experience of the selected
Subaccount(s), interest earned in the General Account and the deduction of
charges. The amount available for distribution of Annuity Payments is
equal to the Account Value on the Maturity Date; a Contract ceases to
accumulate value after the Maturity Date.
Unit Value. Each Subaccount has a distinct value (the "Unit Value").
In addition, because of differences in variable annuity contracts funded by
the Subaccounts, units in a Subaccount attributable to the Contract will
have different unit values than those attributable to other variable
annuity contracts funded by the Subaccount. When a Net Payment is
allocated or an amount is transferred to a Subaccount, a number of units
are purchased based on the Unit Value of the Subaccount as of the end of
the Valuation Period during which the allocation is made. When amounts are
transferred out of or deducted from a Subaccount, units are redeemed in a
similar manner.
For each Subaccount, the Unit Value on a given Valuation Date is based
on the net asset value of a share of the corresponding Portfolio in which
such Subaccount invests. (For the calculation of the net asset value with
respect to a Portfolio, see the prospectus for the Fund, a current copy of
which accompanies this Prospectus.) Each Valuation Period has a single
Unit Value which applies to each day in that period. The Unit Value for
each subsequent Valuation Period is the Investment Experience Factor
(described below) for that Valuation Period multiplied by the Unit Value
for the immediately preceding Valuation Period.
Investment Experience Factor. The "Investment Experience Factor"
measures the investment performance of a Subaccount during a Valuation
Period. An Investment Experience Factor is calculated separately for each
of the Subaccounts. The Investment Experience Factor of a Subaccount for a
Valuation Period equals (a) divided by (b), minus (c), where:
(a) is (i) the value of the net assets of the Subaccount at the
end of the preceding Valuation Period, plus
(ii) the investment income and capital gains, realized or
unrealized, credited to the net assets of that Subaccount during the
Valuation Period for which the Investment Experience Factor is being
determined, minus
(iii) the capital losses, realized or unrealized, charged
against those assets during the Valuation Period, minus
(iv) any amount charged against the Subaccount for taxes or
any amount set aside during the Valuation Period by Intramerica as a
provision for taxes attributable to the
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operation or maintenance of that Subaccount (see "CHARGES AND DEDUCTIONS --
Other Taxes"); and
(b) is the value of the net assets of that Subaccount at the end
of the preceding Valuation Period; and
(c) is a charge that compensates Intramerica for certain
administrative expenses and mortality and expense risks which are assumed
by Intramerica in connection with the Contract. See "CHARGES AND
DEDUCTIONS -- Mortality and Expense Risk Charge" and "CHARGES AND
DEDUCTIONS --Contract Administration Charge."
Contract Ownership
Subject to certain restrictions discussed below, an Owner may
designate a new Owner or Joint Owner at any time during the life of the
Annuitant. Under the terms of the Contract, if a Joint Owner is named,
unless otherwise specified by the Owner, Intramerica will presume the
ownership to be as joint tenants with right of survivorship. If any Owner
dies before the Annuitant and before the Maturity Date, the rights of the
Owner will belong to the Joint Owner, if any, otherwise to the Beneficiary.
The interest of any Owner or Joint Owner may be subject to the rights of
any assignee. See "THE CONTRACT -- Assignment of the Contract."
A new Owner or a Joint Owner may not be designated with respect to a
Contract that qualifies as an individual retirement annuity under Section
408(b) of the Code. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Tax
Status of the Contract." An Owner's designation of a new Owner may be
subject to federal income tax. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- Taxation of Annuities."
An Owner may designate a new Owner by submitting Written Notice to
Intramerica. The change will take effect as of the date the Written Notice
was signed. Intramerica will not be liable for any payment made or other
action taken before the Written Notice was received and recorded by
Intramerica.
Assignment of the Contract
Except in the case of a Contract that qualifies as an individual
retirement annuity under Section 408(b) of the Code, an Owner may assign:
(i) all or a portion of his or her right to receive Annuity Payments under
the Contract or (ii) the Contract as collateral security. An assignment by
the Owner before the Maturity Date of any portion of the right to receive
Annuity Payments entitles the assignee to receive the assigned Annuity
Payments in a lump sum as of the Maturity Date. Such lump sum payment
generally will be made within seven days. An assignment by the Owner after
the Maturity Date
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of any portion of the right to receive Annuity Payments entitles the
assignee to receive the assigned Annuity Payments in accordance with the
Annuity Income Option in effect on the Maturity Date. The assignee may not
select an Annuity Income Option or change an existing Annuity Income
Option. See "THE CONTRACT --Contract Ownership."
In the case of a Qualified Contract, certain assignments permissible
under the Contract may adversely affect the qualification for special
federal income tax treatment of the underlying retirement plan or
individual retirement account. Potential purchasers of Qualified Contracts
are urged to consult their tax advisers.
If the right to receive Annuity Payments is assigned or the Contract
is assigned as collateral security, the Owner's rights and those of any
Beneficiary will be subject to such assignment. Intramerica is not
responsible for the adequacy of any assignment and will not be bound by the
assignment until satisfactory written evidence of the assignment has been
received. In certain circumstances, an assignment will be subject to
federal income tax. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES --
Taxation of Annuities."
D I S T R I B U T I O N S U N D E R T H E C O N T R A C T
Any Annuity Payment, Account Value or Death Benefit available under
the Contract is not less than the minimum benefits required by any statute
of the State of New York.
Full and Partial Surrender Privileges
Subject to certain conditions, a full or partial surrender of the
Contract may be made at any time. No full or partial surrenders may be
made after the Maturity Date. The amount available for any surrender is
the Account Value.
No commission or sales charge is deducted from the Account Value upon
full or partial surrender of a Contract.
In addition to the conditions set forth above, the ability of an Owner
to effect a partial surrender of a Contract is subject to these further
conditions: (i) the minimum amount that can be withdrawn in a partial
surrender is $500 and (ii) the Contract must have an Account Value of at
least $2,500 after the surrender. (If Intramerica, at its sole discretion,
should increase the minimum initial payment to $5,000, Contracts issued
after that date will be required to have an Account Value of at least
$5,000 after a partial surrender.) In addition, a partial surrender
request must contain explicit instructions as to the withdrawal of amounts
from each of the selected Subaccounts. Funds allocated to the General
Account will be withdrawn proportionally from all Declaration Periods in
the General Account. Within each Declaration Period, surrenders will be on
a first-in, first-out basis.
The Owner may effect a partial surrender by sending a Written Notice
to Intramerica or by telephone if a currently valid telephone transfer
request
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form is on file with Intramerica. The Owner may effect a full surrender
only by sending a Written Notice to Intramerica. The Account Value payable
to the Owner upon a full or partial surrender will be calculated at the
price next computed after Intramerica receives a request for surrender.
Intramerica generally will pay the Owner any Account Value owed in respect
of a full or partial surrender within seven days of receipt of the request
for surrender. If, at the time an Owner makes a full or partial surrender
request, such Owner has not provided Intramerica with a written election
not to have federal income taxes withheld, Intramerica, by law, must
withhold such taxes from the taxable portion of any full or partial
surrender. In addition, the Code provides that a federal penalty tax may
be imposed on certain surrenders. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- Taxation of Annuities."
Because the Owner assumes the entire investment risk for all amounts
allocated to the Variable Account, the total amount paid upon surrender of
the Contract (taking into account any prior withdrawals) may be more or
less than the total Payments made under the Contract. See "THE CONTRACT --
Account Value."
Systematic Withdrawals. Intramerica currently offers an option under
which partial surrenders of the Contract may be elected by systematic
withdrawals. The Owner may elect to receive systematic withdrawals before
the Maturity Date by sending a completed Systematic Withdrawal form to
Intramerica at its Home Office. The completed form must include the
written consent of any assignee or irrevocable beneficiary, if applicable.
The Owner may designate the systematic withdrawal amount as a percentage of
the Account Value allocated to the Subaccounts and/or General Account, or
as a specified dollar amount. The Owner may designate that systematic
withdrawals be made monthly, quarterly, semiannually, or annually. If the
Owner has specified, or the form is received on the 29th, 30th or 31st,
Intramerica will consider the effective date to be the first Valuation Date
of the following month. If no date is specified, the systematic withdrawal
option will commence on the date of receipt of the form.
Each systematic withdrawal must be at least $250. The systematic
withdrawal option will terminate if the amount to be withdrawn exceeds the
Account Value or would cause the Account Value to be below $2,500. If any
portion of the systematic withdrawal is to be withdrawn from the General
Account, the amount requested will be deducted proportionately from each
Declaration Period, and will be on a first-in, first-out basis within the
Declaration Period(s).
Each systematic withdrawal will occur as of the end of the Valuation
Period during which the withdrawal is scheduled. The systematic withdrawal
will be deducted from the Owner's Account Value in the Subaccounts and/or
the General Account as directed by the Owner.
The Owner may terminate this option at any time by Written Notice. If
this option is terminated, either by Written Notice by the Owner, or if the
amount to be withdrawn has caused the Account Value to be below $2,500, and
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the Owner wishes to resume systematic withdrawals, a new Systematic
Withdrawal form must be completed and sent to Intramerica's Home Office.
Intramerica may discontinue, modify, or suspend the systematic withdrawal
option at any time. The tax consequences of a systematic withdrawal,
including a 10% penalty tax imposed on withdrawals made prior to the Owner
attaining age 59 1/2 should be carefully considered. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- Taxation of Annuities".
Annuity Payments
The Annuity Payments provided under this Contract on the Maturity Date
will not be less than that available using the Account Value to purchase
any single premium immediate annuity contract being offered by Intramerica
to the same class of annuitants. If the Annuitant is living on the
Maturity Date and the Contract is in force, Annuity Payments will be made
to the Owner in accordance with the terms of the Contract and the Annuity
Income Option selected by the Owner. The first Annuity Payment will be
made within seven days after the Maturity Date.
The amount of the periodic Annuity Payments will depend upon (i) the
Account Value on the Maturity Date, (ii) the age and sex of the Annuitant
(or, in the case of Annuity Income Option 2, the age and sex of the
Annuitant and the Joint Annuitant) on the Maturity Date and (iii) the
Annuity Income Option selected. See "DISTRIBUTIONS UNDER THE CONTRACT --
Annuity Income Options." On the Maturity Date, the dollar amount of each
periodic Annuity Payment under an Annuity Income Option is fixed and will
not change. After the Maturity Date, the Contract will no longer
participate in the Variable Account because the Account Value is
transferred to the General Account on the Maturity Date. If, at the time
of an Annuity Payment, the Owner has not provided Intramerica with a
written election not to have federal income taxes withheld, Intramerica, by
law, must withhold such taxes from the taxable portion of such Annuity
Payment. In addition, the Code provides that a federal penalty tax may be
imposed on certain premature Annuity Payments. See "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES -- Taxation of Annuities."
The amount of the monthly Annuity Payments under Annuity Income
Options 1, 2, and 3, described below, may be determined by dividing the
Account Value on the Maturity Date by 1,000 and multiplying the result by
the appropriate factor contained in the table for the Annuity Income Option
selected. The appropriate factor is based on a guaranteed minimum interest
rate of 3.5%. This factor will be determined at the time of maturity,
subject to current market conditions. The annuity tables for Annuity
Income Options 1, 2, and 3 are contained in the Contract. Information
concerning the amount of the periodic payments under additional Annuity
Income Options that become available, if any, will be provided to the Owner
prior to the Maturity Date. See "DISTRIBUTIONS UNDER THE CONTRACT --
Annuity Income Options."
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Annuity Income Options
At any time prior to the Maturity Date, the Owner may designate the
Annuity Income Option under which Annuity Payments are to be made. If the
Owner does not select an Annuity Income Option by the Maturity Date, fixed
monthly Annuity Payments will be made to the Owner (i) for the life of the
Annuitant or (ii) until the sum of the monthly Annuity Payments made under
the Contract equals the Account Value on the Maturity Date, whichever is
longer (Annuity Income Option 1). Except with the consent of Intramerica,
Annuity Income Options are not available if the Account Value is less than
$2,000 or is insufficient to produce monthly payments of at least $20. In
such cases, Intramerica will pay the Account Value in a lump sum.
Subject to the exceptions discussed above, three Annuity Income
Options are available under the Contract. Intramerica may offer additional
Annuity Income Options in the future which would become available to all
Contract Owners. Information concerning the availability of such
additional Annuity Income Options, if any, will be provided prior to the
time an Annuity Income Option is to be selected.
The following Annuity Income Options currently are available:
Option 1. Life Annuity with Installment Refund - Monthly Annuity
Payments will be made to the Owner (i) for the life of the Annuitant or
(ii) until the sum of the monthly Annuity Payments made equals the Account
Value on the Maturity Date, whichever is longer. If the Owner dies before
the sum of the monthly Annuity Payments made equals the Account Value on
the Maturity Date, the remaining Annuity Payments will be made to the
Beneficiary designated by the Owner. See "DISTRIBUTIONS UNDER THE CONTRACT
- -- Beneficiary Provisions."
Option 2. Joint and Survivor Life Annuity with Installment Refund
- -Monthly Annuity Payments will be made to the Owner (i) for as long as
either the Annuitant or the Joint Annuitant is living or (ii) until the sum
of the monthly Annuity Payments made equals the Account Value on the
Maturity Date, whichever is longer. If all Owner(s) die before the sum of
the monthly Annuity Payments made equals the Account Value on the Maturity
Date, the remaining Annuity Payments will be made to the Beneficiary
designated by the Owner. See "DISTRIBUTIONS UNDER THE CONTRACT --
Beneficiary Provisions."
Option 3. Installments for Life - Monthly Annuity Payments will be
made to the Owner for as long as the Annuitant is living. Payments under
this option will end with the last payment made prior to the death of the
Annuitant. Under this option, it would be possible for the Owner to
receive only one Annuity Payment if the Annuitant died prior to the date of
the second payment, two Annuity Payments if he or she died prior to the
date of the third payment, etc.
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At any time before the Maturity Date, the Owner may select Annuity
Income Option 1, 2 or 3 or may change a prior selection of an Annuity
Income Option by sending Written Notice to Intramerica. In addition, on
the Maturity Date, an Owner may elect to receive Annuity Payments under any
options made available by Intramerica in the future.
Upon selection of Annuity Income Option 2, the Owner must designate a
Joint Annuitant. The life of the Joint Annuitant also will be used to
determine the duration of Annuity Payments. The amount of the monthly
Annuity Payments under Annuity Income Option 2 will be determined by the
age and sex of both the Annuitant and the Joint Annuitant. Prior to the
Maturity Date, the Owner may select a new Joint Annuitant at any time by
sending Written Notice to Intramerica. The Owner may not select a new
Joint Annuitant after the Maturity Date.
In the case of a Contract qualifying as an individual retirement
annuity under Section 408(b) of the Code, an Annuity Income Option may not
be selected with a Period Certain that will guarantee Annuity Payments
beyond the life (or life expectancy) of the Annuitant and the Beneficiary.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Tax Status of the
Contract."
Maturity Date
The Owner may specify in the Contract application the Contract
Anniversary on which Annuity Payments are to begin. The Maturity Date can
be no later than the Contract Anniversary nearest the Annuitant's 80th
birthday or the tenth Contract Anniversary. If no Maturity Date is
specified in the Contract application, the Maturity Date will be the later
of the Contract Anniversary nearest the Annuitant's 80th birthday or the
tenth Contract Anniversary.
In the case of a Qualified Contract, other than an individual
retirement annuity qualifying under Section 408(b) of the Code, selection
of certain Maturity Dates permissible under the Contract may adversely
affect the qualification of the underlying retirement plan for special
federal income tax treatment. Potential purchasers of such Qualified
Contracts are urged to consult their tax advisers.
In the case of a Contract qualifying as an individual retirement
annuity under Section 408(b) of the Code, the minimum required distribution
must be no later than April 1 of the calendar year following the calendar
year in which the Annuitant attains age 70-1/2. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- Tax Status of the Contract."
Subject to the preceding discussion with respect to individual
retirement annuities, the Owner may advance or defer the Maturity Date at
any time while the Annuitant is living. The new Maturity Date chosen by
the Owner must be a Contract Anniversary not later than (i) the Contract
Anniversary nearest the Annuitant's 80th birthday; or (ii) ten years from
the upcoming Contract Anniversary, whichever is later. A Maturity Date may
be changed only by Written Notice to Intramerica prior to the then-scheduled
Maturity Date.
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Death Benefit
If the Annuitant dies prior to the Maturity Date, a Death Benefit will
be paid to the Owner as specified in the Contract. No Death Benefit is
payable if the Annuitant dies on or after the Maturity Date.
If the Annuitant dies prior to the Maturity Date, a Death Benefit
equal to the greater of (i) the Account Value or (ii) the sum of the
Payments made less the amount of any partial surrenders will be paid in a
lump sum to the Owner. If the Owner is a natural person, the Owner may
elect to continue the Contract and become the Annuitant if the deceased
Annuitant was not the Owner. The amount of the Death Benefit will be
calculated at the price next computed after Intramerica receives Proof of
Death of the Annuitant. The Death Benefit will be paid to the Owner within
seven days after Intramerica receives Proof of Death, or as soon thereafter
as Intramerica has sufficient information to make the payment.
Beneficiary Provisions
The Beneficiary will receive any amounts payable under the Contract if
the Beneficiary survives the Owner(s). If no Beneficiary is specified, or
if no Beneficiary survives the Owner by thirty days, the estate of the
Owner will receive any remaining amounts payable under the Contract.
While the Annuitant is living, the Owner may change the Beneficiary by
sending Written Notice to Intramerica. The change will take effect as of
the date the Written Notice was signed. Intramerica will not be liable for
any payment made or other action taken before the notice is received and
recorded by Intramerica. A Beneficiary named irrevocably may not be
changed without written consent of such Beneficiary. The interest of any
Beneficiary is subject to the rights of any assignee. See "THE CONTRACT --
Assignment of the Contract."
Death of Owner
In the case of a Nonqualified Contract in which the Owner or any Joint
Owner (i) is a natural person, (ii) is not the Annuitant and (iii) dies
before the Maturity Date and prior to the Annuitant's death, the Death
Benefit provisions described above do not apply. The Account Value will be
paid in a lump sum no later than five years following the date of the
Owner's death to the Joint Owner, if applicable; otherwise to the
Beneficiary. See "THE CONTRACT -- Contract Ownership." The Account Value
will be calculated at the price next computed after Intramerica receives
Proof of Death of the Owner. If the Joint Owner, if applicable, or the
Beneficiary is the surviving spouse of the Owner, he or she may elect to
continue the Contract as if he or she were the original Owner.
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Employment-Related Benefit Plans
In 1983, the Supreme Court held in Arizona Governing Committee v.
Norris that optional annuity payments provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women on the basis of sex. The Contract
described in this Prospectus contains Annuity Payment rates for certain
Annuity Income Options that distinguish between men and women.
Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII
generally, on any employment-related insurance or benefit program for which
a Contract may be purchased.
C H A R G E S A N D D E D U C T I O N S
No commissions or sales charges are deducted from Payments invested in
the Contract or from amounts payable to the Owner upon full or partial
surrender of the Contract. As more fully described below, certain charges
and deductions will be made in connection with the Contract to compensate
Intramerica for (i) providing the Annuity Payments, (ii) assuming certain
risks in connection with the Contract, and (iii) administering the
Contract.
Mortality and Expense Risk Charge
Intramerica deducts a daily charge from the Account Value for certain
mortality and expense risks connected with the Contract. A daily rate of
.0010997% of the value of net assets in each Subaccount is charged
currently. This corresponds to an annual rate of .40%. Intramerica
reserves the right at any time to increase the Mortality and Expense Risk
Charge to .70%, which corresponds to a daily rate of .0019245%, the maximum
set forth in the Contract. The Mortality and Expense Risk Charge is
applicable only during the period from the Effective Date to the Maturity
Date and is not imposed against the General Account. This charge is
reflected in the Investment Experience Factor for the Contract for each
Subaccount.
The Account Value and Annuity Payments are not affected by changes in
actual mortality experience or by actual expenses incurred by Intramerica.
The mortality risks assumed by Intramerica arise from the contractual
obligations to pay Death Benefits prior to the Maturity Date and to make
Annuity Payments for the entire life of the Annuitant (or, in the case of
Annuity Income Option 2, the entire life of the Annuitant and the Joint
Annuitant). Thus, an Owner is assured that neither the Annuitant's
longevity (or, in the case of Annuity Income Option 2, the Annuitant's and
the Joint Annuitant's longevity) nor an improvement in life expectancy in
general which is greater than expected, will have an adverse effect on the
Annuity Payments; this eliminates the risk of outliving the funds
accumulated for retirement in instances in which the Contract is purchased
to provide funds for retirement.
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With respect to expense risks, Intramerica assumes the risk that the
actual expenses involved in administering the Contract, including Contract
maintenance costs, administrative costs, mailing costs, data processing
costs and costs of other services, may exceed the amount recovered from any
administrative charges.
Contract Administration Charge
Intramerica has primary responsibility for the administration of the
Contract and the Variable Account. Administrative expenses for Intramerica
include expenses with respect to (i) processing applications, Contract
changes, tax reporting, cash surrenders, death claims and initial and
subsequent Payments; (ii) annual and semiannual reports to Owners and
regulatory compliance reports; and (iii) overhead costs. Intramerica
deducts a daily charge from the Account Value for incurring administrative
expenses connected with the Contract and the Variable Account. A daily
rate of .0008248% of the value of net assets in each Subaccount is charged;
this corresponds to an annual rate of .30%. The Contract Administration
Charge is applicable only during the period from the Effective Date to the
Maturity Date and is not imposed against the General Account. This charge
is reflected in the Investment Experience Factor for the Contract for each
Subaccount.
Records Maintenance Charge
Currently, no charge is being imposed for records maintenance. The
Contract, however, permits Intramerica to deduct a Records Maintenance
Charge of up to $40 from the Account Value of each Contract at the end of
each Contract Year to reflect the cost of performing records maintenance
for the Contracts. If such a charge were imposed, it would be deducted
proportionately from each Subaccount and each of the Declaration Period(s)
in the General Account (on a first-in, first-out basis within each
Declaration Period) in which the Owner has funds allocated. The Records
Maintenance Charge, if deducted, would apply only during the period from
the Effective Date to the Maturity Date and would not be assessed if the
Owner surrendered the Contract during a Contract Year.
Premium Taxes
Under New York law, no premium tax is currently payable by
Intramerica; however, the Contract permits Intramerica to deduct any
applicable premium taxes with respect to any future Payments.
Other Taxes
No charges currently are made against the Variable Account for
federal, state or local taxes. Should Intramerica determine that any such
taxes
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may be imposed with respect to the Variable Account, Intramerica may deduct
such taxes from amounts held in the Variable Account. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES --Taxation of Intramerica."
Transfer Charges
Currently, no charge is being imposed for transfers among Subaccounts
or from the Subaccounts to the General Account. The Contract, however,
permits Intramerica to deduct $20 for the third and each subsequent
transfer request made by the Owner during a Contract Year. For the purpose
of determining whether a transfer charge is payable, initial allocations of
Payments are not considered transfers nor are reallocations of amounts
among Declaration Periods in the General Account or transfers from the
General Account to the Subaccounts at the end of a Declaration Period. All
transfer requests made at the same time will be treated as one request. No
transfer charges will be imposed for transfers which are not at the Owner's
request. Intramerica, at its sole discretion, may impose the transfer
charge described above for the third and each subsequent transfer request
at any time. See "THE CONTRACT -- Transfers."
Charges Against the Fund
Scudder, Stevens & Clark, Inc. provides investment advisory services
to the Fund for the Portfolios under the investment advisory agreement
between the Fund, on behalf of the Portfolios, and the Adviser, for a fee.
The Fund is responsible for all of its other expenses. The net assets of
the Fund attributable to the Variable Account will reflect deductions in
connection with the investment advisory fee and other expenses incurred by
the Fund. The investment advisory fees differ with respect to each of the
Portfolios. See "SCUDDER VARIABLE LIFE INVESTMENT FUND." For more
information concerning the investment advisory fee and other charges
against the Portfolios, see the prospectus for the Fund, a current copy of
which accompanies this Prospectus.
C E R T A I N F E D E R A L I N C O M E
T A X C O N S E Q U E N C E S
The following summary is a general discussion of certain of the
expected federal income tax consequences of investment in and distributions
with respect to the Contract, based on the Code, proposed and final
Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain
federal income tax consequences to "United States Persons," and does not
discuss state, local or foreign tax consequences. "United States Persons"
means citizens or residents
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of the United States, domestic corporations, domestic partnerships, and
trusts or estates that are subject to United States federal income tax
regardless of the source of their income. This summary does not discuss
the consequences of an exchange of another annuity contract for the
Contract or a surrender of another annuity contract to provide funds for
investment in the Contract. Additional information regarding such
exchanges or surrenders is contained in the Statement of Additional
Information, which is available at no cost to any person requesting a copy
by writing to Intramerica or by calling (800) 833-0194.
The Qualified Contract was designed for use by retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment under Section 401(a) or 408(a) of the Code and by individuals
purchasing individual retirement annuities that qualify for special federal
income tax treatment under Section 408(b) of the Code. Certain
requirements must be satisfied in purchasing a Qualified Contract for the
plan, account or annuity to retain its special tax treatment. This summary
does not discuss such requirements, and assumes that Qualified Contracts
are purchased pursuant to retirement plans or individual retirement
accounts or are individual retirement annuities that qualify for such
special tax treatment. Additionally, because any distribution with respect
to a Qualified Contract, other than an individual retirement annuity
qualifying under Section 408(b) of the Code, will be made to an entity that
is exempt from federal income tax, this summary does not discuss the
annuity consequences with respect to Qualified Contracts other than such
individual retirement annuities.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY.
EACH POTENTIAL PURCHASER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER AS
TO THE CONSEQUENCES OF INVESTMENT IN A CONTRACT UNDER FEDERAL AND
APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS BEFORE MAKING ANY PAYMENT.
Tax Status of the Contract
Section 817(h) of the Code provides that in order for a variable
contract which is based on a segregated asset account to qualify as an
annuity contract under the Code, the investments made by such account must
be "adequately diversified" in accordance with Treasury regulations. The
Treasury regulations issued under Section 817(h) apply a diversification
formula to each of the Subaccounts. The Variable Account, through the Fund
and its Portfolios, intends to comply with the diversification requirements
of the Treasury regulations. Intramerica and the Fund have entered into
agreements regarding participation in the Fund that require the Fund and
its Portfolios to be operated in compliance with the Treasury regulations.
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,
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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 of the investments of a segregated
asset account may cause the investor (i.e., the Policyowner), 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 subaccounts 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 policyowners were not owners of separate account
assets. For example, the Owner has additional flexibility in allocating
premium payments and contract 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, Intramerica 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. Intramerica 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.
The Code also requires that Nonqualified Contracts contain specific
provisions for distribution of Contract proceeds upon the death of an
Owner. In order to be treated as an annuity contract for federal income tax
purposes, the Code requires that such contracts provide that (a) if any
Owner dies on or after the Maturity Date and before the entire interest in
the Contract has been distributed, the remaining portion must be
distributed at least as rapidly as under the method in effect on the
Owner's death, or (b) if any Owner dies before the Maturity Date, the
entire interest in the Contract must generally be distributed within five
years after the Owner's date of death.
These requirements will be considered satisfied if the entire interest
in the Contract is used to purchase an immediate annuity under which
payments will begin within one year of the Owner's death and will be made
for the life of the "designated beneficiary" or for a period not extending
beyond the life expectancy of the "designated beneficiary." Under Section
72(s) the designated beneficiary is the person to whom ownership of the
Contract passes by reason of death and must be a natural person in order to
take advantage of the exceptions noted. If the designated beneficiary is
the Owner's surviving spouse and the Owner dies before the Maturity Date,
the Contract may be continued with the surviving spouse as the new Owner.
The Nonqualified Contracts contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements
of the Code have yet been issued
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and thus no assurance can be given that the provisions contained in the
Contract satisfy all such Code requirements. The provisions contained in
the Nonqualified Contracts will be reviewed and modified if necessary to
assure that they comply with the Code requirements when clarified by
regulation or otherwise. Similar rules apply to Qualified Contracts. See
"DISTRIBUTIONS UNDER THE CONTRACT -- Death of Owner."
Other rules may apply to Qualified Contracts.
Natural Persons. With respect to Owners who are natural persons, the
Contract should be treated as an annuity contract for federal income tax
purposes, the taxation of which is described below. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- Taxation of Annuities."
Non-natural Persons. Pursuant to Section 72(u) of the Code, an
annuity contract held by a taxpayer other than a natural person generally
will not be treated as an annuity contract under the Code. Accordingly, an
Owner who is not a natural person will recognize as ordinary income for a
taxable year the excess of (i) the sum of the Account Value as of the close
of the taxable year and all distributions under the Contract paid in the
taxable year and previous taxable years over (ii) the sum of the Payments
made for the taxable year and any prior taxable year and the amounts
includable in gross income for any prior taxable year with respect to the
Contract. Section 72(u) of the Code does not apply to (i) a Contract in
which the nominal Owner is not a natural person but the beneficial Owner is
a natural person, (ii) a Qualified Contract or (iii) a single-payment
annuity, the Maturity Date of which is no later than one year from the date
of the single Payment and provides for a series of substantially equal
periodic payments during the annuity period. Instead, such Contracts are
taxed as described below under the heading "Taxation of Annuities."
Individual Retirement Annuities. In order to qualify as an individual
retirement annuity under Section 408(b) of the Code, a Contract must
contain certain provisions, including the following: (i) the Owner must be
the Annuitant; (ii) the Contract may not be transferable by the Owner,
e.g., the Owner may not designate a new Owner or assign the Contract as
collateral security; (iii) the total Payments for any Contract Year may not
exceed $2,000, unless the portion of such Payments in excess of $2,000
qualifies as a rollover amount or contribution under Section 402(a)(5) or
408(d)(3) of the Code; (iv) Annuity Payments must begin no later than April
1 of the calendar year following the calendar year in which the Annuitant
attains age 70-1/2 and meet certain other requirements; (v) an Annuity
Income Option with a Period Certain that will guarantee Annuity Payments
beyond the life expectancy of the Annuitant and the Beneficiary may not be
selected; and (vi) certain payments of Death Benefits must be made in the
event the Annuitant dies prior to the distribution of the Account Value.
Contracts intended to qualify as individual retirement annuities under
Section 408(b) of the Code contain such provisions.
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Other Qualified Contracts. A Contract may be purchased by a trust or
custodial account that forms a retirement plan qualified under Section
401(a) of the Code or an individual retirement account qualified under
Section 408(a) of the Code. The contributions and benefits in respect of a
participant in such a plan or account will be determined by the terms and
conditions of the plan or account, rather than the Contract. Intramerica
shall be under no obligation either (i) to determine whether any payment,
distribution or other transaction under the Contract complies with the
provisions, terms and conditions of such plan or account or of applicable
law or (ii) to administer such plan or account, including without
limitation any provisions required by the Retirement Equity Act of 1984.
The Contract is intended for use by such plans and accounts solely for the
accumulation of retirement savings. Adverse tax consequences to the plan
or account, the participant or both may result if this Contract is
transferred or assigned by the plan or account to any individual as a means
to provide benefit payments. A qualified tax adviser should be consulted
with respect to the use of the Contract in connection with such a plan or
account.
Taxation of Annuities
The discussion below applies only to those Contracts that qualify as
annuity contracts for federal income tax purposes.
In General. An Owner of a Contract should not be taxed on increases
in the Account Value until distribution occurs either in the form of
amounts received in partial or full surrender or as Annuity Payments under
the Annuity Income Option selected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Account Value
(including assignment prior to the Maturity Date of an Owner's right to
receive Annuity Payments) generally will be treated as a distribution in
the amount of such portion of the Account Value. Any such deemed
distribution generally will be taxable in an amount equal to the excess (if
any) of the Account Value immediately before the distribution is deemed to
occur over the Investment in the Contract at such time. The taxable
portion of any such distribution generally will be taxed as ordinary
income. Additionally, when an Owner designates a new Owner prior to the
Maturity Date without receiving full and adequate consideration, the old
Owner generally will be treated as receiving a distribution under the
Contract in an amount equal to the excess (if any) of the Account Value at
the time of such designation over the Investment in the Contract at such
time. "Investment in the Contract" means (i) the aggregate amount of any
Payments made by or on behalf of the recipient or deemed recipient minus
(ii) the aggregate amount received under the Contract which was excluded
from the gross income of the recipient or deemed recipient (except that the
amount of any loan from, or secured by a Contract will be disregarded to
the extent that such amount is excluded from gross income) plus (iii) the
amount of any loan from, or secured by a Contract to the extent that such
amount is included in the gross income of the Owner. Additionally, the
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assignment prior to the Maturity Date of an Owner's right to receive
Annuity Payments without full and adequate consideration generally will be
treated as a distribution under the Contract in an amount equal to the
excess of the Account Value at the time of such assignment over the
Investment in the Contract at such time; any such deemed distribution will
be taxable in full.
Surrenders. In the case of a partial surrender under a Nonqualified
Contract, the amount received generally will be taxable in an amount equal
to the excess (if any) of the Account Value immediately before the
surrender over the Investment in the Contract at such time. In the case of
a partial surrender under a Qualified Contract, generally a portion of the
amount received, based on the ratio of the Investment in the Contract to
the Account Value, will be includable in the recipient's taxable income.
In the case of a full surrender under a Nonqualified or Qualified Contract,
the amount received generally will be taxable only to the extent it exceeds
the Investment in the Contract. In the case of a Qualified Contract (i)
the Investment in the Contract may be zero and (ii) certain surrenders will
not be taxed if they qualify under Section 402(a) or 408(d)(3) of the Code
as rollover contributions to certain retirement plans and individual
retirement arrangements.
Annuity Payments. Generally, a portion of each of the Annuity
Payments will be includable in the taxable income of the recipient. There
is, in general, no tax on the portion of each Annuity Payment that bears
the same ratio to the amount of such Annuity Payment as the Investment in
the Contract bears to the total expected value of the Annuity Payments for
the term of the payments; the remainder of each Annuity Payment is taxable.
Once the aggregate amount received under the Contract on or after the
Maturity Date that was excluded from gross income equals the Investment in
the Contract as of the Maturity Date, any additional Annuity Payments will
be included in gross income in their entirety. If, after the Maturity
Date, Annuity Payments cease by reason of the death of the Annuitant, the
excess (if any) of the Investment in the Contract as of the Maturity Date
over the aggregate amount of Annuity Payments received on or after the
Maturity Date that was excluded from gross income is allowable as a
deduction for the last taxable year of the Annuitant.
Penalty Taxes. In the case of a deemed distribution under a
Nonqualified Contract resulting from a pledge, assignment or agreement to
pledge or assign, a surrender of a Nonqualified Contract, or an Annuity
Payment with respect to a Nonqualified Contract, a federal penalty tax may
be imposed on the taxpayer equal to 10% of the amount of the distribution
(or deemed distribution) that is includable in gross income. The penalty
tax generally will not apply to any distribution (i) made on or after the
date on which the taxpayer attains age 59-1/2; (ii) made as a result of the
death of the Owner; (iii) attributable to the disability of the taxpayer;
or (iv) which is part of a series of substantially equal periodic payments
made (not less frequently than
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annually) for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of such taxpayer and his or her
beneficiary. Similar penalties apply to Qualified Contracts. In addition,
if a minimum distribution is required under a Qualified Contract as a
result of the Annuitant's death or attainment of age 70-1/2, a 50% excise
tax will apply to the portion of any such required minimum distribution
that is not actually distributed. In the case of Qualified Contracts,
penalty taxes or other adverse tax consequences may result if excess
contributions are made, if an annual distribution from the individual
retirement annuity and certain other retirement arrangements exceed
specified amounts, or in certain other circumstances.
Transfer of Ownership. A transfer of ownership of a Contract or
Assignment of a Contract may result in certain tax consequences to the
Owner that are not discussed herein. An Owner contemplating any such
transfer or assignment of a Contract should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.
Withholding. The portion of any distribution under a Contract that is
includable in gross income will be subject to federal income tax
withholding unless the recipient of such distribution elects not to have
federal income tax withheld. Election forms will be provided at the time
distributions are requested or made. Effective January 1, 1993, certain
distributions from retirement plans qualified under Section 401(a) of the
Code are subject to mandatory withholding.
Multiple Contracts. All Nonqualified deferred annuity contracts that
are issued by Intramerica (or its affiliates) to the same Contract Owner
during any calendar year will be treated as one annuity contract for
purposes of determining the amount includable in gross income under Section
72(e) of the Code. The Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There also may be other
situations in which the Treasury may conclude that it would be appropriate
to aggregate two or more annuity contracts purchased by the same Owner.
Accordingly, an Owner should consult a competent tax adviser before
purchasing more than one annuity contract.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of the Owner or the Annuitant. Generally,
such amounts are includable in the income of the recipient as follows: (i)
if distributed in a lump sum, they are taxed in the same manner as a full
surrender of the Contract, as described above, or (ii) if distributed under
an Annuity Option, they are taxed in the same manner as Annuity Payments,
as described above. For these purposes, the investment in the Contract is
not affected by the Owner's or Annuitant's death. That is, the investment
in the
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contract remains the amount of any purchase payments paid which were not
excluded from gross income.
Tax Legislation. In past years, legislation has been proposed in the
U.S. Congress which would have adversely modified the federal taxation of
certain annuities. For example, one such proposal would have adversely
affected annuities that do not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although Congress is not
now actively considering any legislation regarding the taxation of
annuities, there is no way of knowing if legislation affecting the taxation
of annuities will, at some time, be enacted, or the extent to which any
change in the taxation of annuities would be retroactive in effect (i.e.,
effective prior to the date of enactment).
Taxation of Intramerica
At the present time, Intramerica makes no charge to the Variable
Account for any federal, state or local taxes that it incurs which may be
attributable to such Account or to the Contract. Intramerica, however,
reserves the right in the future to make a charge for any such tax or other
economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Variable Account or to the
Contract.
G E N E R A L P R O V I S I O N S
The Contract
The Contract, any endorsements and amendments thereon and the Contract
application constitute the entire contract between Intramerica and the
Owner. Only the President, a Vice President or the Secretary of
Intramerica is authorized to change or waive the terms of a Contract. Any
change or waiver must be in writing and signed by one of those persons.
Deferment of Payment and Transfers
Payment of any amount due from the Variable Account with respect to a
surrender, Death Benefit or the death of the Owner of a Nonqualified
Contract generally will occur within seven days from the date the Written
Notice is received, except that Intramerica may be permitted to defer such
payment if: (i) the New York Stock Exchange is closed for other than usual
weekends or holidays or trading on the Exchange is otherwise restricted;
(ii) an emergency exists as defined by the SEC or the SEC requires that
trading be restricted; or (iii) the SEC permits a delay for the protection
of Owners. Transfers also may be deferred under these circumstances.
Payment of any Account Value from amounts allocated to the General
Account may be deferred for a period of six months after Written Notice is
received by Intramerica.
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Any Payment which is derived, all or in part, from any amount paid to
Intramerica by check or draft may be postponed until such time as
Intramerica determines that such instrument has been honored.
Contract Expiration
The Contract will expire and be of no effect if the Account Value
becomes insufficient to cover deductions for the Mortality and Expense Risk
Charge, the Contract Administration Charge, a Records Maintenance Charge if
imposed, and any transfer charges.
Misstatement of Age or Sex
If the Annuitant's age or sex (and/or the Joint Annuitant's age or
sex, if Annuity Income Option 2 is selected) has been misstated on the
application, Intramerica will recalculate the Annuity Payments to reflect
the calculations that would have been made had the Annuitant's age and sex
(and/or the Joint Annuitant's age and sex, if Annuity Income Option 2 is
selected) been correctly stated. If Intramerica underpays or overpays the
Annuity Benefit because of a misstatement, the amount thereof with interest
at 6% per year will be added to or subtracted from the current or next
succeeding payment.
Nonparticipating Contract
The Contract does not participate in the divisible surplus of
Intramerica. No dividends are payable on the Contract.
Written Notices and Requests: Owner Inquiries
Any Written Notice or Written Request required to be sent to
Intramerica should be sent to 9 Ramland Road, Orangeburg, New York 10962.
Any notice or request must be on the required form provided by Intramerica
and contain such information as Intramerica requires to process such notice
or request, including the Contract number and the Owner's full name and
signature. Any notice sent by Intramerica to an Owner will be sent to the
address shown in the application unless a Written Notice of an address
change has been filed with Intramerica. All Owner inquiries should be
addressed to Intramerica at its Home Office or made by calling (800) 833-0194.
Records and Reports
Intramerica will maintain all records relating to the Variable
Account. At the end of each calendar quarter, Intramerica will send
Owners, at their last known address of record, statements itemizing the
Account Value, additional Payments, transfers, any charges, and any partial
surrenders made during the year. Owners will also be sent annual and
semiannual reports for the Fund
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which will include a list of the securities in each Portfolio as of the
current date of the report to the extent required by the 1940 Act.
D I S T R I B U T I O N O F T H E C O N T R A C T
The principal underwriter of the Contract is CNL. CNL is registered
with the SEC as a broker-dealer under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and is a member of the National Association of
Securities Dealers, Inc. The principal address of CNL is 8301 Maryland
Avenue, St. Louis, Missouri 63105.
For its services as Principal Underwriter, Intramerica pays a .50%
commission, as a percentage of Payments, to CNL. Intramerica paid
commissions of $17,844, $19,288 and $37,970 to CNL on the sale of the
Contracts in 1996, 1995 and 1994, respectively.
CNL has contracted with Scudder Insurance Agency of New York, Inc.
("Scudder") for Scudder's services in connection with the distribution of
the Contract. Scudder is a subsidiary of Scudder Investor Services, Inc.,
which is registered with the SEC as a broker-dealer under the 1934 Act and
is a member of the National Association of Securities Dealers, Inc.
Individuals directly involved in the sale of the Contract are registered
representatives of Scudder and licensed insurance agents. The principal
address of Scudder is 345 Park Avenue, New York, New York 10154.
The Contract will be offered to the public on a continuous basis and
neither CNL nor Scudder anticipates discontinuing the offering of the
Contract. However, both CNL and Scudder reserve the right to discontinue
the offering at any time.
T H E G E N E R A L A C C O U N T
Payments allocated or amounts transferred to the General Account under
the Contract become part of the General Account assets of Intramerica,
which support annuity and insurance obligations. The General Account
includes all of Intramerica's assets, except those assets segregated in
separate accounts. Intramerica has sole discretion to invest the assets of
the General Account, subject to applicable law. 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
subject to the provisions of such statutes, and, as a result, the staff of
the SEC has not reviewed the disclosures in this Prospectus relating to the
General Account. However, disclosures about the General Account may be
subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements
made in prospectuses.
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Intramerica guarantees that it will credit interest at an effective
annual rate of at least 3.5%, compounded monthly. Intramerica may, at its
sole discretion, declare higher interest rates for amounts allocated or
transferred to the General Account ("Declared Rates"). Each such Declared
Rate will be fixed and guaranteed by Intramerica and applied to a specific
period of time, which will not be less than one year or more than five
years (the "Declaration Period"). An Owner must specify one or more of the
Declaration Periods currently offered by Intramerica when allocating or
transferring funds to or within the General Account. At any one time, an
Owner may have amounts earning different Declared Rates within a
Declaration Period because amounts were allocated or transferred to that
Declaration Period at different times. Intramerica will not accept
allocations to the General Account which would increase a Contract's value
in the General Account to over $250,000. Subject to deductions for any
applicable charges, Intramerica guarantees that the value held in the
General Account will equal all amounts allocated or transferred to the
General Account, plus any interest credited thereto, less any amounts
surrendered or transferred from the General Account. An Owner is not
entitled to share in the investment experience of the General Account.
An amount allocated or transferred to the General Account may not be
transferred from or within the General Account prior to the end of the
Declaration Period with which it is associated. Intramerica will notify
Owners having funds allocated to the General Account associated with an
expiring Declaration Period prior to the end of the Declaration Period and
will request instructions as to the reallocation of such amounts. If no
instructions are received from the Owner prior to the end of the
Declaration Period, the portion of the Account Value attributable to that
Declaration Period will be transferred to the Money Market Subaccount at
the end of the Declaration Period.
For a discussion of transfer rights, charges, and surrender privileges
relating to amounts allocated to the General Account, see "THE CONTRACT --
Transfers," "DISTRIBUTIONS UNDER THE CONTRACT -- Full and Partial Surrender
Privileges" and "CHARGES AND DEDUCTIONS --Transfer Charges."
V O T I N G R I G H T S
To the extent required by law, Intramerica will vote the Fund's shares
held in the Variable Account at regular and special shareholder meetings of
the Fund in accordance with instructions received from persons having
voting interests in the corresponding Subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result, Intramerica
determines that it is permitted to vote the Fund's shares in its own right,
it may elect to do so.
The number of votes that an Owner has the right to instruct will be
calculated separately for each Subaccount and will be determined by
dividing a
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Contract's value in a Subaccount by the net asset value per share of the
corresponding Portfolio in which the Subaccount invests. Fractional shares
will be counted. The number of votes of a Portfolio that the Owner has the
right to instruct will be determined as of the date coincident with the
date established by the Fund for determining shareholders eligible to vote
at the meeting of the Fund. Voting instructions will be solicited by
written communications prior to that meeting in accordance with procedures
established by the Fund. Each person having a voting interest in a
Subaccount will receive proxy material, reports, and other materials
relating to the appropriate Portfolio.
Intramerica will vote shares of the Fund for which no timely
instructions are received in proportion to the voting instructions which
are received with respect to all variable annuity contracts (including the
Contract) issued by Intramerica and participating in that Portfolio.
Intramerica also will vote shares it owns that are not attributable to
variable annuity contracts in the same proportion.
Separate accounts of other insurance companies, including an insurance
company affiliated with Intramerica, also invest premiums for variable life
and variable annuity contracts in the Fund. It is to be expected that Fund
shares held by those separate accounts will be voted according to the
instructions of the owners of those variable life and variable annuity
contracts. This will dilute the effect of the Owners' voting instructions.
Intramerica does not see any disadvantages to this dilution.
L E G A L P R O C E E D I N G S
There are no legal proceedings to which the Variable Account is a
party or to which the assets of the Variable Account are subject.
Intramerica is not involved in any litigation that is of material
importance in relation to its total assets or that relates to the Variable
Account.
A D D I T I O N A L I N F O R M A T I O N
A registration statement has been filed with the SEC under the
Securities Act of 1933 and the 1940 Act with respect to the Contract
offered hereby. This Prospectus does not contain all of the information
set forth in the registration statement and the amendments and exhibits to
the registration statement, to all of which reference is made for further
information concerning the Variable Account, Intramerica and the Contract
offered hereby. Statements contained in this Prospectus as to the contents
of the Contract and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
45
<PAGE>
TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
Prospectus
Page Reference*
STATE REGULATION OF INTRAMERICA 1 13
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF CERTAIN EXCHANGES AND SURRENDERS 1 34
SAFEKEEPING OF THE VARIABLE ACCOUNT'S
ASSETS 2 13
CALCULATION OF YIELDS
AND TOTAL RETURNS 2 11
Money Market Subaccount Yields 2
Other Subaccount Yields 3
Total Returns 4
Effect of the Records Maintenance Charge
on Performance Data 5
OTHER PERFORMANCE DATA 5 12
Cumulative Total Returns 5
Comparison of Performance and
Expense Information 6
LEGAL MATTERS 6 45
INDEPENDENT ACCOUNTANTS 7
FINANCIAL STATEMENTS 8 10
* The corresponding section headings may be found in the Prospectus at
the pages indicated.
46
<PAGE>
INTRAMERICA
VARIABLE ANNUITY ACCOUNT
STATEMENT OF
ADDITIONAL INFORMATION
FOR THE
SCUDDER HORIZON PLAN
FLEXIBLE PREMIUM VARIABLE
DEFERRED ANNUITY
Offered by
INTRAMERICA LIFE INSURANCE COMPANY
(A New York Stock Life Insurance Company)
9 Ramland Road
Orangeburg, New York 10962
---------------
This Statement of Additional Information expands upon subjects
discussed in the current Prospectus for the Flexible Premium Variable
Deferred Annuity (the "Contract") offered by Intramerica Life Insurance
Company. You may obtain a copy of the Prospectus, dated May 1, 1997, by
calling (800) 225-2470, or writing to Scudder Insurance Agency of New York,
Inc., 345 Park Avenue, New York, New York 10154. Terms used in the current
Prospectus for the Contract are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS AND SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
Dated May 1, 1997
<PAGE>
TABLE OF CONTENTS
Prospectus
Page Reference*
STATE REGULATION OF INTRAMERICA 1 13
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF CERTAIN EXCHANGES AND SURRENDERS 1 34
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS 2 13
CALCULATION OF YIELDS AND TOTAL RETURNS 2 11
Money Market Subaccount Yields 2
Other Subaccount Yields 3
Total Returns 4
Effect of the Records Maintenance Charge on
Performance Data 5
OTHER PERFORMANCE DATA 5 12
Cumulative Total Returns 5
Comparison of Performance and Expense Information 6
LEGAL MATTERS 6 45
INDEPENDENT ACCOUNTANTS 7
FINANCIAL STATEMENTS 8 10
* The corresponding section headings may be found in the Prospectus at the
pages indicated.
<PAGE>
In order to supplement the description in the Prospectus, the
following provides additional information about Intramerica and the
Contract which may be of interest to an Owner.
STATE REGULATION OF INTRAMERICA
Intramerica is a stock life insurance company organized under the laws
of the State of New York on March 24, 1966. Intramerica is subject to
regulation by the State of New York Insurance Department. Quarterly
statements covering the operations and reporting on the financial condition
of Intramerica are filed with the New York Superintendent of Insurance.
Periodically, the Superintendent examines the financial condition of
Intramerica, including the liabilities and reserves of the Variable Account
and any other separate account of which Intramerica is the depositor.
Intramerica is an indirect wholly-owned subsidiary of Charter National
Life Insurance Company ("Charter"), a Missouri stock life insurance
company. Charter is engaged principally in the offering of insurance
products on a direct marketing basis in 49 states, the District of Columbia
and Puerto Rico. Charter is a wholly-owned subsidiary of Leucadia National
Corporation ("Leucadia"), a New York corporation. Leucadia is a
diversified holding company, the common stock of which is listed on the New
York and Pacific Stock Exchanges. Campet, Inc., a Leucadia subsidiary owns
all of the outstanding stock of CNL, Inc. ("CNL"), the principal
underwriter of the Contract.
The Variable Account was originally established by First Charter Life
Insurance Company ("First Charter"), a subsidiary of Charter, on June 8,
1988. At that time, First Charter's corporate name was "Baldwin Life
Insurance Company" and the Variable Account was named "Baldwin Variable
Annuity Account." These names were changed to "First Charter Life
Insurance Company" and "First Charter Variable Annuity Account"
respectively, in October, 1988. On November 1, 1992, First Charter was
merged with and into Intramerica. Pursuant to the merger, Intramerica
acquired the Variable Account which was then renamed "Intramerica Variable
Annuity Account."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
CERTAIN EXCHANGES AND SURRENDERS
Under Section 1035 of the Code, generally no gain or loss is
recognized on a qualifying exchange of an annuity contract for another
annuity contract. A direct exchange of an annuity contract for the
Contract qualifies as an exchange under Section 1035 of the Code. There
are, however, certain exceptions to this rule. Moreover, although the
issue is not free from doubt, certain surrenders under an annuity contract
followed by an investment in the Contract also may qualify as exchanges
under Section 1035 of the Code. Due to the uncertainty of the rules
regarding the determination of whether a transaction qualifies under
Section 1035 of the Code, prospective purchasers are urged to consult their
own tax advisers.
In addition to being nontaxable events, certain exchanges under
Section 1035 of the Code also may result in a carry-over of the federal
income tax treatment of the old annuity contract to the new annuity
contract. Due to the complexity of the rules regarding the proper
treatment of an exchange qualifying under Section 1035 of the Code
prospective purchasers are urged to consult their own tax advisers.
1
<PAGE>
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
Intramerica holds the assets of the Variable Account. The assets are
kept segregated and held separate and apart from the general funds of
Intramerica. Intramerica maintains records of all purchases and
redemptions of the shares of each Portfolio. A blanket fidelity bond in
the amount of $10,000,000 covers all of the officers and employees of
Intramerica.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, Intramerica may disclose yields, total returns and
other performance data for the Subaccounts in accordance with regulations
published by the Securities and Exchange Commission. Because of the
charges and deductions imposed under the Contract, the yield for the
Subaccounts will be lower than the yield for their respective Portfolios.
Also, because of differences in Variable Account charges for different
variable annuity contracts invested in the Variable Account, the yields,
total returns and other performance data for the Subaccounts will be
different for the Contract than for such other variable annuity contracts.
The calculations of yields, total returns and other performance data do not
reflect the effect of any premium tax since no premium tax on the Contract
is currently payable under New York law.
The yields and total returns for periods prior to the date the
Subaccounts commenced operations, when disclosed, are based on the
performance of the Scudder Variable Life Investment Fund's Portfolios and
the assumption that the Subaccounts were in existence for the same periods
as the Fund's Portfolios with the level of Contract charges equal to those
that were in effect at the inception of the Subaccounts for the Contracts.
The Subaccounts and Portfolios commenced operations, as indicated:
Subaccount/Portfolio Subaccount Portfolio
Money Market July, 1990 July, 1985
Bond July, 1990 July, 1985
Balanced July, 1990 July, 1985
Capital Growth July, 1990 July, 1985
International July, 1990 May, 1987
Growth and Income May, 1994 May, 1994
Global Discovery May, 1996 May, 1996
Money Market Subaccount Yields
Based on the method of calculation described below, the Current Yield
and Effective Yield on amounts held in the Money Market Subaccount for the
seven-day period ended December 31, 1996, were as follows:
Current Yield = 4.31%
Effective Yield = 4.40%
The Current Yield is computed by determining the net change (exclusive
of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of a seven-day period in the
value of a hypothetical account having a balance of one unit of the Money
Market Subaccount at the beginning of the seven-day period, dividing the
net change in account value by the
2
<PAGE>
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 (i) net income from the Portfolio
attributable to the hypothetical account and (ii) charges and deductions
imposed under a Contract that are attributable to the hypothetical account.
The charges and deductions for the hypothetical account include the per
unit charges for Administration and Mortality and Expense Risk. The
Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES) / UV) x (365 / 7)
The Effective Yield is calculated by compounding the unannualized base
period return according to the following formula:
Effective Yield = (1 + ((NCS - ES) / UV))(to the power of 365 / 7) - 1
Where, for both formulas:
NCS = The net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized appreciation and
depreciation) for the seven-day period attributable to a hypothetical
account having a balance of one Subaccount unit under a Contract.
ES = Per unit expenses of the Subaccount for the Contracts for the seven-day
period.
UV = The unit value for a Contract on the first day of the seven-day
period.
The Current and Effective Yield on amounts held in the Money Market
Subaccount 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
Subaccount's actual yield is affected by changes in interest rates on money
market securities, average maturity of the Money Market Portfolio, the
types and quality of securities held by the Money Market Portfolio and its
operating expenses.
Other Subaccount Yields
Based on the method of calculation described below, the 30-Day Yield
for the Bond Subaccount for the 30-Day period ended December 31, 1996, was
as follows:
30-Day Yield = 5.39%
The 30-Day Yield refers to income generated by the Bond Subaccount
over a specific 30-day period. Because the yield is annualized, the yield
generated during the 30-day period is assumed to be generated each 30-day
period over a 12-month period. The yield is computed by: (i) dividing
the net investment income of the Portfolio attributable to the Subaccount
units less Subaccount expenses attributable to the Contracts for the
period, by the maximum offering price per unit on the last day of the
period times the daily average number of units outstanding for the period,
compounding that yield for a six-month period and (ii) multiplying that
result by two. Expenses attributable to the Bond Subaccount for the
Contracts include the Administration Charge and the Mortality and Expense
Risk Charge. The 30-Day Yield is calculated according to the following
formula:
30-Day Yield = 2 x ((((NI -ES) / (U x UV)) + 1)to the power of 6 - 1)
3
<PAGE>
Where:
NI = Net income of the portfolio for the 30-day period attributable to the
Subaccount's units.
ES = Expenses of the Subaccount for the Contracts for the 30-day period.
U = The average daily number of units outstanding attributable to the
Contracts.
UV = The highest unit value at the close of the last day in the 30-day
period.
The 30-Day Yield on amounts held in the Bond Subaccount normally will
fluctuate over time. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Bond Subaccount's actual yield is affected by the types and
quality of securities held by the Portfolio and its operating expenses.
Total Returns
Intramerica may disclose Standard Average Annualized Total Returns
("Total Returns") for one or more of the Subaccounts for various periods of
time. One of the periods of time will include the period measured from the
date the Subaccount commenced operations. When a Subaccount has been in
operation for one, five and ten years, respectively, the Total Returns for
these periods will be provided. Total Returns for other periods of time
may, from time to time, also be disclosed. Based on the method of
calculation described below, the Total Returns for the Subaccounts were as
follows:
Inception of Inception of One Year Five Year
the Subaccount the Portfolio Period Ending Period Ending
Subaccount to 12/31/96 to 12/31/96 12/31/96 12/31/96
Money Market 3.81% 4.76% 4.37% 3.32%
Bond 8.09% 7.57% 2.09% 6.07%
Balanced 9.86% 10.59% 11.10% 9.01%
Capital Growth 12.46% 13.28% 19.28% 11.64%
International 6.80% 9.04% 13.97% 10.26%
Growth and Income* 20.81% 20.81% 21.30% N/A
Global Discovery** 7.58% 7.58% N/A N/A
* Five Year Total Returns are not applicable for the Growth and Income
Subaccount as it commenced operation on May 1, 1994.
** One and Five Year Total Returns are not applicable for the Global
Discovery Subaccount as it commenced operation on May 1, 1996.
Total Returns represent the average annual compounded rates of return
that would equate a single investment of $1,000 to the redemption value of
the investment as of the last day of each of the periods. The ending date
for each period for which Total Return quotations are provided will be for
the most recent month end practicable, considering the type and media of
the communication, and will be stated in the communication.
Total Returns will be calculated using Subaccount Unit Values which
Intramerica calculates on each Valuation Date based on the performance of
the Subaccount's underlying Portfolio, and the deductions for the Mortality
and Expense Risk Charge, the Administration Charge and (for periods prior
to January 25,
4
<PAGE>
1991) the Records Maintenance Charge. An average per dollar Records
Maintenance Charge attributable to the hypothetical account for the period
is used. The Total Return is calculated according to the following
formula:
TR = (ERV / P )(to the power of 1 / N) - 1
Where:
TR = The average annual total return net of Subaccount recurring charges
for the Contracts.
ERV = The ending redeemable value of the hypothetical account at the end of
the period.
P = A hypothetical single payment of $1,000.
N = The number of years in the period.
Effect of the Records Maintenance Charge on Performance Data
The Contract provides for an annual $40 Records Maintenance Charge to
be deducted at the end of each Contract Year proportionately from each
Subaccount and each Declaration Period in the General Account in which the
Owner has funds allocated. Currently, Intramerica is not deducting the
Records Maintenance Charge. For purposes of reflecting the Records
Maintenance Charge on performance information prior to January 25, 1991,
the $40 annual charge was converted into a per dollar per day charge based
on the average Accumulated Value of all Contracts on the last day of the
period for which quotations are provided.
The assumed average Records Maintenance Charge was not, except in rare
instances, reflective of its actual effect on a particular Contract.
OTHER PERFORMANCE DATA
Cumulative Total Returns
Intramerica may disclose Cumulative Total Returns in conjunction with
the standard format described previously. The Cumulative Total Returns for
the Subaccounts were as follows:
Inception of Inception of One Year FiveYear
the Subaccount the Portfolio Period Ending Period Ending
Subaccount to 12/31/96 to 12/31/96 12/31/96 12/31/96
Money Market 27.45% 70.41% 4.37% 17.77%
Bond 65.59% 130.85% 2.09% 34.31%
Balanced 83.92% 217.29% 11.10% 54.04%
Capital Growth 114.05% 317.63% 19.28% 73.53%
International 53.19% 130.84% 13.97% 63.07%
Growth and Income* 65.70% 65.70% 21.30% N/A
Global Discovery** 5.01% 5.01% N/A N/A
* Five Year Returns are not applicable for the Growth and Income
Subaccount as it commenced operation on May 1, 1994.
** One Year and Five Year Returns are not applicable for the Global
Discovery Subaccount as it commenced operation on May 1, 1996.
5
<PAGE>
The Cumulative Total Returns are calculated using the following formula:
CTR = (ERV / P) - 1
Where:
CTR = The Cumulative Total Return net of Subaccount recurring charges for
the period.
ERV = The ending redeemable value of the hypothetical investment at the end
of the period.
P = A hypothetical single payment of $1,000.
Comparison of Performance and Expense Information
Expenses and performance information for each Subaccount may be
compared in advertising, sales literature, and other communications to
expenses and performance information of other variable annuity products
investing in mutual funds (or investment portfolios of mutual funds) with
investment objectives similar to each of the Subaccounts tracked by
independent services such as Lipper Analytical Services, Inc. ("Lipper"),
Morningstar and the Variable Annuity Research Data Service ("V.A.R.D.S.").
Lipper, Morningstar and V.A.R.D.S. monitor and rank the performance and
expenses of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance
issuers as well as variable annuity issuers. V.A.R.D.S. rankings only
compare variable annuity issuers. The performance analyses prepared by
Lipper and V.A.R.D.S. each rank such issuers on the basis of total return,
assuming reinvestment of distributions, but do not take sales charges or
certain expense deductions at the separate account level into
consideration. The performance analyses prepared by Morningstar rates
subaccount performance relative to its investment class based on total
returns. Morningstar deducts front end loads from total returns and
deducts half of the surrender charge, if applicable, for the relevant time
period when calculating performance figures. In addition, Morningstar and
V.A.R.D.S. prepare risk adjusted rankings, which consider the effects of
market risk on total return performance. This type of ranking provides
data as to which funds provide the highest total return within various
categories defined by the degree of risk inherent in their investment
objectives.
From time to time, Intramerica may also compare the performance of
each Subaccount to indices that measure stock market performance, such as
Standard & Poors 500 Composite ("S & P 500") or the Dow Jones Industrial
Average ("Dow"). Unmanaged indices such as these may assume reinvestment
of dividends but generally do not reflect "deductions" for the expenses of
operating and managing an investment portfolio.
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided
advice on certain legal matters relating to the Federal Securities Laws.
All matters of New York law pertaining to the Contracts, including the
validity of the Contract and Intramerica's authority to issue the Contract
under New York Insurance Law, have been passed upon by Alexis M. Berg,
General Counsel of Intramerica Life Insurance Company.
6
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements of the Intramerica Variable Annuity Account
as of December 31, 1996 and for each of the two years in the period ended
December 31, 1996 and the financial statements of Intramerica Life
Insurance Company as of December 31, 1996 and 1995and for each of the three
years in the period ended December 31, 1996 have been included in this
Registration Statement in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of Intramerica, which are included in this
Statement of Additional Information, should be considered only as bearing
on the ability of Intramerica to meet its obligation under the Contract.
They should not be considered as bearing on the investment performance of
the assets held in the Variable Account.
7
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGES
INTRAMERICA VARIABLE ANNUITY ACCOUNT
Report of Independent Accountants 9
Financial Statements:
Statement of Assets and Liabilities
as of December 31, 1996 10
Statement of Operations for the year ended
December 31, 1996 11
Statement of Changes in Net Assets for the
years ended December 31, 1996 and 1995 12-13
Notes to Financial Statements 14-18
INTRAMERICA LIFE INSURANCE COMPANY
Report of Independent Accountants 19
Financial Statements:
Balance Sheets as of December 31, 1996 and 1995 20
Statements of Income for the years ended
December 31, 1996, 1995 and 1994 21
Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994 22
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 23
Notes to Financial Statements 24-34
FINANCIAL STATEMENTS AND SCHEDULES OMITTED
All other schedules are not submitted because they are not required or
because the required information is included in the financial statements or
notes thereto.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Intramerica Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Intramerica Variable Annuity Account (comprising, respectively the Money
Market, Bond, Capital Growth, Balanced, International, Growth and Income
and Global Discovery Subaccounts) as of December 31, 1996 and the related
statement of operations for the year then ended and the statements of
changes in net assets for each of the two years in the period then ended.
These financial statements are the responsibility of the management of the
Intramerica Variable Annuity Account. 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. Our procedures included confirmation of securities held by the
custodian as of December 31, 1996. 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 financial position of each of the respective
subaccounts comprising the Intramerica Variable Annuity Account as of
December 31, 1996, the results of their operations for the year then ended
and the changes in their net assets for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 10, 1997
9
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Money Capital
Total Market Bond Growth
<S> <C> <C> <C> <C>
Assets:
Investment in series mutual funds, at
net asset value (cost $35,007,138
in total; and $4,302,519, $1,993,357,
$8,113,164, $3,489,184, $8,423,913,
$6,721,856 and $1,963,145 for
each portfolio, respectively.) $39,051,895 $4,302,519 $1,956,432 $9,317,380
Total net assets $39,051,895 $4,302,519 $1,956,432 $9,317,380
Net assets:
For variable annuity contracts $38,524,395 $4,302,519 $1,956,432 $9,317,380
Retained in separate account by
Intramerica Life Insurance Company 527,500
Total net assets $39,051,895 $4,302,519 $1,956,432 $9,317,380
The accompanying notes are an integral part of these financial statements.
</TABLE>
10
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Growth and Global
Balanced International Income Discovery
<S> <C> <C> <C> <C>
Assets:
Investment in series mutual funds, at
net asset value (cost $35,007,138
in total; and $4,302,519, $1,993,357,
$8,113,164, $3,489,184, $8,423,913,
$6,721,856 and $1,963,145 for
each portfolio, respectively.) $4,051,407 $9,476,993 $7,905,685 $2,041,479
Total net assets $4,051,407 $9,476,993 $7,905,685 $2,041,479
Net assets:
For variable annuity contracts $4,051,407 $9,476,993 $7,905,685 $1,513,979
Retained in separate account by
Intramerica Life Insurance Company 527,500
Total net assets $4,051,407 $9,476,993 $7,905,685 $2,041,479
</TABLE>
The accompanying notes are an integral part of these financial statements.
10a
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Money Capital
Total Market Bond Growth
<S> <C> <C> <C> <C>
Investment income:
Dividend income $1,813,549 $205,959 $191,741 $785,671
Less administrative expenses and
mortality and expense risk charges 220,276 29,322 13,872 50,112
Net investment income 1,593,273 176,637 177,869 735,559
Gains (losses) on investments:
Realized gains (losses):
Proceeds from sales of fund shares 32,244,069 13,628,262 739,197 6,022,121
Cost of fund shares sold 30,620,734 13,628,262 760,531 5,466,105
Net realized gains (losses) 1,623,335 0 (21,334) 556,016
Unrealized gains (losses):
Beginning of year 2,642,065 85,892 934,590
End of year 4,044,757 (36,925) 1,204,216
Change in unrealized gains
and losses 1,402,692 (122,817) 269,626
Net realized and unrealized
gains (losses) on investments 3,026,027 (144,151) 825,642
Increase in net assets
from operations $4,619,300 $176,637 $33,718 $1,561,201
* The Global Discovery Portfolio was added to the Fund on May 1, 1996.
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Growth and Global
Balanced International Income Discovery*
<S> <C> <C> <C> <C>
Investment income:
Dividend income $204,692 $199,986 $225,500 $0
Less administrative expenses and
mortality and expense risk charges 25,952 56,384 39,496 5,138
Net investment income 178,740 143,602 186,004 (5,138)
Gains (losses) on investments:
Realized gains (losses):
Proceeds from sales of fund shares 616,078 6,695,700 3,824,884 717,827
Cost of fund shares sold 552,966 6,121,552 3,385,860 705,458
Net realized gains (losses) 63,112 574,148 439,024 12,369
Unrealized gains (losses):
Beginning of year 399,332 598,294 623,957
End of year 562,223 1,053,080 1,183,829 78,334
Change in unrealized gains
and losses 162,891 454,786 559,872 78,334
Net realized and unrealized
gains (losses) on investments 226,003 1,028,934 998,896 90,703
Increase in net assets
from operations $404,743 $1,172,536 $1,184,900 $85,565
* The Global Discovery Portfolio was added to the Fund on May 1, 1996.
</TABLE>
The accompanying notes are an integral part of these financial statements.
11a
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Money Capital
Total Market Bond Growth
<S> <C> <C> <C> <C>
Changes in assets:
Operations:
Net investment income $1,593,273 $176,637 $177,869 $735,559
Net realized gains (losses) 1,623,335 (21,334) 556,016
Change in unrealized gains and losses 1,402,692 (122,817) 269,626
Net change from operations 4,619,300 176,637 33,718 1,561,201
Capital share transactions:
Premiums 3,675,106 481,756 144,427 630,719
Capital contributions 500,000
Contract surrenders (1,344,302) (533,168) (135,400) (288,903)
Transfers (to) from general account
and Portfolio transfers, net 479,067 (41,387) (267,986) (763,794)
Net change from capital
share transactions 3,309,871 (92,799) (258,959) (421,978)
Total change in net assets $7,929,171 $83,838 ($225,241) $1,139,223
Net assets:
Beginning of year $31,122,724 $4,218,681 $2,181,673 $8,178,157
End of year 39,051,895 4,302,519 1,956,432 9,317,380
Total change in net assets $7,929,171 $83,838 ($225,241) $1,139,223
* The Global Discovery Portfolio was added to the Fund on May 1, 1996.
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Growth and Global
Balanced International Income Discovery*
<S> <C> <C> <C> <C>
Changes in assets:
Operations:
Net investment income $178,740 $143,602 $186,004 ($5,138)
Net realized gains (losses) 63,112 574,148 439,024 12,369
Change in unrealized gains and losses 162,891 454,786 559,872 78,334
Net change from operations 404,743 1,172,536 1,184,900 85,565
Capital share transactions:
Premiums 403,163 452,345 1,225,572 337,124
Capital contributions 500,000
Contract surrenders (101,751) (201,724) (66,769) (16,587)
Transfers (to) from general account
and Portfolio transfers, net (216,262) (163,229) 796,348 1,135,377
Net change from capital
share transactions 85,150 87,392 1,955,151 1,955,914
Total change in net assets $489,893 $1,259,928 $3,140,051 $2,041,479
Net assets:
Beginning of year $3,561,514 $8,217,065 $4,765,634 $0
End of year 4,051,407 9,476,993 7,905,685 2,041,479
Total change in net assets $489,893 $1,259,928 $3,140,051 $2,041,479
* The Global Discovery Portfolio was added to the Fund on May 1, 1996.
</TABLE>
The accompanying notes are an integral part of these financial statements.
12a
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Money Capital
Total Market Bond Growth
<S> <C> <C> <C> <C>
Changes in assets:
Operations:
Net investment income $679,903 $195,262 $117,340 $211,946
Net realized gains (losses) 986,582 (10,132) 231,559
Change in unrealized gains and losses 3,086,515 217,258 1,243,064
Net change from operations 4,753,000 195,262 324,466 1,686,569
Capital share transactions:
Premiums 3,619,686 1,255,530 179,019 587,801
Capital withdrawals (631,383)
Contract claims (38,600) (14,287)
Contract surrenders (2,516,834) (954,076) (181,119) (473,964)
Transfers (to) from general account
And portfolio transfers, net 55,891 (704,804) 44,277 111,404
Net change from capital
share transactions 488,760 (403,350) 42,177 210,954
Total change in net assets $5,241,760 ($208,088) $366,643 $1,897,523
Net assets:
Beginning of year $25,880,964 $4,426,769 $1,815,030 $6,280,634
End of year 31,122,724 4,218,681 2,181,673 8,178,157
Total change in net assets $5,241,760 ($208,088) $366,643 $1,897,523
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Growth and
Balanced International Income
<S> <C> <C> <C>
Changes in assets:
Operations:
Net investment income $86,414 ($21,673) $90,614
Net realized gains (losses) 28,939 416,033 320,183
Change in unrealized gains and losses 588,402 400,395 637,396
Net change from operations 703,755 794,755 1,048,193
Capital share transactions:
Premiums 313,017 475,017 809,302
Capital withdrawals (631,383)
Contract claims (16,106) (8,207)
Contract surrenders (229,839) (357,268) (320,568)
Transfers (to) from general account
and portfolio transfers, net 211,910 (1,049,722) 1,442,826
Net change from capital
share transactions 278,982 (940,180) 1,300,177
Total change in net assets $982,737 ($145,425) $2,348,370
Net assets:
Beginning of year $2,578,777 $8,362,490 $2,417,264
End of year 3,561,514 8,217,065 4,765,634
Total change in net assets $982,737 ($145,425) $2,348,370
</TABLE>
The accompanying notes are an integral part of these financial statements.
13a
<PAGE>
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. Organization:
The Intramerica Variable Annuity Account (the "Variable Account") is a unit
investment trust registered under the Investment Company Act of 1940, as
amended. The Variable Account was established by First Charter Life
Insurance Company ("First Charter") as a separate investment account on
June 8, 1988. On November 1, 1992, the Variable Account was transferred
from First Charter to Intramerica Life Insurance Company ("Intramerica")
pursuant to a merger with and into Intramerica. Intramerica is 98% owned
by Colonial Penn Insurance Company ("CPI") and 2% owned by Charter National
Life Insurance Company ("Charter National"). Through several layers of
ownership, CPI is owned by Charter National, which is wholly-owned by
Leucadia National Corporation ("Leucadia").
The Variable Account receives funds representing premiums collected under
the variable annuity contracts (the "Contracts") offered by Intramerica.
The funds are directed by the Contract owners into one or more subaccounts,
each of which, in turn, invests exclusively in the shares of up to seven
portfolios of the Scudder Variable Life Investment Fund (the "Fund"), an
open-end, diversified investment company managed by Scudder, Stevens &
Clark, Inc. (the "Adviser"). The Fund, at December 31, 1996, consists of
the Money Market Portfolio, the Bond Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, the International Portfolio, the Growth
and Income Portfolio and the Global Discovery Portfolio (collectively
referred to as the "Portfolios"). The Global Discovery Portfolio was added
to the Fund on May 1, 1996.
The Adviser receives compensation for its management and advisory services.
Total annual compensation received by the Adviser in 1996 and 1995 as a
percentage of average net assets was as follows:
1996 1995
Money Market Portfolio .460% .500%
Bond Portfolio .610% .560%
Capital Growth Portfolio .530% .570%
Balanced Portfolio .600% .650%
International Portfolio 1.050% 1.080%
Growth and Income Portfolio .660% .750%
Global Discovery Portfolio 1.500% *
* The Global Discovery Portfolio was added to the Fund on May 1,
1996.
14
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS, Continued
1. Organization, continued:
Intramerica has an agreement whereby it reimburses the Fund for its share
of the annual operating expenses incurred by the Adviser that exceed 1.50%
of the average daily net assets in the International and Global Discovery
Portfolios and .75% of the average daily net assets in the remaining
Portfolios. Intramerica's share of such excess expenses are determined by
the proportion of its investment in the Fund to the total investment of all
companies participating in the Fund.
Each subaccount is denominated in units having a distinct value (the "Unit
Value"). For each subaccount, the Unit Value for the Contracts on a given
date is based on the net asset value of a share of the corresponding
Portfolio in which such subaccount invests. When a payment is allocated or
an amount is transferred to a subaccount, a number of units is purchased
based on the Unit Value of the subaccount. When amounts are transferred
out of or deducted from a subaccount, units are redeemed in a similar
manner.
Intramerica is domiciled in the State of New York. Under New York
insurance regulations, the assets of the Variable Account are the property
of Intramerica. The assets of each subaccount attributable to the
Contracts, and the income arising therefrom, may not be used to settle the
liabilities arising from any other subaccount or from any other business
operations of Intramerica. The assets of each subaccount in excess of
those attributable to the Contracts, and the income arising therefrom, are
available for Intramerica's general use.
2. Significant Accounting Policies:
Investment Valuation:
Investments made in the Portfolios of the Fund are valued at their
respective net asset values. Transactions are recorded on the trade date.
Dividend income is recognized when declared in all Portfolios except the
Money Market Portfolio, which recognizes income based upon a daily earnings
rate. Gains and losses on investments, both realized and unrealized, are
determined on the basis of the weighted average cost of the aggregate
shares held in each of the Portfolios of the Fund.
Federal Income Taxes:
Under current law, the net income and realized gains and losses
attributable to the Contracts are subject to taxation, under certain
circumstances, upon the withdrawal of such funds. The Variable Account
makes no provision for such future, potentially taxable events as any such
taxes that would then become payable would be the responsibility of the
owners of the Contracts. Similar items attributable to Intramerica's
capital contribution are included in its federal income tax return, with
provisions for such tax included in the accounts of Intramerica.
15
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS, Continued
2. Significant Accounting Policies, continued:
Federal Income Taxes, continued:
At the present time, Intramerica makes no charge to the Variable Account
for any federal, state or local taxes that it incurs which may be
attributable to such Account or to the Contracts.
Intramerica, however, reserves the right in the future to make a charge for
any such tax or other economic burden resulting from the application of the
tax laws that it determines to be properly attributable to the Variable
Account or to the Contracts.
Use of Estimates in Preparing Financial Statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Basis of Presentation:
Certain amounts in the prior year's financial statements have been
reclassified to conform with the 1996 presentation.
3. Charges and Deductions:
Mortality and Expense Risk Charges and Administrative Expenses:
Intramerica assumes certain mortality and expense risks related to the
operation of the Variable Account and deducts daily charges from the
Contract's values at an annual rate of .40%. Intramerica reserves the
right to increase the mortality and expense risk charge to an annual rate
of .70%. In addition, similar deductions are made on a daily basis for
administrative expenses at an annual rate of .30%.
Records Maintenance Charge:
The Contract permits Intramerica to deduct a records maintenance charge of
up to $40 from each Contract at the end of each Contract year to reflect
the cost of performing records maintenance. No charge is currently being
imposed for records maintenance.
16
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS, Continued
3. Charges and Deductions, continued:
Transfer Charge:
The Contract permits Intramerica to deduct a transfer charge of $20 for the
third and each subsequent transfer request made during a Contract year. No
charge is currently being imposed for transfers.
4. Distribution of the Contracts:
CNL, Inc. ("CNL") is a wholly-owned subsidiary of Campet, Inc., which is a
wholly-owned subsidiary of Leucadia. CNL, which acts as the principal
underwriter for the Contracts, is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"). CNL
receives commissions and underwriting fees directly from Intramerica. CNL
and Intramerica have contracted with Scudder Fund Distributors, Inc.
("Scudder") for Scudder's services in connection with the distribution of
the Contracts. Scudder is registered with the SEC as a broker-dealer and
is a member of the NASD.
17
<PAGE>
INTRAMERICA VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS, Continued
5. Investments:
The following table presents selected data regarding the investments in
each of the Portfolios of the Fund at December 31, 1996.
Number of Net Asset Value
Portfolio Shares Cost Total Per Share
Money Market 4,302,519 $4,302,519 $4,302,519 $1.00
Bond 290,703 1,993,357 1,956,432 6.73
Capital Growth 564,690 8,113,164 9,317,380 16.50
Balanced 348,958 3,489,184 4,051,407 11.61
International 715,245 8,423,913 9,476,993 13.25
Growth and Income 843,723 6,721,856 7,905,685 9.37
Global Discovery* 322,508 1,963,145 2,041,479 6.33
Total $35,007,138 $39,051,895
The number and cost of Fund shares purchased and sold for the years ended
December 31, 1996 and 1995 are as follows:
Portfolio Purchases Sales
Shares Cost Shares Cost
1996
Money Market 13,712,100 $13,712,100 13,628,262 $13,628,262
Bond 96,890 658,107 110,465 760,531
Capital Growth 415,234 6,335,702 392,862 5,466,105
Balanced 79,528 879,968 55,822 552,966
International 558,944 6,926,694 538,882 6,121,552
Growth and Income 700,388 5,966,039 453,862 3,385,860
Global Discovery* 438,889 2,668,603 116,381 705,458
Total $37,147,213 $30,620,734
Portfolio Purchases Sales
Shares Cost Shares Cost
1995
Money Market 14,828,072 $14,828,072 15,036,160 $15,036,160
Bond 173,557 1,178,295 149,376 1,028,910
Capital Growth 584,528 7,771,503 555,753 7,117,044
Balanced 115,014 1,136,926 77,251 742,591
International 715,694 7,938,458 802,783 8,484,278
Growth and Income 630,136 4,432,443 419,083 2,721,469
Total $37,285,697 $35,130,452
* The Global Discovery Portfolio was added to the Fund on May 1, 1996.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Intramerica Life Insurance Company:
We have audited the accompanying balance sheets of Intramerica Life
Insurance Company (an indirect wholly-owned subsidiary of Leucadia National
Corporation) as of December 31, 1996 and 1995 and the related statements of
income, stockholders' 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 financial position of Intramerica Life
Insurance Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 10, 1997
19
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31, 1996 and 1995
(Dollars in thousands except par value)
1996 1995
ASSETS
Investments classified as available for sale $61,408 $61,565
(Aggregate cost of $62,368 and $61,237)
Investments classified as held to maturity 2,399 2,408
(Aggregate fair value of $2,373 and $2,404)
Policyholder loans 1,888 1,811
Accrued investment income 771 833
Total investments 66,466 6,617
Cash and cash equivalents 18,207 24,370
Accounts receivable 254 202
Reinsurance receivable 98 109
Deferred income taxes 955 346
Deferred policy acquisition costs 4,784 3,628
Furniture, equipment, and leasehold
improvements, net 320 402
Assets held in separate account 39,052 31,123
Total assets $130,136 $126,797
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits $53,033 $52,909
Policy and contract claims 1,915 1,631
Accounts payable and accrued expenses 1,062 1,065
Payable to parents and affiliates 642 852
Income taxes payable 2,428 2,069
Other liabilities 376 311
Liabilities related to separate account 38,524 31,123
Total liabilities 97,980 89,960
Stockholders' equity:
Common stock, $7 par value per share, 300,000
shares authorized, issued and outstanding 2,100 2,100
Additional paid-in capital 30,662 34,524
Net unrealized gain (loss) on investments (606) 213
Retained earnings
Total stockholders' equity 32,156 36,837
Total liabilities and stockholders' equity $130,136 $126,797
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
1996 1995 1994
Revenues:
Insurance revenues $13,547 $13,269 $12,765
Net investment income 4,955 5,516 5,866
Net securities gains (losses) 530 320 (159)
Other 246 196 163
Total revenues 19,278 19,301 18,635
Benefits and expenses:
Policyholder benefits and claims 9,348 12,034 10,297
Increase (decrease) in future
policy benefits 1,093 (1,569) (135)
Administrative and general
expenses 6,773 6,392 5,899
Capitalization of policy
acquisition costs (1,992) (1,757) (1,205)
Amortization of deferred policy
acquisition costs 836 404 285
Total benefits and expenses 16,058 15,504 15,141
Income before income taxes 3,220 3,797 3,494
Income taxes:
Current 1,250 1,049 1,197
Deferred (168) 285 (78)
Total provision for income
taxes 1,082 1,334 1,119
Net income $2,138 $2,463 $2,375
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except par value)
Net
Common Unrealized
Stock, Additional Gain(Loss)
$7 Par Paid-in on Retained
Value Capital Investments Earnings Total
Balance, January 1, 1994 $2,100 $35,647 $1,588 $9,139 $48,474
Net income 2,375 2,375
Net change in unrealized
gain in investments (2,694) (2,694)
Dividends paid (8,100) (8,100)
Balance, December 31, 1994 2,100 35,647 (1,106) 3,414 40,055
Net income 2,463 2,463
Net change in unrealized
loss on investments 1,319 1,319
Dividends paid/return
of capital (1,123) (5,877) (7,000)
Balance, December 31, 1995 2,100 34,524 213 0 36,837
Net income 2,138 2,138
Net change in unrealized
gain on investments (819) (819)
Dividends paid/return
of capital (3,862) (2,138) (6,000)
Balance, December 31,1996 $2,100 $30,662 ($606) $0 $32,156
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
1996 1995 1994
Cash flows from operating activities:
Net income $2,138 $2,463 $2,375
Adjustments to reconcile net income to net
cash provided by operating activities:
Net security (gains) losses (530) (320) 159
Depreciation and amortization of furniture,
equipment, and leasehold improvements 82 41 7
Amortization of investment premium and
discount, net (241) (757) (198)
Net change in future policy benefits 425 1,514 1,588
Net change in policy and contract claims 284 139 26
Net change in accounts receivable (129) (129) (165)
Net change in reinsurance receivable 11 19 56
Net change in accounts payable and accrued
expenses and payable to parents and
affiliates (213) 650 (741)
Net change in income taxes payable and
deferred income taxes 191 261 239
Net change in accrued investment income 62 164 124
Net change in deferred policy acquisition
costs (1,156) (1,353) (921)
Net change in other liabilities 65 (68) (97)
Net cash provided by operating activities 989 2,624 2,452
Cash flows from investing activities:
Purchases of investments (other than
short-term) (61,491)(67,183)(51,257)
Proceeds from sales of investments 29,833 27,751 17,712
Proceeds from maturities of investments 31,307 60,976 40,561
Net change in investment in separate account (500) 617 (435)
Purchase of furniture, equipment, and
leasehold improvements 0 (399) (6)
Net cash provided by (used for)
investment activities (851) 21,762 6,575
Cash flows from financing activities:
Net change in policyholder account balances (301) (467) (673)
Dividends paid (6,000) (7,000) (8,100)
Net cash used for financing activities (6,301) (7,467) (8,773)
Net increase (decrease) in cash and
cash equivalents (6,163) 16,919 254
Cash and cash equivalents at January 1, 24,370 7,451 7,197
Cash and cash equivalents at December 31, $18,207 $24,370 $ 7,451
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $891 $1,073 $880
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Nature of Operations:
Intramerica Life Insurance Company (the "Company") is a stock life
insurance company owned 98% by Colonial Penn Insurance Company ("CPI"),
which is domiciled in the State of Pennsylvania and 2% by Charter National
Life Insurance Company ("Charter National"), which is domiciled in the
State of Missouri. Through several layers of ownership, CPI is a wholly
- -owned subsidiary of Charter National. Charter National is a wholly-owned
subsidiary of Leucadia National Corporation ("Leucadia"), a publicly traded
holding company domiciled in the State of New York.
The Company is a provider of graded benefit life insurance to the age 50
and over population, and variable annuity products, in the State of New
York, its state of domicile. These products are marketed on a direct
response basis.
Certain amounts in the prior years' financial statements have been
reclassified to conform with the 1996 presentation.
2. Significant Accounting Policies:
a. Statements of Cash Flows
The Company considers short-term investments, which have maturities of less
than three months at the time of acquisition, to be cash equivalents. Cash
and cash equivalents include short-term investments of approximately
$17,871,000 and $23,909,000 at December 31, 1996 and 1995, respectively.
b. Investments:
At acquisition, marketable debt and equity securities are designated as
either i) held to maturity, which are carried at amortized cost, ii)
trading, which are carried at estimated fair value with unrealized gains
and losses reflected in results of operations, or iii) available for sale,
which are carried at estimated fair value with unrealized gains and losses
reflected as a separate component of stockholders' equity, net of taxes.
Held to maturity investments are made with the intention of holding such
securities to maturity, which the Company has the ability and intent to do.
Estimated fair values are principally based on quoted market prices.
24
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. Significant Accounting Policies, continued:
b. Investments, continued:
The Company had no investments classified as trading securities at December
31, 1996 or 1995.
Policyholder loans are stated at the aggregate unpaid balance.
Gains or losses on sales of investments are determined on a specific cost
identification basis.
c. Deferred Policy Acquisition Costs:
Policy acquisition costs principally consist of direct response marketing
costs and policy issuance expenses. Policy acquisition costs of ordinary
life insurance are deferred and amortized over the premium paying period of
the related policies in proportion to the ratio of annual premium revenue
to the total premium revenue expected. The assumptions used to estimate
the future expected premium are consistent with the assumptions used in
computing the liabilities for future policy benefits.
d. Furniture, equipment, and leasehold improvements:
Furniture, equipment, and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization of approximately $135,000 and
$53,000 at December 31, 1996 and 1995, respectively. Depreciation and
amortization are computed on the straight-line method over the estimated
useful lives of the respective assets, not to exceed 10 years for furniture
and equipment, and five years for leasehold improvements.
e. Insurance Revenues and Other Charges:
Premiums for investment oriented insurance ("IOP") products are reflected
in a manner similar to a deposit; revenues reflect only mortality charges
and other amounts assessed against the holder of the annuity contracts.
The principal IOP product offered during the three year period ended
December 31, 1996 was a variable annuity ("VA") product. Other life
premiums are recognized as revenues when due.
Premiums for the VA products are directed by the policyholder to be
invested generally in a unit investment trust solely for the benefit and
risk of the policyholder. Such investments are considered a "separate
account". Policyholders' accounts are charged for the cost of insurance
provided, administrative and certain other charges.
25
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. Significant Accounting Policies, continued:
f. Future Policy Benefits and Policy and Contract Claims:
Policy reserves for ordinary life and health policies are generally
calculated on a net level premium method based upon estimated future
investment yields, expected mortality and morbidity based on standard and
company development tables with provision for adverse deviation and
estimated withdrawals. Interest rate assumptions for life and health
policies range from 3% to 6%. Claims and benefits payable for both
reported losses and incurred but not reported losses are determined on the
basis of past experience and on an individual case basis.
The liabilities for future policy benefits related to single premium
deferred annuities are stated at accumulated value which is premiums paid,
plus all interest credited to date, less any withdrawals. The average
crediting rate was 4% during 1996, 1995 and 1994.
g.Pension Plans and Other Postemployment and Postretirement Benefits:
The Company participates in a non-contributory trusteed pension plan
sponsored by Colonial Penn Group, Inc. ("CPG"), the parent of the Company
through several layers of ownership. The plan covers certain Company
employees, and generally provides for retirement benefits based on salary
and length of service. The plan is funded in amounts sufficient to satisfy
minimum ERISA funding requirements.
The Company provides health care and other benefits to certain eligible
retired employees. The plans (most of which require employee
contributions) are unfunded. There was no material effect on the Company's
results of operations for each of the three years in the period ended
December 31, 1996 as a result of providing these benefits, and the Company
does not expect them to have a material effect on results of future
operations.
h. Income Taxes:
The Company files a separate federal income tax return.
The Company provides for income taxes using the liability method. The
future benefit of certain tax loss carryforwards and future deductions is
recorded as an asset and the provisions for income taxes are not reduced
for the benefit from utilization of tax loss carryforwards. A valuation
allowance is provided if deferred tax assets are not considered more likely
than not to be realized.
26
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. Significant Accounting Policies, continued:
i. Separate Account Assets and Liabilities:
Separate account assets and liabilities relate to funds received from the
Company's variable annuity product. Separate account assets are carried at
fair market value. Separate account liabilities represent the
policyholders' account value.
j. Use of Estimates in Preparing Financial Statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements
and disclosures of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
k. Risks and Uncertainties
The Company is subject to interest rate risk to the extent its investment
portfolio cash flows are not matched to its insurance liabilities. The
Company believes it manages this risk through modeling of the cash flows
under reasonable scenarios. The Company's assets are also subject to
credit risk, but this is minimized through a significant concentration in
U. S. government securities.
3. Insurance Operations:
The principal insurance products are "Graded Benefit Life" and "Investment
Oriented" insurance.
Graded Benefit Life: "Graded Benefit Life" is a guaranteed-issue product.
These modified-benefit, whole life policies are offered on an individual
basis primarily to persons age 50 to 75, principally in face amounts of
$350 to $10,000.
Investment Oriented Products: The Company's principal IOP product is a
no-load VA product. The VA product is marketed as an investment vehicle to
individuals seeking to defer, for federal income tax purposes, the annual
increase in their account balance. Premiums from this VA product either
are invested at the policyholders' election in unaffiliated mutual funds
where the policyholder bears the entire investment risk or in a fixed
account where the funds earn interest at rates determined by the Company.
The Company's VA product is currently marketed in conjunction with a mutual
fund manager. Premiums received on the VA product were approximately
$3,679,000, $3,754,000 and $7,609,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
27
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
4. Investments:
Net investment income for the years ended December 31, 1996, 1995 and 1994
was as follows , in thousands of dollars:
1996 1995 1994
Fixed maturities and cash equivalents $4,920 $5,473 $5,774
Other investments 124 133 105
Total investment income 5,044 5,606 5,879
Less: Investment expenses (89) (90) (13)
Net investment income $4,955 $5,516 5,866
The amortized cost and estimated fair value of investments classified as
available for sale and as held to maturity at December 31, 1996, by
contractual maturity, are shown below, in thousands of dollars. Expected
maturities are likely to differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Available for Sale Held to Maturity
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or less $3,371 $3,373 $240 $244
Due after one year through
five years 42,454 41,651 2,159 2,129
Due after five years through
ten years 5,034 4,959
Mortgage-backed securities 11,509 11,425
Total $62,368 $61,408 $2,399 $2,373
At December 31, 1996 and 1995, securities with book values aggregating
approximately $2,399,000 and $2,408,000 were on deposit with various
regulatory authorities and are classified as held to maturity.
Gross security gains for the years ended December 31, 1996, 1995 and 1994
were approximately $572,000, $320,000 and $36,000, respectively, and gross
security losses for the same periods were approximately $42,000, $0 and
$195,000, respectively.
28
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
4. Investments, continued:
The amortized cost, gross unrealized holding gains and losses and estimated
fair value of investments classified as available for sale and as held to
maturity at December 31, 1996 and 1995 were as follows in thousands of
dollars:
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
1996 Cost Gains Losses Value
Available for sale:
U. S. Government agencies
and authorities $50,758 $2 ($877) $49,883
Corporate securities 101 (1) 100
Mortgage-backed securities 11,509 61 (145) 11,425
Total investments available
for sale $62,368 $63 ($1,023) $61,408
Held to maturity:
U.S. Government agencies
and authorities $ 2,399 $ 4 ($30) $ 2,373
1995
Available for sale:
U.S. Government agencies
and authorities $43,033 $349 ($ 1) $43,381
Corporate securities 1,101 18 1,119
Mortgage-backed securities 17,103 57 (95) 17,065
Total investments available
for sale $61,237 $424 ($96) $61,565
Held to maturity:
U.S. Government agencies
and authorities $ 2,408 $ 15 ($19) $ 2,404
Unrealized gains on separate account assets attributable to the Company (as
opposed to the policyholder) were approximately $28,000 and $0 at
December 31, 1996 and 1995, respectively.
29
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
5. Income Taxes:
The principal components of the deferred tax assets at December 31, 1996
and 1995 are as follows, in thousands of dollars:
1996 1995
Insurance reserves and unearned premiums $634 $381
Unrealized (gain) loss on investments 326 (115)
Employee benefits and compensation 87 87
Policy acquisition costs (117) 99
Other, net 25 (106)
Net deferred tax asset $955 $346
The Company believes it is more likely than not that the recorded deferred
tax asset will be realized principally from taxable income generated by
profitable operations.
The table below reconciles the "expected" statutory federal income tax to
the actual income tax expense, in thousands of dollars:
1996 1995 1994
"Expected" federal income tax $1,127 $1,329 $1,223
Other, net (45) 5 (104)
Total provision for income taxes $1,082 $1,334 $1,119
Under prior law, the Company had accumulated approximately $2,083,000 of
special federal income tax deductions allowed life insurance companies at
December 31, 1996. Under certain conditions, this amount could become
taxable in future periods. The Company does not anticipate any
transactions occurring that would cause these amounts to become taxable.
30
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
6. Pension Plans and Other Postemployment and Postretirement Benefits:
CPG sponsors a non-contributory defined benefit pension plan covering
substantially all employees of the Company and other CPG subsidiaries.
Plan benefits are generally based on years of service and employees'
compensation during the last years of employment. CPG's policy is to fund
the pension cost calculated under the unit credit funding method provided
that this amount is at least equal to the Employee Retirement Income
Security Act minimum funding requirements and is not greater than the
maximum tax deductible amount for the year. Pension cost allocated to the
company for participation in the CPG plan amounted to approximately
$87,000, $128,000 and $48,000 in 1996, 1995 and 1994, respectively.
Separate records for vested benefits and pension fund assets are not
maintained for each subsidiary.
In addition to providing pension benefits, CPG provides health care and
other benefits to certain eligible retired employees. The plans (most of
which require employee contributions) are unfunded. The Company accrues
the cost of providing certain postretirement and postemployment benefits
during the employees' period of service. Amounts charged to expense
related to such benefits were approximately $15,000, $16,000 and $16,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
The costs allocated to the Company by CPG for participation in the pension
plan and other employee benefits are included in general and administrative
expenses referenced in Note 7.
7. Related Party Transactions:
Leucadia, Charter National and CPG affiliates provide the Company with
investment advisory, actuarial, electronic data processing and certain
other services. Included in administrative and general expenses are
approximately $2,544,000, $2,100,000 and $2,076,000 related to such
services for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company provided services to Colonial Penn Franklin
Insurance Company, a subsidiary of CPI, related to the administration of
health insurance policies for which the Company received income of
approximately $50,000, $70,000 and $76,000 in 1996, 1995 and 1994,
respectively. The Company paid to CNL, Inc., an indirect subsidiary of
Leucadia and the principal underwriter of the Company's annuity products,
commissions and expense allowances of approximately $18,000, $19,000 and
$38,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
31
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. Statutory Information:
The Company also prepares financial statements on a statutory basis for
filing with regulatory authorities. These financial statements are
prepared on the basis of accounting practices and procedures of the
National Association of Insurance Commissioners as prescribed or permitted
by the Insurance Department of the State of New York, which differ in
certain respects from generally accepted accounting principles.
The Company's reported statutory capital and surplus was $24,971,442 and
$29,924,510 at December 31, 1996 and 1995, respectively. The Company's
statutory net income reported for the years ended December 31, 1996, 1995
and 1994 was $1,034,388, $1,807,129 and $1,720,678, respectively.
The payment of cash dividends by the Company to its stockholders requires
prior approval of the State of New York Insurance Department.
9. Commitments and Contingencies:
The Company is subject to various litigation which arises in the course of
its business. The Company is not currently involved in any litigation.
The Company is a member of state insurance funds which provide certain
protection to policyholders of insolvent insurers doing business in those
states. Due to insolvencies of certain insurers in recent years, the
Company has been assessed certain amounts and is likely to be assessed
additional amounts by the state insurance funds. The Company has provided
for all anticipated assessments and does not expect any additional
assessments to have a material effect on results of operations.
The Company currently occupies office space that is rented under a
non-cancelable operating lease that expires in 2000. Rental expenses charged
to operations were approximately $90,000, $216,000 and $320,000 for the
years ended December 31, 1996, 1995 and 1994, respectively. Minimum annual
rental payments relating to facilities under lease in effect at
December 31, 1996 are as follows:
Future Minimum Rental Payments
1997 $93,818
1998 $93,818
1999 $93,818
2000 $46,909
32
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. Fair Value of Financial Instruments:
Fair values are based on estimates using present value or other valuation
techniques where quoted market prices are not available. Those techniques
are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. The fair value amounts presented
do not purport to represent and should not be considered representative of
the underlying "market" or franchise value of the Company.
The methods and assumptions used to estimate the fair values of each class
of the financial instruments described below are as follows:
(a)Investments: The fair values of fixed maturities are
substantially based on quoted market prices. It is not practicable to
determine the fair value of policyholder loans since such loans generally
have no stated maturity, are not separately transferable and are often
repaid by reductions to benefits and surrenders.
(b)Cash equivalents: The statement value of cash equivalents
approximates fair value.
(c)Separate account: Separate account assets and liabilities are
carried at market value, which is a reasonable estimate of fair value.
(d)Investment contract reserves: SPDA reserves are carried at
account value, which is a reasonable estimate of fair value.
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows, in thousands of
dollars:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Investments:
Practicable to estimate
fair value $63,807 $63,781 $63,973 $63,969
Policyholder loans 1,888 1,888 1,811 1,811
Cash equivalents 17,871 17,871 23,909 23,909
Separate account 39,052 39,052 31,123 31,123
Financial liabilities:
Investment contract reserves 2,805 2,805 3,564 3,564
Separate account 38,524 38,524 31,123 31,123
33
<PAGE>
INTRAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
11. Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash. The Company
places its cash with high quality financial institutions. At times such
amounts may be in excess of the Federal Deposit Insurance Corporation
insurance limits.
34
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) (a) Resolutions of the Board of Directors of First Charter Life
Insurance Company authorizing establishment of the Variable Annuity
Account i
(b) Resolutions of the Board of Directors of Intramerica
regarding the acquisition of the Variable Annuity Account i
(2) Not applicable
(3) (a) Principal Underwriting Agreement, dated September 1,1989,
amended January 25, 1991, by and between First Charter Life Insurance
Company on its own behalf and on behalf of First Charter Variable Annuity
Account,and CNL, Inc. i
(b) Amendment, dated October 26, 1992, to the Principal
Underwriting Agreement i
(c) Form of Marketing and Solicitation Agreement between
Scudder Fund Distributors, Inc., First Charter Life Insurance Company,
CNL, Inc. and First Charter Variable Annuity Account i
(d) Amendment, dated October 26, 1992, to the Marketing and
Solicitation Agreement i
(4) (a) Contract for the Flexible Premium Variable Deferred Annuity
(S 1802) i
(5) (a) Application for the Flexible Premium Variable Deferred
Annuity (A 1802) i
(b) Financial Questionnaire (B 1802) i
(6) (a) Charter of Intramerica Life Insurance Company i
(b) By-Laws of Intramerica Life Insurance Company i
(7) Not Applicable
(8) (a) Participation Agreement dated May 11, 1994, by and between
Scudder Variable Life Investment Fund and Intramerica Life Insurance
Company i
(b) Reimbursement Agreement dated May 11, 1994, by and between
Scudder, Stevens & Clark, Inc. and Intramerica Life Insurance Company i
(c) General Services and Expense Reimbursement Agreement dated
September 1, 1989, between First Charter Life Insurance Company and Charter
National Life Insurance Company i
(9) (a) Opinion and Consent of Counsel
(b) Consent of Counsel
(10) Consent of Independent Accountants
(11) Not Applicable
(12) Not Applicable
(13) Schedule for Computation of Performance Data i
(14) Power of Attorney i
(i) Incorporated by reference to the Post-Effective Amendment No. 6 to
the Registration Statement on Form N-4, File No. 33-54116, filed on
February 26, 1997.
C-1
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and offices
Business Address* with Depositor
Richard G. Petitt Chairman, Chief Executive Officer
Colonial Penn Life and Director
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Alexis M. Berg Vice President, Secretary,
Colonial Penn Life General Counsel and Director
Insurance Co.
399 Market Street
Law Department
Philadelphia, PA 19181
Elizabeth A. Clifford Vice President, Controller
Colonial Penn Life and Treasurer
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Linda H. Gerdes Senior Vice President, Assistant
Secretary, Chief Administrative
Officer and Director
Karen M. Henneberg Assistant Vice President
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Elizabeth H. Lally Director
Four M Corporation
115 Steven Avenue
Valhalla, NY 10595
Godfrey H. Murrain, Esq. Director
225 Broadway, Suite 3504
New York, NY 10007
Henry H. Wulsin Vice President and Director
Colonial Penn
Insurance Co.
2650 Audubon Road
Norristown, PA 19403
Howard M. Pines Director
BeamPines, Inc.
600 3rd Avenue
New York, NY 10007
David L. Baxter Senior Vice President and Chief Actuary
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
C-2
<PAGE>
Name and Principal Positions and offices
Business Address* with Depositor
Timothy C. Sentner Vice President
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Allen S. Miller Vice President
Charter National Life
Insurance Co.
8301 Maryland Avenue
St. Louis MO 63105
Kathleen A. Urbanowicz Assistant Vice President
Charter National Life
Insurance Co.
8301 Maryland Avenue
St. Louis MO 63105
Gregory R. Barstead President, Chief Operating
Colonial Penn Life. Officer and Director
Insurance Co
399 Market Street
Philadelphia, PA 19181
Robert F. Vickery Vice President
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
William R. Ziegler Director
Parson & Brown
230 Park Avenue
New York, NY 10169
* The principal business address of each person listed above, unless
otherwise indicated, is Intramerica Life Insurance Company, 9 Ramland Road,
Orangeburg, New York 10962.
Item 26. Persons Controlled by or Under Common Control With the
Depositor or Registrant
Intramerica is the depositor of Intramerica Variable Annuity Account, a
separate account. This separate account was originally established by
First Charter Life Insurance Company in connection with the sale of
Variable Annuity Contracts by First Charter. First Charter was merged with
and into Intramerica on November 1, 1992.
Intramerica is an indirect wholly-owned subsidiary of Charter National Life
Insurance Company ("Charter"). First Charter was a direct wholly-owned
subsidiary of Charter.
Charter is a stock life insurance company incorporated under the laws of
Missouri on December 7, 1955. Charter is engaged principally in the
offering of insurance products on a direct marketing basis and had assets
of $3.048 billion as of December 31, 1996. Charter is admitted to do
business in 49 states, the District of Columbia and Puerto Rico. The
principal offices of Charter are located at 8301 Maryland Avenue, St.
Louis, Missouri 63105, and its telephone number at that address is (314)
725-7575.
Charter is a wholly-owned subsidiary of Leucadia National Corporation
("Leucadia"), a New York corporation. Leucadia is a diversified holding
company, the common stock of which is listed on the New York and Pacific
Stock Exchanges.
C-3
<PAGE>
Campet, Inc., a Leucadia subsidiary owns all of the outstanding stock of
CNL, Inc. ("CNL"), the principal underwriter for the Contracts.
Set forth below is certain information concerning each of the persons under
common control with Intramerica, including state of organization,
percentage of voting securities owned or other basis of control and
principal business.
Percent of
Jurisdiction Voting
of Securities Principal
Name Incorporation Owned* Business
Campet, Inc. Delaware 100% Investments
Centurion Ins. Co. New York 100% Insurance
WMAC Investment Corp. Wisconsin 100% Holding Company
Colonial Penn Madison Wisconsin 100% Insurance
Insurance Co.
Bellpet, Inc. Delaware 100% Holding Company
Baldwin-CIS L.L.C. Delaware 100% Investments
Solana Corporation Utah 100% Holding Company
Baldwin Forest Delaware 100% Investments
Products L.L.C.
Conwed Corporation Delaware 100% Real Estate
Leucadia Film Utah 100% Film Products
Corporation
Neward Corporation New York 100% Owner and Operator of
Oil Wells
Rastin Investing Corp. Delaware 100% Investments
HSD Venture California 100% Real Estate
American Investment Delaware 100% Holding Company
Company
Leucadia Aviation, Inc. Delaware 100% Aviation
LNC Investments, Inc. Delaware 100% Investments
The Sperry and
Hutchinson Co., Inc. New Jersey 100% Trading Stamps
Leucadia, Inc. New York 100% Manufacturing &
Investments
College Life Indiana 100% Real Estate
Development Corp.
Phlcorp, Inc. Pennsylvania 100% Holding Company
Empire Insurance Co. New York 100% Insurance
American Investment Utah 100% Banking
Bank, N.A.
Wedgewood Investments Delaware 100% Investments
L.L.C.
Leucadia Financial Utah 100% Real Estate
Corporation
AIC Financial Corp. Delaware 100% Real Estate
Leucadia Cellars Delaware 100% Investments
American Investment Utah 100% Thrift Loan
Financial
Allcity Insurance Co. New York 89.8% Insurance
Charter National Life
Insurance Comp Missouri 100% Insurance
Colonial Penn Franklin
Insurance Compa Pennsylvania 100% Insurance
Colonial Penn Adminis-
trative Services Delaware 100% Administrator
Colonial Penn Group, Delaware 100% Holding Company
Inc.
Bay Colony Insurance California 100% Insurance
Company
Colonial Penn Delaware 100% Holding Company
Holdings, Inc.
Colonial Penn Ins. Co. Pennsylvania 100% Insurance
Colonial Penn Life Pennsylvania 100% Insurance
Ins. Co.
CPI Investment, Inc. Delawar 100% Investments
Intramerica Life New York 100% Insurance
Ins. Co.
Leucadia Properties, Utah 100% Real Estate
Inc.
C-4
<PAGE>
Percent of
Jurisdiction Voting
of Securities Principal
Name Incorporation Owned* Business
Terracor II Utah 100% Real Estate
CPAX, Inc. Delaware 100% Holding Company
The Village at Florida 100% Real Estate
Inlet Beach, Inc.
Pennpark Investors Illinois 80% Real Estate
L.L.C.
Professional Data Indiana 100% Real Estate
Management, Inc.
Bayside Casualty New Jersey 100% Insurance
Insurance Company
Leucadia Investors, New York 100% Investments
Inc.
Silver Mountain Utah 100% Real Estate
Industries, Inc.
Telluride Properties Utah 100% Real Estate
Acquisition, Inc.
Baldwin Enterprises, Colorado 100% Holding Company
Inc.
Commercial Loan
Insurance Company Wiscon 100% Insurance
NSAC, Inc. Colorado 100% Real Estate
RERCO, Inc. Delaware 100% Finance
330 MAD. PARENT CO Delaware 100% Investments
WMAC Credit Insurance Wisconsin 100% Insurance
Corp.
Providential Life Arkansas 100% Insurance
Insurance Co.
Andrus Vineyard Co., California 95% Vineyard
L.L.C.
CDS Devco, Inc. California 80% Investments
San Elijo Ranch, Inc. California 68% Real Estate
RRP, Inc. Colorado 100% Real Estate
CDS Holding Delaware 100% Holding Company
Corporation
International Delaware 75% Holding Company
Bottlers L.L.C.
Pepsi International Delaware 75% Holding Company
Bottlers L.L.C.
LUK-REN, Inc. New York 100% Real Estate
Pine Ridge Texas 75% Winery
Associates, L.P.
Leucadia Bottling Utah 100% Holding Company
L.L.C.
Leucadia Power Utah 100% Holding Company
Holdings, Inc.
Colonial Penn Mexico 100% Insurance
De Mexico, Inc.
* Unless otherwise noted, voting securities are owned by Leucadia. A
number of subsidiaries of Leucadia are not included on this list. Taken
together and considered as a single subsidiary, they would not constitute a
significant subsidiary of Leucadia. More detailed information will be
supplied upon request. In addition, inactive companies are not included on
this list.
Item 27. Numbers of Contract Owners
As of December 31, 1996 there were 1,048 Owners of the flexible premium
variable deferred annuity, of which 1,028 were Non-qualified and 20 were
Qualified, issued by the Variable Account.
Item 28. Indemnification
Section 722 of New York General and Business Corporation Law, in brief,
allows a corporation to indemnify any person who is a party or who is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, against expenses, including
attorneys' fee, judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action if he acted
in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation. Where any person was or is a
party or is threatened to be made a party in an action or suit by or in the
right of the
C5
<PAGE>
corporation to procure a judgment in its favor, indemnification may not be
paid where such person shall have been adjudged to be liable for negligence
or misconduct in the performance of his duty to the corporation, unless a
court determines that the person is fairly and reasonably entitled to
indemnity. A corporation has the power to give any further indemnity, to
any person who is or was a director, officer, employee or agent, as
provided for in the articles of incorporation or as authorized by any by-law
which has been adopted by vote of the shareholders, provided that no
such indemnity shall indemnify any person whose action was finally adjudged
to have been knowingly fraudulent, deliberately dishonest or the result of
willful misconduct.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of Intramerica
and the Variable Account pursuant to the foregoing statute, or otherwise,
Intramerica and the Variable Account have been advised that in the opinion
of the SEC such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a claim
is made for indemnification against such liabilities (other than the
payment by Intramerica or the Variable Account of expenses incurred or paid
by a director, officer or controlling person in connection with the
securities being registered), Intramerica or the Variable Account 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 of 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.
Item 29. Principal Underwriter
CNL is the principal underwriter for the Intramerica Variable Annuity
Account, a separate account of Intramerica formed in connection with the
distribution of variable annuity contracts by Intramerica. Currently, CNL
also acts as principal underwriter for variable annuity contracts and
variable life policies issued by the Charter National Variable Account.
The directors and officers of CNL are as follows:
Name and Principal Positions and offices
Business Address* with Underwriter
Richard G. Petitt Chairman and Director
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Allen S. Miller President and Director
Gregory R. Barstead Executive Vice President
Colonial Penn Life. Treasurer and Director
Insurance Co
399 Market Street
Philadelphia, PA 19181
Kathleen A. Urbanowicz Vice President and Assistant Secretary
Karen M. Henneberg Vice President and Secretary
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Elizabeth A. Clifford Senior Vice President, and Controller
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
C-6
<PAGE>
Name and Principal Positions and offices
Business Address* with Underwriter
Ronald Stitt Assistant Secretary
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
Alexis M. Berg Director
Colonial Penn Life
Insurance Co.
399 Market Street
Philadelphia, PA 19181
* The principal business address of each person listed above, unless
otherwise indicated, is Charter National Life Insurance Company, 8301
Maryland Avenue, St. Louis, Missouri 63105.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the
1940 Act and rules under it are maintained by Intramerica at its Home
Office.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Intramerica Life Insurance Company hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by Intramerica Life Insurance Company.
C-7
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485 (b) for effectiveness of this amended Registration
Statement and has duly caused this amended Registration Statement to be
signed on its behalf in the City of Philadelphia and the State of
Pennsylvania on this 21st day of April, 1997.
INTRAMERICA VARIABLE ANNUITY ACCOUNT
(Registrant)
(Seal) INTRAMERICA LIFE INSURANCE COMPANY
(Depositor)
Attest: _____________________ By:___________________________________
/S/ Alexis M. Berg /S/ Karen M. Henneberg
Vice President, General Assistant Vice President,
Counsel & Corporate Compliance
Secretary
As required by the Securities Act of 1933 this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
*________________________ Chairman of the Board, Chief ________
Richard G. Petitt Executive Officer and Director
*________________________ Vice President, Secretary, ________
Alexis M. Berg General Counsel and Director
*________________________ Vice President, Treasurer and ________
Elizabeth A. Clifford Controller
*________________________ Senior Vice President, Assistant ________
Linda H. Gerdes Secretary, Chief Administrative
Officer and Director
<PAGE>
Signature Title Date
*________________________ Vice President ________
Timothy C. Sentner
*________________________ Director ________
Elizabeth H. Lally
*________________________ Vice President ________
Allen S. Miller
*________________________ Director ________
Godfrey H. Murrain, Esq.
*________________________ Director ________
Howard M. Pines
*________________________ Senior Vice President and Chief ________
David L. Baxter Actuary
*________________________ Vice President and Director ________
Henry H. Wulsin
*________________________ President, Chief Operating ________
Gregory R. Barstead Officer and Director
*________________________ Director ________
William R. Ziegler
*________________________ Vice President ________
Robert F. Vickery
* Pursuant to Power of Attorney
<PAGE>
(Seal) Date: April 21, 1997
Attest: _____________________ By:___________________________________
/S/ Alexis M. Berg /S/ Karen M. Henneberg
Vice President, General Assistant Vice President,
Counsel & Corporate Compliance
Secretary
EXHIBIT LIST
(9)(a) Opinion and Consent of Counsel
(9)(b) Consent of Counsel
(10) Consent of Independent Accountants
<PAGE>
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue
Washington, D.C. 20004-2404
April 16, 1997
Board of Directors
Intramerica Life Insurance Company
9 Ramland Road
Orangeburg, New York 10962
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of Post
- -Effective Amendment No. 7 to the registration statement on Form N-4 for
Intramerica Variable Annuity Account (File No. 33-54116). In giving this
consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
BY:____________________________________
/S/ Stephen E. Roth
<PAGE>
INTRAMERICA
Intramerica Life Insurance Company - 9 Ramland Road - Orangeburg, New York
10962
April 21, 1997
Board of Directors
Intramerica Life Insurance Company
9 Ramland Road
Orangeburg, New York 10962
Ladies and Gentlemen:
With reference to Post -Effective Amendment No. 7 to the Registration
Statement on Form N-4, soon to be filed by Intramerica Life Insurance
Company (the "Company"), and Intramerica Variable Annuity Account (the
"Account") with the Securities and Exchange Commission covering the
registration under the Securities Act of 1933 of certain variable annuity
contracts (the "Contracts") to be funded by the Account, I have examined
such documents and such law as I considered necessary and appropriate, and
on the basis of such examination it is my opinion that:
1. The Company is duly organized and validly existing under the laws of the
State of New York and has been duly authorized to issue Variable Annuity
Contracts by the Department of Insurance of the State of New York.
2. The Contracts, when issued after the Post-Effective Amendment becomes
effective and in the manner contemplated by the Post-Effective Amendment,
will be, under New York law, legally issued and will represent binding
obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the heading "Legal
Matters" in the Registration Statement.
Sincerely,
Alexis M. Berg
Vice President, General Counsel
& Corporate Secretary
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Intramerica Life Insurance Company:
We consent to the inclusion of the following in Post-Effective Amendment
No. 7 to the Registration Statement of the Intramerica Variable Annuity
Account on Form N-4 (File No. 811-5649 and Registration No. 33-54116):
- Our report dated February 10, 1997, on our audits of the financial
statements of the Intramerica Variable Annuity Account as of December 31,
1996 and for each of the two years in the period ended December 31, 1996.
- Our report dated February 10, 1997, on our audits of the financial
statements of Intramerica Life Insurance Company as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31,
1996.
- The reference to our Firm under the caption "Independent
Accountants".
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 18, 1997
