April 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Transamerica Occidental Life Insurance Company Separate Account VA-5,
Post-Effective Amendment No. 4 To Form N-4, (File Nos. 33-71746, 811-8158)
Dear Commissioners:
Transmitted herewith for filing via EDGAR, please find Post-Effective Amendmen
No. 4 to
the Registration Statement on Form N-4 for Separate Account VA-5 of Transamerica
Occidental Life Insurance Company.
This Amendment is being filed pursuant to Paragraph (b) of Rule 485 under the
Securities
Act of 1933.
Please call Regina M. Fink, Esq. of Transamerica's Law Department at (213)
742-3131 with
any questions.
Very truly yours,
Susan Vivino
Paralegal
cc: F. Bellamy, Esq.
R. Fink, Esq.
Enclosures
<PAGE>
As filed with the Securities and Exchange Commission on __________, 1996
Registration No. 33-71746
811-8158
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 4 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 5 |X|
-----
SEPARATE ACCOUNT VA-5
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(Name of Depositor)
1150 South Olive Street, Los Angeles, CA 90015
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (213) 742-2111
Name and Address of Agent for Service: Copy to:
James W. Dederer, Esquire Frederick R. Bellamy, Esquire
Executive Vice President, General Counsel and Sutherland, Asbill & Brennan
Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Co. Washington, D.C. 20004-2404
1150 South Olive Street
Los Angeles, CA 90015
Approximate date of proposed sale to the
public: As soon as practicable after effectiveness of the
Registration Statement.
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the year ended December 31, 1995 was filed on February 28,
1996.
It is proposed that this filing will become effective: |_|
immediately upon filing pursuant to paragraph (b) |X| on May
1, 1996 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 appropropriate, check the following box:
|_| this Post-Effective Amendment designates
a new effective date for a previously
filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page.......................... Cover Page
2. Definitions......................... Definitions
3. Synopsis............................ Key Features of the Contracts
4. Condensed Financial Information..... Condensed Financial Information
5. General
(a) Depositor......... Transamerica Occidental Life Insurance Company;
Available Information
(b) Registrant.................... The Variable Account
(c) Portfolio Company............. The Portfolios
(d) Portfolio Prospectus...... The Portfolios
(e) Voting Rights................. Voting Rights
6. Deductions and Expenses.............
(a) General....................... Charges and Deductions
(b) Sales Load %.................. Not Applicable
(c) Special Purchase Plan......... Not Applicable
(d) Commissions................... Distribution of the Contracts
(e) Fund Expenses................. The Funds
(f) Operating Expenses............ Variable Account Fee Table
7. Contracts
(a) Persons with Rights................................ The Contract;
Application and Purchase Payments;
Cash Withdrawals; Account Value; Death Benefit;
Voting Rights
(b) (i) Allocation of Purchase Payments
Payments....... Allocation of Purchase Payments
(ii) Transfers...... Transfers
(iii) Exchanges...... Federal Tax Matters
(c) Changes.............. Addition, Deletion, or Substitution
(d) Inquiries............ Key Features of the Contracts; Available
Information
8. Annuity Period............. Annuity Payments
9. Death Benefit.............. Death Benefit
<PAGE>
10. Purchase and Contract Balances...........................
(a) Purchases.............. Application and Purchase Payments
(b) Valuation.............. Account Value; Appendix A
(c) Daily Calculation...... Account Value
(d) Underwriter............ Distribution of the Contracts
11. Redemptions
(a) By Contract Owners..... Cash Withdrawals; Automatic Payout Option
By Annuitant........... Not Applicable
(b) Texas ORP.............. Not Applicable
(c) Check Delay............ Cash Withdrawals
(d) Lapse.................. Not Applicable
(e) Free Look............ Key Features of the Contracts; Application and
Purchase Payments
12. Taxes........................ Federal Tax Matters
13. Legal Proceedings............ Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information..... Statement of Additional Information Table of
Contents
PART B
Item of Form N-4 Statement of Additional
Information Caption
15. Cover Page............................................... Cover Page
16. Table of Contents.................................... Table of Contents
17. General Information
and History.................(Prospectus) Transamerica Occidental Life
Insurance Company; (Prospectus) Available
Information; Transamerica
18. Services....................
(a) Fees and Expenses
of Registrant.........(Prospectus) Variable Account Fee Table;
(Prospectus) The Portfolios
(b) Management Contracts..(Prospectus) Third Party Administrator
(c) Custodian.............Safekeeping of Account Assets; Records and
Reports
Independent Auditors Experts
(d) Assets of Registrant..Not Applicable
(e) Affiliated Person.....Not Applicable
(f) Principal Underwriter.Not Applicable
- 3 -
<PAGE>
19. Purchase of Securities
Being Offered................. (Prospectus) The Contract
Offering Sales Load........... Not Applicable
20. Underwriters.................. (Prospectus) Distribution of the Contracts
21. Calculation of Performance
Data..................... (Prospectus) Performance Data; Performance Data
22. Annuity Payments........... (Prospectus) Annuity Payments; Annuity Period
23. Financial Statements.......... Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits...................... Financial Statements and Exhibits
(a) Financial Statements........ Financial Statements
(b) Exhibits.................... Exhibits
25. Directors and Officers of
the Depositor.................. Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant ...... Persons Controlled By or
Under Common Control
with the Depositor or Registrant
27. Number of Contract Owners................... Number of Contract Owners
28. Indemnification..................................... Indemnification
29. Principal Underwriters........................... Principal Underwriter
30. Location of Accounts
and Records........................... Location of Accounts and Records
31. Management Services........................... Management Services
32. Undertakings.......................................... Undertakings
Signature Page......................................... Signature Page
- 4 -
<PAGE>
SCHWAB INVESTMENT ADVANTAGETM
A VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
Issued by
Transamerica Occidental Life
Insurance Company
The Schwab Investment Advantage ("Contract") is a combination variable and fixed
annuity issued by Transamerica Occidental Life Insurance Company. It allows you
to invest in your choice of eleven different mutual fund Portfolios offered by
eight different mutual fund investment advisers. It also provides a Fixed
Account option with different maturities which provide guaranteed annual
returns. You may withdraw funds in the Contract as a lump sum, through a
systematic withdrawal program, or from a choice of Annuity Payment Options.
The minimum initial investment is $5,000. There are no sales charges,
redemption, surrender or withdrawal charges. The Contract provides a Free Look
Period of 10 days from your receipt of the Contract (or longer, if required by
state law) during which you may cancel your investment in the Contract.
Your investment in the Contract may be allocated among eleven Sub-Accounts of
Transamerica Separate Account VA- 5 ("Variable Account") and the available
Guarantee Periods of the Fixed Account. Based on your instructions, your
Investment in the Contract may be invested in Portfolios of various mutual funds
(open-end investment companies) offered by fund families such as Federated,
INVESCO, Janus, Lexington, Schwab Funds(R), Stein Roe, Strong and Twentieth
Century. Your initial investment in the Variable Account is automatically
allocated to the Schwab Money Market Portfolio until after the end of the Free
Look Period, and is then allocated according to your instructions. You also have
the option of allocating some or all of your investment in the Contract to one
or more Guarantee Periods, each of which offers you a specified interest rate
for a specified period.
The wide array of mutual fund choices and Fixed Account options allows you to
select a mix of investment vehicles specifically suited to your particular risk
tolerances, as well as investment objectives and adviser preferences. Prior to
the Annuity Date, you are free to transfer amounts among the Portfolios;
transfers involving the Fixed Account are limited to 10 during any Contract
Year. This ability to transfer assets among the various Portfolios and the
Guarantee Periods of the Fixed Account allows you to change your investment mix
in response to changes in your personal objectives or investment outlook.
Your Account Value, except for amounts in the Fixed Account, will increase or
decrease based on the investment performance of the Portfolios you select. You
bear the entire investment risk under the Contract prior to the Annuity Date for
all amounts in the Variable Account. While there is a guaranteed death benefit,
there is no guaranteed or minimum Account Value for amounts in the Variable
Account. Therefore, the Account Value you receive could be less than the total
amount you have invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Dated May 1, 1996
The Contracts are not deposits of, or guaranteed or endorsed by any bank, nor is
the Contract federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency. The Contracts involve
certain investment risks, including possible loss of principal.
- i -
<PAGE>
The Contract offers a number of ways of withdrawing funds at a future date,
including a lump-sum payment and several annuity payment forms. You may choose
the Annuity Date on which the annuity payments begin.
Full or partial withdrawals from the Variable Account may be made at any time
before the Annuity Date. Up to ten partial withdrawals may be made from the
Fixed Account during any Contract Year. Generally, withdrawals made prior to age
591/2 are subject to ordinary income taxes and a 10% federal income penalty tax.
Withdrawals or transfers from a Guarantee Period of the Fixed Account before its
Expiration Date will be subject to an interest adjustment which will reduce the
interest earned to 3% per year on the amount withdrawn.
To Place Orders and for Account Information: Contact the Annuity Service Center
("Service Center"), Charles Schwab &
Co., Inc. ("Schwab") at 800-838-0650 or P.O. Box 7785, San Francisco, California
94120-9420.
About This Prospectus: This Prospectus concisely presents important information
you should have before investing in the Contract. Please read it carefully and
retain it for future reference. You can find more detailed information
pertaining to the Contract in the Statement of Additional Information dated May
1, 1996 (as may be amended from time to time), and filed with the Securities and
Exchange Commission. The Statement of Additional Information is incorporated by
reference into this Prospectus, and may be obtained without charge by contacting
Schwab at 800-838-0650 or P.O. Box 7785, San Francisco, California 94120-9420.
- ii -
ii
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS....................................................... iv
KEY FEATURES OF THE CONTRACT...................................... 1
CONDENSED FINANCIAL INFORMATION................................... 9
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE VARIABLE
ACCOUNT...................................................... 11
THE PORTFOLIOS.................................................... 12
THE FIXED ACCOUNT................................................. 17
THE CONTRACT...................................................... 20
APPLICATION AND PURCHASE PAYMENTS................................. 21
ACCOUNT VALUE..................................................... 23
TRANSFERS......................................................... 25
CASH WITHDRAWALS.................................................. 27
TELEPHONE TRANSACTIONS............................................ 31
DEATH BENEFIT..................................................... 31
CHARGES AND DEDUCTIONS............................................ 33
ANNUITY PAYMENTS.................................................. 36
FEDERAL TAX MATTERS............................................... 41
PERFORMANCE DATA.................................................. 46
DISTRIBUTION OF THE CONTRACTS..................................... 48
VOTING RIGHTS..................................................... 48
LEGAL PROCEEDINGS................................................. 49
LEGAL MATTERS..................................................... 49
ACCOUNTANTS....................................................... 51
AVAILABLE INFORMATION............................................. 51
STATEMENT OF ADDITIONAL INFORMATION--TABLE OF CONTENTS............ 52
- -----------------------------------------------------------
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 ON.
----------------------------------------------------------------
The Contract is not available in all
states.
- iii -
iii
<PAGE>
- --------------------------------------------------------------------------
DEFINITIONS
- ------------------------------------------------------------------------------
Account Value: The Account Value of a particular Contract is equal to the sum
of: (a) the Fixed
Accumulated Value plus (b) the Variable Accumulated Value.
Annuitant: The person or persons named on the application and whose life is
used to determine the
amount of monthly annuity payments on the Annuity Date.
Annuity Date: The date on which the Account Value, less any applicable premium
taxes, will be applied to provide an Annuity for you under the annuity form you
selected. Unless a different Annuity Date is elected under the annuity payment
provisions, the Annuity Date will be as shown in the Contract. The date annuity
payments start is the Commencement of Annuity Payment Date shown in the
Contract.
Contract: An individual annuity contract issued to an individual or a
certificate issued to an
individual which evidences his or her coverage under a group annuity contract.
Expiration Date: The last day of a Guarantee Period.
Fixed Account: The Fixed Account is part of Transamerica's general account to
which you may allocate Net Purchase Payments. The Fixed Account provides
guarantees of principal and income. Special limits apply to transfers of Account
Value to and from the Fixed Account.
Fixed Accumulated Value: The total dollar amount of all Guarantee Amounts held
under the Fixed
Account for the Contract prior to the Annuity Date.
Guarantee Amount: The Guarantee Amount is equal to: (a) the amount of the Net
Purchase Payment or transfer allocated to a particular Guarantee Period of the
Fixed Account with a particular Expiration Date; less (b) any withdrawals or
transfers made from that Guarantee Period; less (c) any applicable Transfer Fee;
less (d) reductions for the Annual Contract Charge; and plus (e) interest
credited.
Guarantee Period: The period for which Transamerica will guarantee a specified
interest rate for amounts allocated or transferred to the Fixed Account. The
guarantee period will be at least one year in duration.
Joint Owners: Must be husband and wife as of the Annuity Issue Date.
- iv -
iv
<PAGE>
Net Purchase Payment: A Purchase Payment reduced by any applicable premium tax
charge (including charge for retaliatory premium taxes) (see "Premium Taxes,"
page 34 ).
Owner or You: The person or persons who, while living, controls all rights and
benefits under an individual annuity contract, or under a certificate issued
under a group annuity contract.
Payee: The person who receives the annuity payments after the Annuity Date.
The Payee will be the
Annuitant unless you designate that some other person shall be the Payee.
Portfolio: (1) A separate "series" or portfolio of investments within a mutual
fund or (2) a mutual
fund available for investment under the Contract.
Receipt: Receipt and acceptance by us at our Service Center.
Service Center: The Annuity Service Center, P.O. Box 7785, San Francisco,
California 94120-9420,
telephone 800-838-0650.
Sub-Account: A subdivision of the Variable Account investing solely in shares
of one of the
Portfolios.
Variable Account: Transamerica Separate Account VA-5 which is not part of
Transamerica's general
account. The Variable Account is divided into Sub-Accounts.
Variable Accumulated Value: The total dollar amount of all Variable Accumulation
Units under each Sub-Account of the Variable Account held for the Contract prior
to the Annuity Date.
We, our, us, or Transamerica: Transamerica Occidental Life Insurance Company.
- v -
v
<PAGE>
KEY FEATURES OF THE CONTRACT
The Schwab Investment Advantage ("Contract") allows you to invest currently in
your choice of eleven different mutual fund Portfolios offered by eight
different mutual fund investment advisers. You can also invest in the Fixed
Account option. You may withdraw funds in the Contract as a lump sum, through a
systematic withdrawal program, or from a choice of annuity payment options. Your
Account Value will vary with the investment performance of the Portfolios you
select. You bear the entire investment risk for all amounts invested in the
Variable Account. The Account Value could be less than the total amount you have
invested.
Who should invest. The Contract is designed for investors who are seeking
long-term tax-deferred asset accumulation with a wide range of investment
options. The Contract can be used for retirement or other long-term investment
purposes. The deferral of income taxes is particularly attractive to investors
in high federal and state tax brackets who have already taken full advantage of
their ability to make IRA contributions or "pre-tax" contributions to their
employer sponsored retirement or savings plans.
A Wide Range of Investment Choices. The Contract gives you an opportunity to
select among eleven different Portfolios offered by eight different mutual fund
investment advisers and the Fixed Account option. The mutual fund investment
options cover a wide range of investment objectives as follows:
Aggressive Growth
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
Growth Janus Aspen Growth Portfolio
TCI Growth Portfolio
Growth & Income Federated American Leaders Fund
II
INVESCO VIF-Industrial Income Portfolio
Balanced/Asset Allocation INVESCO VIF-Total Return Portfolio
International Lexington Emerging Markets Fund
High Yield Bond INVESCO VIF-High Yield Portfolio
Government Bond Federated Fund for U.S.
Government Securities II
- 1 -
1
<PAGE>
Money Market Schwab Money Market Portfolio
The assets of each Portfolio are separate, and each Portfolio has distinct
investment objectives and policies as described in their individual Fund
Prospectuses which are available without charge from the Service Center, Charles
Schwab & Co., Inc., P.O. Box 7785, San Francisco, California 94120- 9420,
800-838-0650. (See "The Portfolios," page 11).
The Fixed Account Option. The Contract also gives you an opportunity to allocate
your net Purchase Payments and to transfer your Account Value to the Fixed
Account. The Fixed Account is divided into Guarantee Periods, each of which has
its own guaranteed interest rate and its own expiration date. Each time amounts
are allocated or transferred to the Fixed Account, a new Guarantee Period is
established. The guaranteed interest rate for the Guarantee Period will depend
on the date the Guarantee Period is established and the duration of the
Guarantee Period you select from among those available. The guaranteed interest
rate will be at least 3% per year. Transamerica may, in its discretion, declare
interest rates in excess of the 3% minimum annual rate. Amounts withdrawn or
transferred from a Guarantee Period prior to its Expiration Date will be subject
to an interest adjustment which will reduce the interest earned to the 3%
minimum annual rate. (See "The Fixed Account," page 16.)
How to Invest. You must complete an application form in order to invest in a
Contract and you must either have sufficient funds available in your Schwab
account to purchase a Contract or pay by check. The minimum initial investment
is $5,000. Subsequent investments must be at least $1,000. (See "Application and
Purchase Payments," page 20.)
Free Look Period. The Contract provides for a Free Look Period which allows you
to cancel your investment generally within 10 days of your receipt of the
Contract. You can cancel the Contract during the Free Look Period by telephone
(where permitted by law) or by delivering or mailing written notice or sending a
telegram to the Service Center. The cancellation is not effective unless we
receive the notice before the end of the Free Look Period. We will reimburse you
all Purchase Payments made to the Contract and any appreciation in the amounts
you allocated to the Variable Account. These procedures may vary where required
by state law. (See "Application and Purchase Payments," page 20.)
Allocation of the Initial Investment. Your initial investment in the Variable
Account will be allocated to the Schwab Money Market Portfolio until the
estimated end of the Free Look Period (allowing 5 days for mail delivery of the
Contract), at which time the then current value of your Contract in the Variable
Account will be allocated to the Portfolios in accordance with your
instructions. (See "Account Value," page 22.) Your initial investment in the
Fixed Account will be immediately allocated to the Fixed Account.
Charges and Deductions Under the Contract. The Contract is a "no load" variable
annuity and imposes no sales charges, redemption or withdrawal charges.
- 2 -
2
<PAGE>
There is a Mortality and Expense Risk Charge at an effective annual rate of
0.85% of the value of the net assets in the Variable Account. An Annual Contract
Charge of $25 (or 2% of Account Value, if lower) will be deducted from your
Account Value.
Although we currently do not deduct any additional charge for administrative
expenses, we reserve the right to deduct one. We guarantee that this charge will
never exceed an effective annual rate of 0.15% of your Variable Account Value,
if imposed.
Depending on your state of residence, we may deduct a charge for state premium
taxes from purchase payments or amounts withdrawn or at the Annuity Date. (See
"Charges and Deductions," page 32.)
Switching Investments. You may switch investments among the Portfolios of the
Variable Account as often as you like. However, you may make up to only ten
transfers involving the Fixed Account during any Contract Year. You may make a
transfer by giving telephone instructions or making a written request to our
Service Center. For any transfer, the minimum amount which may be transferred is
$1,000 (or the entire value of the Portfolio or Guarantee Period being
transferred, if less). Ten free transfers will be allowed per Contract Year and
a charge of $10 (or 2% of the amount of the transfer, whichever is less) will be
imposed for each subsequent transfer during that Contract Year. Amounts
transferred out of a Guarantee Period prior to its Expiration Date will be
subject to an interest adjustment which will reduce the interest earned to the
3% per year minimum rate. (See "The Fixed Account," page 16.)
Full and Partial Withdrawals. You may withdraw all or part of your Account Value
before the earlier of the Annuity Date you selected or the Annuitant's or
Owner's death. Withdrawals may be taxable and if made prior to age 591/2 may be
subject to a 10% penalty tax. Withdrawals from a Guarantee Period prior to its
Expiration Date will be subject to an interest adjustment which will reduce the
interest earned to 3%. (See "The Fixed Account," page 16.) Transamerica may
delay payment of any withdrawal from the Fixed Account for up to six months.
(See "Cash Withdrawals," page 26.)
Annuity Forms. Beginning on the first day of the month immediately following the
Annuity Date you select (which generally may not be later than Annuitant's age
85), you may receive annuity payments on a fixed basis. A wide range of annuity
forms are available to provide flexibility in choosing an annuity payment
schedule that meets your particular needs. These annuity forms include
alternatives designed to provide payments for life (for either a single or joint
life) with or without a guaranteed minimum number of payments.
Death Benefit. If the death of the Owner or the Annuitant specified in your
Contract occurs prior to the Annuity Date, a Death Benefit will be paid to the
appropriate Beneficiary. The Death Benefit will be the greater of the sum of
your Purchase Payments, less withdrawals and any applicable premium taxes, or
the then current Account Value. The beneficiary may elect to receive the Death
Benefit proceeds as a lump sum or as Annuity Payments.
- 3 -
3
<PAGE>
Customer Service. Schwab's professional representatives are available toll-free
to assist you. If you have any questions about your Contract, please telephone
the Service Center (800-838-0650) or write to the Service Center, Charles Schwab
Co., Inc., at P.O. Box 7785, San Francisco, California 94120-9420. All inquiries
should include the Contract Number, your name and the Annuitant's name. As a
Contract Owner you will receive periodic statements confirming any transactions
relating to your Contract, as well as a quarterly statement and an Annual
Report.
- 4 -
4
<PAGE>
VARIABLE ANNUITY FEE TABLE
The purpose of this table and the examples that follow is to assist you in
understanding the various costs and expenses that you will bear directly or
indirectly when investing in the Contract. The table and examples reflect
expenses of the Variable Account as well as of the Portfolios. The table assumes
that the entire Account Value is in the Variable Account. The information set
forth should be considered together with the narrative provided under the
heading "Charges and Deductions" on page 32 of this Prospectus, and with the
Funds' prospectuses. In addition to the expenses listed below, premium taxes may
be applicable.
Contract Owner Transaction Expenses (1)
Sales Load...........................................None
Surrender Fee........................................None
Transfer Fee (First 10 Per Year)(2)..................None
Annual Contract Charge(3)............................$25.00
Variable Account Annual Expenses(1)
(as a percentage of average Variable
Account assets)
Mortality and Expense Risk Charge...................0.85%
Administrative Expense Charge(4)....................0.00%
Other Fees and Expenses of the Variable Account.....0.00%
Total Variable Account Annual Expenses..............0.85%
(1) The Contract Owner Transaction Expenses apply to each Contract, regardless
of how Account Value is allocated between the Variable Account and the Fixed
Account. The Variable Account Annual Expenses do not apply to the Fixed Account.
(2) There is a $10 (or 2% of the amount of the transfer, whichever is less) fee
for each transfer in excess of 10 in any Contract Year.
(3) This is a maximum annual charge. The Annual Contract Charge is the lesser
of $25 or 2% of Account Value.
(4) There is currently no Administrative Expense Charge. If one is added in the
future, it will not exceed an annual rate of 0.15% of the Variable Account
assets.
- 5 -
5
<PAGE>
<TABLE>
<CAPTION>
Portfolio Annual Expenses(1)
(as a percentage of Portfolio net assets, after expenses reimbursements)
Total
Management Other Portfolio
Fees Expenses Expenses
Portfolio
<S> <C> <C> <C>
Federated American Leaders Fund II............................ 0.00% 0.85% 0.85%
Federated Fund for U.S. Government Securities II.............. 0.00% 0.80% 0.80%
INVESCO VIF-High Yield Portfolio.............................. 0.60% 0.37% 0.97%
INVESCO VIF-Industrial Income Portfolio....................... 0.75% 0.28% 1.03%
INVESCO VIF-Total Return Portfolio............................ 0.75% 0.26% 1.01%
Janus Aspen Growth Portfolio.................................. 0.65% 0.13% 0.78%
Lexington Emerging Markets Fund............................... 0.85% 0.47% 1.32%
Schwab Money Market Portfolio................................. 0.44% 0.06% 0.50%
SteinRoe Capital Appreciation Fund............................ 0.50% 0.27% 0.77%
Strong Discovery Fund II...................................... 1.00% 0.31% 1.31%
TCI Growth Portfolio.......................................... 1.00% 0.00% 1.00%
</TABLE>
(1) The figures given above are based on expenses that would have been incurred
but for expense offset arrangements, if any, for 1995. From time to time, a
Portfolio's investment adviser, in its sole discretion, may waive all or part of
its fees and/or voluntarily assume certain Portfolio expenses. For a more
complete description of the Portfolios' fees and expenses, see the Portfolio's
prospectuses. As of the date of this Prospectus, certain fees are being waived
or expenses are being assumed, in each case on a voluntary basis. Without such
waivers or reimbursements, the Total Portfolio Annual Expenses that would have
been incurred for the last completed fiscal year would be: 2.21% for Federated
American Leaders Fund II; 5.61% for Federated Fund for U.S. Government
Securities II; 2.71% for INVESCO VIF-High Yield Portfolio; 2.31% for INVESCO
VIF-Industrial Income Portfolio; 2.51% for INVESCO VIF-Total Return Portfolio;
0.98% for Janus Aspen Growth Portfolio; 4.09% for Lexington Emerging Markets
Fund; and 1.02% for Schwab Money Market Portfolio. See the Portfolios'
prospectuses for a discussion of fee waiver and expense reimbursements.
- 6 -
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<PAGE>
EXAMPLES(1)
The following chart reflects the $25 Annual Contract Charge as an
annual charge of 0.048% of assets based on an approximate average Account Value
of $52,000, assuming a 5% annual return before expenses. The tabular information
also assumes that the entire Account Value is allocated to the particular
Sub-Account. These examples assume that no premium taxes have been assessed
(although premium taxes may be applicable - see "Premium Taxes," page 34).
If you retain, annuitize, or surrender the Contract at the end of the
applicable time period, assuming a $1,000 Purchase Payment, you would pay the
following fees and expenses
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years 5 Years 10 Years
- -------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Federated American Leaders Fund II............. 17.76 55.05 94.79 206.03
Federated Fund for U.S. Government Securities II 17.26 53.51 92.20 200.65
INVESCO VIF-High Yield Portfolio............... 18.97 58.72 101.00 218.83
INVESCO VIF-Industrial Income Portfolio........ 19.58 60.55 104.09 225.17
INVESCO VIF-Total Return Portfolio............. 19.38 59.94 103.06 223.06
Janus Aspen Growth Portfolio................... 17.06 52.90 91.16 198.49
Lexington Emerging Markets Fund................ 22.49 69.36 118.88 255.24
Schwab Money Market Portfolio.................. 14.23 44.25 76.48 167.76
SteinRoe Capital Appreciation Fund............. 16.96 52.59 110.61 197.41
Strong Discovery Fund II....................... 22.39 69.06 118.37 254.22
TCI Growth Portfolio........................... 19.28 59.64 102.54 222.01
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES.
ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO THE
GUARANTEES
IN THE CONTRACT.
- 7 -
7
<PAGE>
(1) The Portfolio Annual Expenses and these examples are based on data provided
by the Portfolios. Transamerica has no reason to doubt the accuracy or
completeness of that data, but Transamerica has not verified the Funds' figures.
In preparing the Portfolio Expense table and the Examples above, Transamerica
has relied on the figures provided by the Portfolios.
- 8 -
8
<PAGE>
Federal Income Tax Consequences
A Contract Owner who is a natural person generally should not be taxed on
increases in the Account Value (if any) until a distribution under a Contract
occurs (e.g., a withdrawal or Annuity Payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of the Contract). Generally, a portion (up to 100%)
of any distribution or deemed distribution is taxable as ordinary income. The
taxable portion of distributions is generally subject to income tax withholding
unless the recipient (if permitted) elects otherwise. In addition, a federal
penalty tax may apply to certain distributions or deemed distributions. (See
"Federal Tax Matters," page 39.)
NOTES:
The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the prospectuses for the
Portfolios which should be referred to for more detailed information.
With respect to Qualified Contracts, it should be noted that the
requirements of a particular retirement plan, an endorsement to the Contract, or
limitations or penalties imposed by the Code or the Employee Retirement Income
Security Act of 1974, as amended, may impose additional limits or restrictions
on Purchase Payments, withdrawals, surrenders, distributions, or benefits, or on
other provisions of the Contract. This Prospectus does not describe any such
limitations or restrictions. (See "Federal Tax Matters," page 39.)
- ------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
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 in the Statement of Additional Information.
The following table sets forth certain information regarding the
Sub-Accounts for the period from commencement of business operations of these
Sub-Accounts on April 25, 1994, through December 31, 1995.
Financial statements for the Variable Account and Transamerica and reports of
the independent certified public accountants are available in the Statement of
Additional Information.
- 9 -
9
<PAGE>
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Units
Unit Values Unit Values Outstanding
as of as of as of
Sub-Accounts (commenced 4/25/94) 4/25/94 12/31/94 12/31/94
<S> <C> <C> <C>
Federated American Leaders Fund II $9.768 $10.024 53,914.919
Federated Fund for U.S. Government Securities II $9.994 $10.114 46,770.953
INVESCO VIF-High Yield Portfolio $9.994 $9.996 60,841.351
INVESCO VIF-Industrial Income Portfolio $9.993 $10.058 49,645.395
INVESCO VIF-Total Return Portfolio $10.004 $10.110 100,047.367
Janus Aspen Growth Portfolio $9.965 $9.950 79,075.200
Lexington Emerging Markets Fund $9.704 $10.011 123,057.764
Schwab Money Market Portfolio $0.999 $1.019 7,182,951.890
SteinRoe Capital Appreciation Fund $9.380 $10.204 85,615.721
Strong Discovery Fund II $10.723 $10.848 134,743.547
TCI Balanced Portfolio $9.798 $9.773 8,724.244
TCI Growth Portfolio $9.666 $9.695 42,130.724
Accumulation Accumulation No. of Units
Unit Values Unit Values Outstanding
as of as of as of
Sub-Accounts 1/1/95 12/31/95 12/31/95
Federated America Leaders Fund II $10.024 13.350 369,810.694
Federated Fund for U.S. Government Securities II 10.114 10.950 268,795.355
INVESCO VIF-High Yield Portfolio $9.996 11.870 325,562.577
INVESCO VIF-Industrial Income Portfolio $10.058 12.891 523,887.849
INVESCO VIF-Total Return Portfolio $10.110 12.310 475,508.048
Janus Aspen Growth Portfolio $9.950 12.843 567,398.939
Lexington Emerging Markets Fund $10.011 9.536 33,348.590
Schwab Money Market Portfolio $1.019 1.064 14,778,494.692
SteinRoe Capital Appreciation Fund $10.204 11.307 234,375.748
Strong Discovery Fund II $10.848 14.550 501,172.961
TCI Balanced Portfolio $9.773 11.736 25,564.912
TCI Growth Portfolio $9.695 12.603 452,055.571
</TABLE>
The TCI Balanced Portfolio Sub-Account, which
- 10 -
10
<PAGE>
was offered prior to May 1, 1995, remains part of the Variable Account and is
included in the
Condensed Financial Information and financial statement. However, the TCI
Balanced Portfolio Sub-
Account is no longer available for investment.
- ------------------------------------------------------------------------------
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
- ------------------------------------------------------------------------------
Transamerica Occidental Life Insurance Company
Transamerica Occidental Life Insurance Company ("Transamerica") is a stock
life insurance company incorporated under the laws of the State of California in
1906. It is principally engaged in the sale of life insurance and annuity
policies. Transamerica is a wholly-owned subsidiary of Transamerica Insurance
Corporation of California which, in turn, is a direct subsidiary of Transamerica
Corporation. The address of Transamerica is 1150 South Olive Street, Los
Angeles, California 90015 and the telephone number for Transamerica is (213)
742-2111.
Published Ratings
We may from time to time publish in advertisements, sales literature and
reports, the ratings and other information assigned to Transamerica by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's, Moody's and Duff & Phelps. The purpose of the ratings is to reflect our
financial strength and/or claims-paying ability and should not be considered as
bearing on the investment performance of assets held in the Variable Account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, our claims-paying ability as
measured by Standard & Poor's Insurance Ratings Services or Duff & Phelps may be
referred to in advertisements or sales literature or in reports. These ratings
are opinions of an operating insurance company's financial capacity to meet the
obligations of its insurance and annuity policies in accordance with their
terms, including its obligations under the Fixed Account provisions of this
Contract. Such ratings do not reflect the investment performance of the Variable
Account or the degree of risk associated with an investment in the Variable
Account.
The Variable Account
Separate Account VA-5 of Transamerica ("Variable Account") was established
by us as a separate
account under the laws of the State of California on September 28, 1993,
pursuant to resolutions of our
Board of Directors. The Variable Account is registered with the Securities and
Exchange Commission
("Commission") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. It
- 11 -
11
<PAGE>
meets the definition of a separate account under the federal securities laws.
However, the Commission does not supervise the management or the investment
practices or policies of the Variable Account.
The assets of the Variable Account are owned by Transamerica but they are
held separately from our other assets. Section 10506 of the California Insurance
Law provides that the assets of a separate account are not chargeable with
liabilities incurred in any other business operation of the insurance company
(except to the extent that assets in the separate account exceed the reserves
and other liabilities of the separate account). Income, gains and losses
incurred on the assets in the Variable Account, whether or not realized, are
credited to or charged against the Variable Account without regard to our other
income, gains or losses. Therefore, the investment performance of the Variable
Account is entirely independent of the investment performance of our general
account assets or any other separate account maintained by us.
The Variable Account currently has eleven Sub-Accounts available for
investment, each of which invests solely in a specific corresponding mutual fund
Portfolio. (See "The Portfolios," page 11.) Changes to the Sub-Accounts may be
made at our discretion. (See "Addition, Deletion, or Substitution," page 15.)
- ------------------------------------------------------------------------------
THE PORTFOLIOS
- ------------------------------------------------------------------------------
The Portfolios described below are exclusively for use as funding vehicles
for insurance products and qualified plans in certain circumstances and,
consequently, are not publicly available mutual funds. Each Portfolio has
separate investment objectives and policies. As a result, each Portfolio
operates as a separate investment portfolio and the investment performance of
one Portfolio has no effect on the investment performance of any other
Portfolio. See the Portfolios' prospectuses for more information.
Federated Insurance Series
Federated American Leaders Fund II: Seeks to achieve long-term growth of
capital as a primary objective and seeks to provide income as a secondary
objective through investment of at least 65% of its total assets (under
normal circumstances) in common stocks of "blue-chip" companies.
Federated Fund for U.S. Government Securities II: Seeks to provide current
income through investment of at least 65% of its total assets (under
normal circumstances) in securities which are primary or direct
obligations of the U.S. government or its agencies or instrumentalities or
which are guaranteed by the U.S. government, its agencies, or
instrumentalities and in collateralized mortgage obligations issued by
U.S. government agencies and instrumentalities.
- 12 -
12
<PAGE>
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Industrial Income Portfolio: Seeks the best possible current
income while following sound investment practices. Capital growth
potential is an additional, but secondary, consideration in the selection
of portfolio securities. The Industrial Income Portfolio seeks to achieve
its investment objective by investing in securities which will provide a
relatively high yield and stable return and which, over a period of years,
also may provide capital appreciation.
INVESCO VIF-Total Return Portfolio: Seeks a high total return on
investment through capital appreciation and current income. The Total
Return Portfolio seeks to achieve its investment objective by investing in
a combination of equity securities (consisting of common stocks and, to a
lesser degree, securities convertible into common stock) and fixed income
securities.
INVESCO VIF-High Yield Portfolio: Seeks a high level of current income by
investing substantially all of its assets in lower rated bonds and other
debt securities and in preferred stock. These bonds and other securities
are sometimes referred to as "junk bonds." The High Yield Portfolio
pursues its investment objective through investment in a variety of
long-term, intermediate-term, and short-term bonds. Potential capital
appreciation is a factor in the selection of investments, but is secondary
to the Portfolio's primary objective.
Janus Aspen Series
Janus Aspen Growth Portfolio: Seeks long-term growth of capital in a
manner consistent with the preservation of capital. Realization of income
is not a significant investment consideration and any income realized on
the Growth Portfolio's investments will be incidental to its primary
objective. The Growth Portfolio seeks to achieve its investment objective
by investing substantially all of its assets in common stock when its
portfolio manager believes that the relevant market environment favors
profitable investing in those securities. Generally, the Portfolio
emphasizes issuers with larger market capitalizations.
- 13 -
13
<PAGE>
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets Fund: Seeks long term growth of capital by
investing primarily in emerging country and emerging market equity
securities. For purposes of its investment objective, the Fund considers
emerging country equity securities to be any country whose economy and
market the World Bank or United Nations considers to be emerging or
developing. The Fund may also invest in equity securities and equivalents
traded in any market, of companies that derive 50% or more of their total
revenue from either goods or services produced in such emerging countries
or markets or sales made in such countries.
Schwab Annuity Portfolios
Schwab Money Market Portfolio: Seeks maximum current income consistent
with liquidity and stability of capital. It seeks to achieve its objective
by investing in short-term money market instruments. This Portfolio is
neither insured nor guaranteed by the United States Government and there
can be no assurance that it will be able to maintain a stable net asset
value of $1.00 per share.
SteinRoe Variable Investment Trust
SteinRoe Capital Appreciation Fund: Seeks capital growth by investing
primarily in common stocks, convertible securities, and other securities
selected for prospective capital growth.
Strong Discovery Fund II, Inc.
- 14 -
14
<PAGE>
Strong Discovery Fund II: Seeks capital growth by investing in a
diversified portfolio of securities that the Fund's investment adviser
believes represent attractive growth opportunities.
TCI Portfolios, Inc.
TCI Growth Portfolio: Seeks capital growth by investing in common stocks
(including securities convertible into common stocks and other equity
equivalents) and other securities that meet certain fundamental and
technical standards of selection and have, in the opinion of the
investment manager, better-than-average potential for appreciation. The
Portfolio's investment manager intends to stay fully invested in such
securities, regardless of the movement of stock prices generally.
The two Federated Insurance Series Portfolios are advised by Federated
Advisers of Pittsburgh, Pennsylvania. The three INVESCO Variable Investment
Funds, Inc., Portfolios are advised by INVESCO Funds Group, Inc., of Denver,
Colorado. The Janus Aspen Growth Portfolio is advised by Janus Capital
Corporation of Denver, Colorado. The Lexington Emerging Markets Fund is advised
by Lexington Management Corporation of Saddle Brook, New Jersey. The Schwab
Money Market Portfolio is advised by Charles Schwab Investment Management, Inc.,
of San Francisco, California. The SteinRoe Capital Appreciation Fund is advised
by Stein Roe & Farnham Incorporated of Chicago, Illinois. Strong Discovery Fund
II is advised by Strong Capital Management, Inc. of Milwaukee, Wisconsin. The
TCI Growth Portfolio is advised by Investors Research Corporation of Kansas
City, Missouri, advisers to the Twentieth Century family of mutual funds.
* * *
- 15 -
15
<PAGE>
Meeting investment objectives depends on various factors, including,
but not limited to, how well
the portfolio managers anticipate changing economic and market conditions.
THERE IS NO
ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL ACHIEVE THEIR STATED
OBJECTIVES.
The Contracts are not deposits of, or guaranteed or endorsed by, any bank,
nor is the Contract federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency. The
Contracts involve certain investment risks, including possible loss of
principal.
Each Portfolio is registered with the Commission as an open-end management
investment company or a series thereof. The Commission does not supervise the
management or the investment practices and policies of any of the Portfolios.
Since some of the Portfolios are available to registered separate accounts
of other insurance companies offering variable annuity and variable life
products and to qualified plans in certain circumstances, there is a possibility
that a material conflict may arise between the interests of the Variable Account
and one or more other separate accounts or qualified plans investing in the
Portfolios. In the event of a material conflict, the affected insurance
companies or qualified plans are required to take any necessary steps to resolve
the matter, including stopping their separate accounts or qualified plans from
investing in the Portfolios. See the Portfolios' prospectuses for more details.
Additional information concerning the investment objectives and policies
of all of the Portfolios and the investment advisory services and administrative
services and charges can be found in the current prospectuses for the
Portfolios, which can be obtained by calling the Service Center at 800-838-0650
or by writing to the Service Center, Charles Schwab & Co., Inc., P.O. Box 7785,
San Francisco, California 94120-9420. The Portfolios' prospectuses should be
read carefully before any decision is made concerning the allocation of Purchase
Payments to, or transfers among, the Sub-Accounts.
Addition, Deletion, or Substitution
Transamerica does not control the Portfolios and cannot guarantee that any
of the Portfolios will always be available for allocation of Purchase Payments
or transfers, so Transamerica retains the right to make changes in the Variable
Account and in its investments. Currently, Charles Schwab & Co., Inc., must
approve certain fundamental changes.
Transamerica and Schwab reserve the right to eliminate the shares of any
Portfolio held by a Sub- Account and to substitute shares of another Portfolio
or of another investment company, for the shares of any Portfolio, if the shares
of the Portfolio are no longer available for investment or if, in our judgment,
investment in any Portfolio would be inappropriate in view of the purposes of
the Variable Account. To the extent required by the 1940 Act, a substitution of
shares attributable to the Owner's interest in a Sub-Account will not be made
without prior notice to the Owners and the prior approval of the Commission.
Nothing contained herein shall prevent the Variable Account from purchasing
other
- 16 -
16
<PAGE>
securities for other series or classes of variable annuity policies, or from
effecting an exchange between series or classes of variable policies on the
basis of requests made by Owners.
New Sub-Accounts may be established when, in our discretion, marketing,
tax, investment or other conditions so warrant. Any new Sub-Accounts will be
made available to existing Owners on a basis to be determined by us. Each
additional Sub-Account will purchase shares in a Portfolio or in another mutual
fund or investment vehicle. We may also eliminate one or more Sub-Accounts if,
in our sole discretion, marketing, tax, investment or other conditions so
warrant. In the event any Sub-Account is eliminated, we will notify the Owners
and request a re-allocation of the amounts invested in the eliminated
Sub-Account. We also reserve the right to restrict the transfer privilege.
In the event of any such substitution or change, we may make such changes
to your Contract as may be necessary or appropriate to reflect such substitution
or change. Furthermore, if deemed to be in the best interests of persons having
voting rights under the Contracts, the Variable Account may be operated as a
management company under the 1940 Act or any other form permitted by law, may be
de- registered under such Act in the event such registration is no longer
required, or may be combined with one or more other separate accounts.
- ------------------------------------------------------------------------------
THE FIXED ACCOUNT
- ------------------------------------------------------------------------------
This Prospectus is generally intended to serve as a disclosure document
only for the Contract and the Variable Account. For complete details regarding
the Fixed Account, see the Contract itself.
Purchase Payments allocated to and amounts transferred to the Fixed
Account become part of the general account of Transamerica, which supports
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interests in the general account have not been registered under the
Securities Act of 1933 (the "1933 Act"), nor is the general account registered
as an investment company under the Investment Company Act of 1940 (the "1940
Act"). Accordingly, neither the general account nor any interests therein are
generally subject to the provisions of the 1933 and 1940 Acts and Transamerica
has been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this Prospectus which relate to the Fixed
Account.
The Guarantee Periods of the Fixed Account are part of the general account
of Transamerica. The general account of Transamerica consists of all the general
assets of Transamerica, other than those in the Variable Account, or in any
other segregated asset account. Instead of the Owner bearing the investment risk
as is the case for values in the Variable Account, Transamerica bears the full
investment risk for all values in the Fixed Account. Transamerica has sole
discretion to invest the assets of its general account subject to applicable
law.
- 17 -
17
<PAGE>
The allocation or transfer of funds to the Fixed Account does not entitle
the Owner to share in the investment experience of Transamerica's general
account. Instead, Transamerica guarantees that the funds allocated or
transferred to the Fixed Account will accrue a specified annual rate of interest
for a specific duration. The rate of interest credited will always be at least
3% per year. Consequently, if the Owner allocates all Net Purchase Payments only
to the Fixed Account and makes no transfers or withdrawals, the minimum amount
of the Account Value will be determinable and guaranteed. The Policy Owner bears
the risk that, after the initial Guarantee Period, Transamerica will not credit
interest in excess of 3% per year on amounts allocated to the Fixed Account.
Net
Purc
hase
Pay
ment
s allocated to or amounts transferred to the Fixed Account will establish a new
Guarantee Period of a duration selected by the Owner from among those currently
being offered by Transamerica. Every Guarantee Period offered by Transamerica
will have a duration of at least one year. The minimum amount that may be
allocated or transferred to a Guarantee Period is $1,000. Net Purchase Payments
allocated to the Fixed Account will be credited on the date the payment is
received at the Service Center. Any amount transferred from another Guarantee
Period or from a Sub-Account of the Variable Account to the Fixed Account will
establish a new Guarantee Period as of the effective date of the transfer.
Each Guarantee Period will have its own Guaranteed Interest Rate and
Expiration Date. The Guarantee Interest Rate applicable to a Guarantee Period
will depend on the date the Guarantee Period is established and the duration
chosen by the Owner. A Guarantee Period chosen may not extend beyond the Annuity
Date.
Transamerica reserves the right to change the maximum number of Guarantee
Periods that may be in effect at any one time.
Transamerica will declare an effective annual rate of interest for each
Guarantee Period ("Guaranteed Interest Rate"). Interest will be credited to a
Guarantee Period based on its daily balance at a daily rate which is equivalent
to the Guaranteed Interest Rate applicable to that Guarantee Period for amounts
held during the entire Guarantee Period.
Amounts withdrawn or transferred from a Guarantee Period prior to its
Expiration Date will be subject to an interest adjustment. Any such amount
withdrawn or transferred from a guarantee period will be credited with interest
at a rate of only 3% per year from the date the guarantee period was established
to the date of payment or transfer, regardless of the guaranteed interest rate.
This means that any interest in excess of 3% will be forfeited.
- 18 -
18
<PAGE>
An interest adjustment will not apply to amounts withdrawn or transferred
within the 30-day period ending on the Expiration Date of the Guarantee Period
from which the withdrawal or transfer is being made. No interest adjustment
applies to death benefits.
At least 45 days, but not more than 60 days, prior to the Expiration Date
of a Guarantee Period,
Transamerica will notify the Owner as to the options available when a Guarantee
Period expires. The
Owner may elect one of the following options:
(1) transfer the Guarantee Amount of that Guarantee Period to a new
Guarantee Period from among those being offered by Transamerica at such time.
The Guarantee Amount is equal to: (a) the amount of the Net Purchase Payment or
transfer allocated to a particular Guarantee Period with a particular Expiration
Date; less (b) any withdrawals or transfers made from that Guarantee Period;
less (c) any applicable Transfer Fees; less (d) reductions for the Annual
Contract Charge; and plus (e) interest credited. The new Guarantee Period will
be established on the later of (i) the date selected by the Owner, or (ii) the
date the notice, in a form and manner acceptable to Transamerica, is received by
Transamerica at the Service Center, but in no event later than the day
immediately following the Expiration Date of the previous Guarantee Period; or
(2) transfer the Guarantee Amount of that Guarantee Period to one or more
Sub-Accounts of the Variable Account.
Transamerica must receive the Owner's notice electing one of these options
at the Service Center by the expiration date of the Guarantee Period. If such
election has not been received by Transamerica at the Service Center, the
Guarantee Amount of that Guarantee Period will remain in the Fixed Account and a
new Guarantee Period of the same duration as the expiring Guarantee Period, if
offered, will automatically be established by Transamerica with a new Guaranteed
Interest Rate declared by Transamerica for that Guarantee Period. The new
Guarantee Period will start on the day following the expiration date of the
previous Guarantee Period.
If Transamerica is not currently offering Guarantee Periods having the
same duration as the expiring Guarantee Period, the new Guarantee Period will be
the next longer duration, or if Transamerica is not offering Guarantee Periods
longer than the duration of the expiring Guarantee Period, the next shorter
duration.
If the Guarantee Amount of an expiring Guarantee Period is less than
$1,000, Transamerica reserves the right to transfer such amount to the Money
Market Sub-Account of the Variable Account.
A transfer from a Guarantee Period made within the 30-day period ending on
its Expiration Date
will not be counted for the purpose of the ten allowable transfers under the
Fixed Account, nor for the
purpose of determining any Transfer Fee on transfers in excess of the ten
transfers a year, nor will such transfer be subject to any interest adjustment.
- ------------------------------------------------------------------------------
- 19 -
19
<PAGE>
THE CONTRACT
- ------------------------------------------------------------------------------
The Contract is a combination deferred variable and fixed annuity
contract. Your rights and benefits are described below and in the individual
contract or in the certificate and group contract; however, we reserve the right
to make any modification to conform the individual contract or the group
contract and certificates thereunder to, or give you the benefit of, any federal
or state statute or rule or regulation. The obligations under the Contract are
our obligations.
You as Owner will designate the Annuitant. You can be the Annuitant and
must be the Annuitant
in the case of a Qualified Contract issued to fund an IRA. (See "Qualified
Contracts" below.)
Annuity payments will be made to the Annuitant after the Annuity Date
unless, in the case of a Non-Qualified Contract, you designate a different
Payee.
The term "Contract" as used herein refers to either an individual annuity
contract or to a certificate issued under a group annuity contract. For each
Contract, a different Account will be established and values and benefits will
be calculated separately. The various administrative rules described below will
apply separately to each Contract, unless otherwise noted.
Qualified Contracts
The Contracts may be used to fund IRA rollovers for use in connection with
Section 408(b) of the Code. If a Contract is purchased to fund an IRA, the
Annuitant must also be the Owner. In addition, if a Contract is purchased to
fund an IRA or other Qualified Plan, minimum distributions must commence not
later than April 1st of the calendar year following the calendar year in which
you attain age 701/2.
You should consult your tax adviser concerning these matters.
The Contract and prototype IRA endorsement have received IRS approval that
they are acceptable under Section 408 of the Code, and that each individual who
purchases a Contract with an IRA endorsement will be considered to have adopted
a retirement savings program that satisfies the requirements of Section 408 of
the Code. The IRS approval is a determination only as to the form of the
Contract and does not represent a determination of the merits of the Contract.
An IRA rollover is a rollover of certain kinds of distributions from
qualified plans, Section 403(b) tax sheltered annuities, and individual
retirement plans, following the rules set out in the Code to maintain favorable
tax treatment, to an Individual Retirement Annuity.
The Contracts may also be used for various types of qualified pension and
profit sharing plans under Section 401 of the Code, which permits employers to
establish various types of retirement plans for themselves and for employees.
- 20 -
20
<PAGE>
Purchasers of the Contract for use in Qualified Plans should seek
competent advice regarding the
suitability of the proposed plan documents and the Contract to their specific
needs. Transamerica reserves
the right to decline to sell the Contract to certain Qualified Plans or
terminate the Contract if in Transamerica's judgment the Contract is not
appropriate for the Plan.
- ------------------------------------------------------------------------------
APPLICATION AND PURCHASE PAYMENTS
- ------------------------------------------------------------------------------
Purchase Payments
All Purchase Payments can be paid to the Service Center by a check payable
to Transamerica or by transfer of available funds from your Schwab account.
The Initial Purchase Payment for the Contract must be at least $5,000. A
confirmation will be issued to you upon the acceptance of each Purchase Payment.
Your Contract will be issued and your Net Purchase Payment derived from
the Initial Purchase Payment generally will be accepted and credited within two
business days after receipt of an acceptable application and receipt of the
Initial Purchase Payment at the Service Center. (A Net Purchase Payment is the
Purchase Payment less any applicable premium taxes, including any retaliatory
premium taxes.) The Purchase Payment can be paid by check (payable to
Transamerica) or by transfer of available cash from your account with Schwab.
Acceptance is subject to there being sufficient information in a form acceptable
to us, and we reserve the right to reject any application or Purchase Payment.
The Service Center will process your application and Purchase Payments. If
your application is complete and your initial Purchase Payment is being
transferred from funds available in your Schwab account, then the Purchase
Payment will generally be credited on the business day following receipt of the
application. If your application is incomplete, the Service Center will either
complete the application from information Schwab has on file, or contact you for
the additional information. No transfer of funds will be made from your Schwab
Account until your application is complete. The funds will be credited to the
Contract when they are transferred.
If your Purchase Payment is by check, and the application is complete,
Schwab will use its best efforts to credit the Purchase Payment on the day of
receipt, but in all such cases it will be credited to your Contract within two
business days of receipt. If your application is incomplete, the Service Center
will complete the application from information Schwab has on file or contact you
by telephone to obtain the required information. If your application remains
incomplete for five business days, we will return to you both the check and the
application unless you consent to our retaining the Initial Purchase Payment and
crediting it as soon as the requirements are fulfilled.
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Each Contract provides for a Free Look Period of ten days (or longer, if
required by state law) after you receive the Contract. You may cancel the
Contract by notifying us within the Free Look Period. Then you will be refunded
the sum of: (i) the Purchase Payments allocated to the Fixed Account; and (ii)
the greater of the Purchase Payments allocated to the Variable Account or the
Variable Accumulated Value.
Additional Purchase Payments may be made at any time prior to the Annuity
Date, as long as the Annuitant or Contingent Annuitant is living. Additional
Purchase Payments must be at least $1,000. In addition, minimum allocation
amounts apply (see "Allocation of Purchase Payments" ). Additional Purchase
Payments made by check are credited to your Contract as of the date of receipt
of the payment at the Service Center. If made by transfer of funds from your
Schwab account, funds for the additional Purchase Payment will be transferred
and credited to your Contract the business day of receipt of your instructions
in good order.
Total Purchase Payments may not exceed $1,000,000 without our prior
approval.
In no event may the sum of all Purchase Payments for a Contract during any
taxable year exceed the limits imposed by any applicable federal or state law,
rules, or regulations.
Allocation of Purchase Payments
You specify either in your application or by subsequent telephone or
written notice how Purchase Payments will be allocated. You may allocate each
Net Purchase Payment to one or more of the Sub- Accounts of the Variable
Account, to the available Guarantee Periods of the Fixed Account, or to both, as
long as the portions are whole number percentages. Any allocation percentage for
a Sub-Account must be at least 10%. In addition, the Initial Purchase Payment
allocation is subject to a minimum allocation of $1,000 to each Sub-Account you
select and the amount allocated to a Guarantee Period must be at least $1,000.
On the Annuity Issue Date, the Net Purchase Payment, or portion thereof,
derived from your Initial Purchase Payment which you allocate to the Variable
Account will first be allocated to the Money Market Sub-Account and will remain
in that Sub-Account until the estimated end of the Free Look Period ( plus 5
days for delivery of the Contract by mail). At that time, the dollar value of
the Accumulation Units held in the Money Market Sub-Account attributable to such
Net Purchase Payment will be allocated among the Sub-Accounts in accordance with
the allocation percentages selected by you.
Each Net Purchase Payment will be subject to the allocation percentages in
effect at the time of receipt of such Purchase Payment. The allocation
percentages for new Purchase Payments among the Sub-Accounts of the Variable
Account and the Guarantee Periods of the Fixed Account may be changed by you at
any time by request in a manner and form acceptable to us. Any changes to the
allocation percentages are subject to the limitations above. Any change will
take effect with the first Purchase Payment received with or after receipt of
notice of the change by our Service Center and will continue
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in effect until subsequently changed. The minimum amount of any new Purchase
Payment that can be allocated to establish a Sub-Account or Guarantee Period is
$1,000.
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ACCOUNT VALUE
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Before the Annuity Date, your Account Value is the total dollar amount of
each Sub-Account and Guarantee Period credited to your Contract. The Account
Value is equal to: (a) the Fixed Accumulated Value plus (b) the Variable
Accumulated Value.
The Fixed Accumulated Value is the total dollar amount of all Guarantee
Amounts held under the Fixed Account for the Contract prior to the Annuity Date.
The Fixed Accumulated Value is determined without regard to any interest
adjustment.
Before the Annuity Date, the Variable Accumulated Value is the total
dollar amount of all Variable Accumulation Units under each Sub-Account of the
Variable Account held for the Contract. The Variable Accumulated Value prior to
the Annuity Date is equal to: (a) Net Purchase Payments allocated to the
Sub-Accounts; plus or minus (b) any increase or decrease in the value of the
assets of the Sub- Accounts due to investment results; less (c) the daily
Mortality and Expense Risk Charge; less (d) the daily Administrative Expense
Charge; less (e) reductions for the Annual Contract Charge deducted on the last
business day of each Contract or Certificate Year; plus or minus (f) amounts
transferred from or to the Fixed Account; less (g) any applicable Transfer Fees;
and less (h) any withdrawals from the Sub-Accounts.
A Valuation Period is the period between successive Valuation Days. It
begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on
each Valuation Day and ends at the close of the New York Stock Exchange on the
next succeeding Valuation Day. A Valuation Day is each day that the New York
Stock Exchange is open for regular business. The value of the Variable Account
assets is determined at the end of each Valuation Day. To determine the value of
an asset on a day that is not a Valuation Day, the value of that asset as of the
end of the next Valuation Day will be used.
The Variable Accumulated Value is expected to change from Valuation Period
to Valuation Period, reflecting the investment experience of the selected
Portfolios as well as the deductions for charges.
Any time the value in a Sub-Account is less than $250, whether by
transfer, withdrawal or investment experience, we reserve the right to transfer
the balance in the Sub-Account to the Money Market sub-account.
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Net Purchase Payments which you allocate to a Sub-Account of the Variable
Account are used to purchase Variable Accumulation Units in the Sub-Account or
Sub-Accounts you select. The number of Variable Accumulation Units to be
credited for each Sub-Account will be determined by dividing the portion of each
Net Purchase Payment allocated to the Sub-Account by the Variable Accumulation
Unit Value determined at the end of the Valuation Period during which the Net
Purchase Payment was received. In the case of the Initial Net Purchase Payment,
Variable Accumulation Units for that payment will be credited to the Account
Value (and held in the Money Market Sub-Account until the estimated end of the
Free Look Period) as soon as possible, but no later than two Valuation Days
after the later of: (a) the date sufficient information in a form acceptable to
us is received by us at the Service Center; or (b) the date the Service Center
receives the Initial Purchase Payment. In the case of any subsequent Purchase
Payment, Variable Accumulation Units for that payment will be credited at the
end of the Valuation Period during which we receive the payment. The value of a
Variable Accumulation Unit for each Sub-Account for a Valuation Period is
established at the end of each Valuation Period and is calculated by multiplying
the value of that unit at the end of the prior Valuation Period by the Sub-
Account's Net Investment Factor for the Valuation Period.
The Net Investment Factor is a formula that reflects the changes in the
value of a share of the applicable Portfolio (and any dividends declared by the
Portfolio); it is used to determine the value of Accumulation Units. The
applicable formula can be found in the Statement of Additional Information.
The value of a Variable Accumulation Unit may go up or down.
Unlike a brokerage account, this account is not covered by the Securities
Investor Protection Corporation ("SIPC").
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TRANSFERS
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In General
Prior to the Annuity Date you may transfer all or part of your Account
Value among and between the Sub-Accounts and the available Guarantee Periods by
telephone or by sending a written request to our Service Center. The minimum
amount which may be transferred, is the lesser of $1,000 or the entire value of
the Sub-Account or Guarantee Period from which the transfer is being made. Any
transfer intended to establish a new Guarantee Period under the Fixed Amount
must be at least $1,000. The request must specify the amounts being transferred,
the Sub-Account(s) and/or Guarantee Period(s) from which the transfer is to be
made and the Sub-Account(s) and/or Guarantee Period(s) that will receive the
transfer.
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Currently, there is no limit on the number of transfers you can make
within the Variable Account during any Contract Year. There is no charge for the
first ten transfers each Contract Year, but there is a charge of $10 (or 2% of
the amount of the transfer, whichever is less) for each additional transfer in
each Contract Year. We reserve the right to limit the number of transfers you
can make.
Transfers involving the Fixed Account (including transfers to or from the
Variable Account) are limited to ten (10) during any Contract Year. No
additional transfers may be made involving the Fixed Account. These Fixed
Account transfers are counted against your ten free transfers. (Partial cash
withdrawals from the Contract from the Fixed Account are limited to ten during a
Contract Year. See "Cash Withdrawals," page 26.)
A transfer generally will be effective on the date the request for
transfer is received by our Service Center if received before 4:00 p.m. Eastern
Time. Under current law, there will not be any tax liability to you if you make
a transfer.
Transfers among the Sub-Accounts may also be subject to such terms and
conditions as may be imposed by the Portfolios.
Transfers involving the Sub-Accounts will result in the purchase and/or
cancellation of Variable Accumulation Units having a total value equal to the
dollar amount being transferred to or from a particular Sub-Account. The
purchase and/or cancellation of such units generally shall be made using the
Variable Accumulation Unit value of the applicable Sub-Accounts as of the end of
the Valuation Day on which the transfer is effective.
When a transfer is made from a Guarantee Period before its Expiration
Date, the amount transferred will be subject to an interest adjustment,
resulting in the crediting of interest at a rate of only 3% per year for the
amount transferred from the date the Guarantee Period was established to the
date of transfer. (See "The Fixed Account," page 16.) A transfer from a
Guarantee Period made within the 30- day period ending on its Expiration Date
will not be counted for the purpose of the ten allowable transfers under the
Fixed Account, nor for the purpose of determining any Transfer Fee on transfers
in excess of the ten transfers per year, nor will such transfer be subject to
any interest adjustment.
Possible Restrictions
We reserve the right, without prior notice, to modify, restrict,
suspend or eliminate the transfer privileges (including telephone transfers) at
any time and for any reason. For example, restrictions may be necessary to
protect Contract Owners from adverse impacts on portfolio management of large
and/or numerous transfers by market timers or others. We have determined that
the movement of significant Sub-Account values from one Sub-Account to another
may prevent the underlying Portfolio from taking advantage of investment
opportunities because the Portfolio must maintain a significant cash position in
order to handle redemptions. Such movement may also cause a substantial increase
in Portfolio transaction costs which must be indirectly borne by Contract
Owners. Therefore, we reserve the right
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to require that all transfer requests be made by the Contract Owner and not by a
third party holding a power of attorney and to require that each transfer
request be made by a separate communication to us. We also reserve the right to
request that each transfer request be submitted in writing and be manually
signed by the Contract Owner or Owners; facsimile transfer requests may not be
allowed.
Dollar Cost Averaging (Automatic Transfers)
Prior to the Annuity Date, you may automatically transfer, without charge,
amounts from one Sub- Account selected from among those being allowed under this
option to any of the other Sub-Accounts on a monthly basis. The transfers will
begin on the tenth day of the next month following receipt of the request,
provided that automatic transfers will not commence until the later of (a) 30
days after the Annuity Issue Date, or (b) the estimated end of the Free Look
Period. Transfers will continue unless terminated by you or automatically
terminated by us because there are insufficient funds in the applicable
Sub-Account, or for other reasons as set forth in the Contract.
Automatic transfers must meet the following conditions: (1) the minimum
amount that can be transferred out of the selected Sub-Account is $250 per
month; and (2) the minimum amount transferred into any other Sub-Account is the
greater of $250 or 10% of the amount being transferred that month. At the time
of your election and of the first automatic transfer made under this option, the
amount in the selected Sub-Account from which the transfers are to be made must
be at least $5,000.
Automatic transfers will not count toward the limitation of 10 free
transfers per Contract Year.
Dollar Cost Averaging is not available with respect to the Fixed Account.
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CASH WITHDRAWALS
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Withdrawals
You (the Owner) may withdraw from the Contract all or part of your Account
Value at any time during the life of the Annuitant and prior to the Annuity Date
by request in a manner and form acceptable to us at our Service Center subject
to the rules below. Federal or state laws, rules or regulations may apply. The
amount payable to you if you surrender your Contract on or before the Annuity
Date is your Account Value, less any interest adjustment, and less any
applicable premium taxes. No withdrawals may be made after the Annuity Date.
A full surrender will result in a cash withdrawal payment equal to the
Account Value (less any interest adjustment and any applicable premium taxes) at
the end of the Valuation Period during which the request is received. A request
for a partial withdrawal will result in a reduction in your Account Value equal
to the sum of the dollar amount withdrawn plus any interest adjustment.
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<PAGE>
Partial withdrawals must be at least $1,000. Partial withdrawals from the
Variable Accounts are unlimited; partial withdrawals from the Fixed Account are
limited to ten during any Contract Year. If you specify the Variable Account but
do not specify the Sub-Account(s) from which the withdrawal is to be made, our
Service Center will effect such withdrawal pro rata from all Sub-Accounts in
which your Account Value is invested. If you have Account Value in both the
Fixed and Variable Accounts and do not specify from which one the withdrawal
should come, then the withdrawal request cannot be processed.
When a withdrawal is made from a Guarantee Period of the Fixed Account
before its Expiration Date, the amount withdrawn will be subject to interest
adjustment and will be credited with interest at a rate of only 3% per year from
the date the Guarantee Period was established to the date of withdrawal.
(See "The Fixed Account," page 16.)
In accordance with state insurance law, Transamerica may delay payment of
any withdrawal from the Fixed Account for up to six months after Transamerica
receives the request for such withdrawal. If Transamerica delays payment for
more than 30 days, Transamerica will pay interest on the withdrawal amount up to
the date of payment.
A partial withdrawal will not be processed if it would reduce the Account
Value to less than $2,000. In that case, you will be contacted to decide either
to: (a) withdraw a lesser amount (subject to the $1,000 minimum) leaving an
Account Value of at least $2,000; or (b) completely surrender the Contract. You
will have ten days to notify us of your decision. Amounts payable will be
determined as of the end of the Valuation Period during which the subsequent
instructions are received. If, after the expiration of the 10-day period, no
election is received from you, the withdrawal request will be considered null
and void and no withdrawal will be processed.
Withdrawals may be taxable transactions (this includes APO withdrawals and
Systematic Withdrawals discussed below). Moreover, the Internal Revenue Code
provides that a 10% penalty tax may be imposed on the taxable portions of
certain early withdrawals. The Code generally requires us to withhold federal
income tax from withdrawals. However, generally you will be entitled to elect,
in writing, not to have tax withholding apply although withholding is mandatory
for certain types of Qualified Contracts. Withholding applies to the portion of
the withdrawal which is included in your income and subject to federal income
tax. The tax withholding rate is 10% of the taxable amount of the withdrawal.
Withholding applies only if the taxable amount of the withdrawal is at least
$200. Some states also require withholding for state income taxes. (See "Federal
Tax Matters," page 39.)
Withdrawal requests must be in writing to ensure that your instructions
regarding withholding are followed.
Since you assume the investment risk under the Contract for amounts
allocated to the Variable Account, the total amount paid upon surrender of your
Contract (taking into account any prior withdrawals) may be more or less than
the total Purchase Payments you made.
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Withdrawal (including surrender) requests generally will be processed as
of the end of the Valuation Period during which the completed request, including
any necessary forms, is received by the Service Center. Payment of any cash
withdrawal or lump sum death benefit due from the Variable Account will occur no
longer than seven days from the date the request is received, except that we may
postpone such payment if: (1) the New York Stock Exchange is closed for other
than usual weekends or holidays, or trading on the Exchange is otherwise
restricted; or (2) an emergency exists as defined by the Commission, or the
Commission requires that trading be restricted; or (3) the Commission permits a
delay for the protection of Owners. The withdrawal request will be effective
when any necessary withdrawal request forms are received. Payments of any
amounts derived from Purchase Payment paid by check may be delayed until the
check has cleared the Owner's bank.
After a surrender of your total Account Value, or at any time that your
Account Value is zero, all your rights under the Contract will terminate.
Since the Qualified Contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of the Code,
reference should be made to the Code and the terms of the particular retirement
plans for any additional limitations or restrictions on cash withdrawals.
Systematic Withdrawal Option
Under the Systematic Withdrawal Option, you can instruct Transamerica to
make automatic payments of a predetermined dollar amount or fixed percentage of
the Account Value to you monthly. To be eligible for systematic withdrawal, the
Account Value must be at least $15,000 at the time you elect the Systematic
Withdrawal Option and at the time of the first withdrawal. The minimum
systematic withdrawal payment is $150.
Systematic withdrawals will commence on the fourth day of the month
following receipt of the election at our Service Center. Such date may not be
earlier than: (a) 30 days after the Annuity Issue Date shown on the Certificate
Data page; or (b) the end of the Free Look Period, whichever is later. If the
fourth day is not a Valuation Day, systematic withdrawals will start on the next
following Valuation Day. Subsequent withdrawals will be made on the fourth day
of each month thereafter. To ensure that your instructions regarding withholding
are followed, requests for systematic withdrawal must be in a manner and form
acceptable to the Service Center. You may specify the Sub-Accounts from which
systematic withdrawals will be made, but if you do not specify the Sub-Accounts
from which systematic withdrawals are to be taken, systematic withdrawals will
be taken from each Sub-Account in the proportion that the Account Value in each
Sub-Account bears to the total Account Value of the Contract.
When using systematic withdrawals, an Owner may not simultaneously
participate in the Automatic Payout Option.
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<PAGE>
Systematic withdrawals may be taxable, subject to withholding, and subject
to the 10% penalty tax. (See "Federal Tax Matters," page 39.)
Qualified Policies are subject to complex rules with respect to
restrictions on and taxation of distributions, including the applicability of
penalty taxes. A qualified tax adviser should be consulted before a Systematic
Withdrawal Option is requested. (See "Federal Tax Matters," page 39.)
The Systematic Withdrawal Option is not available with respect to the
Fixed Account.
Automatic Payout Option ("APO") For Qualified Contracts
Prior to the Annuity Date, for Qualified Contracts, you may elect the
Automatic Payout Option ("APO") to satisfy minimum distribution requirements
under Sections 401 and 408(b)(3) of the Code. This may be elected no earlier
than six months prior to the calendar year in which you attain age 701/2, but
payments may not begin earlier than January 1 of such calendar year. The APO is
not available with respect to the Fixed Account.
Payments will be made on the seventh day of the month, and will continue
unless terminated by you or automatically terminated by us as stated in the
Contract.
APO may be elected in any calendar month, but no later than the month
immediately preceding the month in which you attain age 84.
To be eligible for this option, the following conditions must be met: (1)
your Account Value must be at least $15,000 at the time of election and the time
of the first APO withdrawal; and (2) the annual withdrawal amount is the larger
of the required minimum distribution for this contract as defined under Code
Sections 401 or 408(b)(3) or $1,000. APO withdrawals are available on a monthly,
quarterly, semi-annual or annual basis. If you elect other than an annual
distribution mode, the minimum modal APO withdrawal amount is $150.
APO allows the required minimum distribution to be paid periodically from
any of the Sub- Accounts. If there are insufficient funds in any of the Accounts
to make a withdrawal, or for other reasons as set forth in the Contract, this
option will terminate. If you have more than one qualified plan, you must
consider all such plans in the calculation of your minimum annual distribution
requirement. Termination of distributions from this Contract will not relieve
you from your distribution requirements if you own multiple contracts.
You may also make partial withdrawals in addition to APO withdrawals,
subject to the withdrawal provisions of the Contract.
APO withdrawals may be taxable and subject to withholding.
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TELEPHONE TRANSACTIONS
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We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if we follow such procedures we will
not be liable for any losses due to unauthorized or fraudulent instructions.
However we may be liable for such losses if we do not follow those reasonable
procedures. The procedures we will follow for telephone transactions may include
requiring some form of personal identification prior to acting on instructions
received by telephone, providing written confirmation of the transaction, and/or
tape recording the instructions given by telephone.
We reserve the right to suspend telephone transaction privileges at any
time, for some or all Contracts, and for any reason. Telephone transactions may
not be allowed in all states. Withdrawals are not permitted by telephone.
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DEATH BENEFIT
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Before the Annuity Date, the death benefit will equal the larger of (1)
the sum of the Purchase Payments, less withdrawals and less premium or similar
taxes as of the date of death of you or the Annuitant, or (2) your Account
Value, as of the end of the Valuation Period during which the later of (a) due
Proof of Death is received by our Service Center and (b) a written notice of the
method of settlement elected by the Beneficiary is received at our Service
Center. (See "Designation of Beneficiaries," page 31). If no settlement method
is elected, the death benefit will be paid in a lump sum no later than one year
after the date of death. Until the death benefit is paid, the Account Value
allocated to the Variable Account remains in the Variable Account, and
fluctuates with the investment performance of the applicable Portfolio(s).
Accordingly, the amount of the death benefit depends on the Account Value at the
time the death benefit is paid (not on the date of death).
Due Proof of Death may be: (a) a copy of a certified death certificate; (b) a
copy of a certified decree of a court of competent jurisdiction as to the
finding of death; (c) a written statement by a medical doctor who attended the
deceased; or (d) any other proof satisfactory to us.
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Payment of Death Benefit
The death benefit is generally payable upon receipt of Proof of Death of
you or the Annuitant. Upon receipt of this proof and an election of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as we have sufficient information about the Beneficiary to make
the payment. The Beneficiary may receive the amount payable in a lump sum cash
benefit or, subject to any limitations under any state or federal law, rule, or
regulation, under one of the annuity forms unless a settlement agreement is
effective under the Contract preventing such election. If no settlement method
is elected within one year of the date of death, the death benefit will be paid
in a lump sum based upon the Account Value at that time (i.e., one year after
the date of death). The payment of the death benefit may be subject to certain
distribution requirements under the federal income tax laws. (See "Federal Tax
Matters," page 39.)
Designation of Beneficiaries
You may select one or more Beneficiaries and name them in the application
or a Beneficiary designation form. If you select more than one Beneficiary,
unless you otherwise indicate, they will share equally in any death benefits
payable in the event of the Annuitant's death before the Annuity Date if there
is no Contingent Annuitant or upon your death if there is no Joint Owner.
Different Beneficiaries may be named with respect to the Annuitant's death
("Annuitant's Beneficiary") and your death ("Owner's Beneficiary"). Before the
Annuitant's death, you may change any Beneficiary by written notice to the
Service Center. You may also make the designation of a Beneficiary irrevocable
by sending written notice to and obtaining approval from our Service Center.
Irrevocable Beneficiaries may be changed only with the written consent of the
designated Irrevocable Beneficiaries, except to the extent required by law.
The interest of any Beneficiary who dies before you or the Annuitant will
terminate at the death of the Beneficiary. The interest of any Beneficiary who
dies at the time of, or within 30 days after your or the Annuitant's death, will
also terminate if no benefits have been paid, unless the Contract has been
endorsed to provide otherwise. The benefits will then be paid as though the
Beneficiary has died before you or the Annuitant. If the interest of all
designated beneficiaries has terminated, or if you do not designate a
beneficiary, any benefits payable will be paid to your estate.
We may rely on an affidavit by any responsible person in determining the
identity or non-existence of any Beneficiary not identified by name.
Death of Annuitant Prior to the Annuity Date
If the Annuitant dies prior to the Annuity Date, the Annuitant is not an
Owner, and there is no Contingent Annuitant, a death benefit under the Contract
relating to that Annuitant will be paid to the
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Annuitant's Beneficiary. If there is a Contingent Annuitant, then the Contingent
Annuitant will become
the Annuitant.
Death of Owner Prior to the Annuity Date
If an Owner dies before the Annuity Date, a death benefit will be paid to
the Owner's Beneficiary. If your Joint Owner or Beneficiary is your spouse, then
your spouse may elect to treat the Contract as his or her own.
Death of Owner or Annuitant After the Annuity Date
If an Owner or the Annuitant dies after the Annuity Date, the remaining
undistributed portion, if any, of the Contract will be distributed at least as
rapidly as under the method of distribution being used as of the date of such
death. Under some annuity forms, there will be no death benefit.
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CHARGES AND DEDUCTIONS
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THIS PRODUCT HAS NO SALES CHARGE AND NO WITHDRAWAL OR SURRENDER
CHARGES.
No deductions are made from Purchase Payments except for any applicable
premium taxes. Therefore, the full amount of the Purchase Payments (less any
applicable premium tax charges) is invested in the Contract.
The variable account expenses for the Contract are substantially below the
costs of most other variable annuity contracts. The average variable account
expense charge of other variable annuity contracts was 1.30% as reported by
Morningstar Annuity/Life Sourcebook, 1995, and 1.25% as reported by
Barron's-Lipper Mutual Fund Quarterly, January 1996. The variable account
expense charge for this Contract is 0.85%.
As more fully described below, charges under the Contract are assessed
only as deductions for premium taxes, if applicable, as charges against the
assets of the Variable Account for our assumption of mortality and expense risks
and administrative expenses (if charged), for certain transfers, and as an
Annual Contract Charge. In addition, an interest adjustment applies to
withdrawals and transfers from a Guarantee Period prior to its Expiration Date.
In addition, certain deductions are made from the assets of the Portfolios
for investment management fees and expenses. These fees and expenses are
described in the Portfolios' prospectuses and their Statements of Additional
Information.
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Mortality and Expense Risk Charge
We deduct a Mortality and Expense Risk Charge from the Variable Account at
the end of each Valuation Period to compensate us for bearing certain mortality
and expense risks under the Contracts. This is a daily charge equal to an
effective annual rate of 0.85% of the value of the net assets in the Variable
Account. The approximate portion of this charge attributable to mortality risks
is 0.30%; the approximate portion of this charge estimated to be attributable to
expense risk is 0.55% of the value of the net assets in the Variable Account. We
guarantee that this charge will never increase beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the Variable
Accumulation Unit Values for each Sub-Account.
Account Values and annuity payments are not affected by changes in actual
mortality experience incurred by us. The mortality risks assumed by us arise
from our contractual obligations to make annuity payments determined in
accordance with the annuity tables and other provisions contained in the
Contract. Thus you are assured that neither the Annuitant's longevity nor an
unanticipated improvement in general life expectancy will adversely affect the
annuity payments under the Contract.
We also bear substantial risk in connection with the death benefit before
the Annuity Date, since we will pay a death benefit equal to the greater of your
Account Value or your Purchase Payments less withdrawals and premium taxes (so
we bear the risk of unfavorable experience in the Sub-Accounts).
The expense risk assumed by us is the risk that our actual expenses in
administering the Contracts and the Variable Account will be greater than
anticipated, or exceed the amount recovered through the Annual Contract Charge
plus the amount, if any, recovered through Transfer Fees and the Administrative
Expense Charge (currently not being charged).
If the Mortality and Expense Risk Charge is insufficient to cover actual
costs and risks assumed, the loss will fall on us. Conversely, if this charge is
more than sufficient, any excess will be profit to us. Currently, we expect a
profit from this charge. Our expenses for distributing the Contracts will be
borne by our general assets, including any profits from this charge.
Administrative Expense Charges
We currently deduct a $25 (or 2% of Account Value if less) Annual Contract
Charge from the Account Value on each Contract Anniversary to partially cover
our costs for administering the Contracts and the Variable Account. The Annual
Contract Charge is deducted from the Money Market Sub- Account. If there are not
sufficient funds in the Money Market Sub-Account to cover the Annual Contract
Charge, then the Charge or any portion thereof will be deducted on a pro rata
basis from all Sub-Accounts of the Variable Account with current value. If the
entire Account is in the Fixed Account,
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then the Annual Contract Charge will be deducted on a pro rata basis from all
Guarantee Periods under the Fixed Account. We do not expect a profit from the
Annual Contract Charge.
We currently do not deduct any other administrative expense charge.
However, we reserve the right to deduct such a Charge from the Variable Account
at the end of each Valuation Period at an effective annual rate that is
guaranteed not to exceed 0.15% of the assets held in the Variable Account to
reimburse us for those administrative expenses attributable to the Contracts and
the Variable Account. We will provide you at least 30 days written notice before
any such charge is imposed.
If we impose an Administrative Expense Charge, it will be at a level that
will be designed to recover no more than the anticipated and estimated costs
associated with administering the Contract and the Variable Account that are not
recovered through the Annual Contract Charge. We do not expect to make a profit
from any Administrative Expense Charge.
Premium Taxes
We may be required to pay state premium taxes or retaliatory taxes
currently ranging from 0% to 3.5% in connection with Purchase Payments or values
under the Contracts. Depending upon applicable state law, we will deduct charges
for the premium taxes we incur with respect to a particular Contract from the
Purchase Payments, from amounts withdrawn, or from amounts applied on the
Annuity Date. In some states, charges for both direct premium taxes and
retaliatory premium taxes may be imposed at the same or different times with
respect to the same Purchase Payment, depending on applicable state law.
Other Taxes
Under present laws, we will incur state or local taxes (in addition to the
premium taxes described above) in several states. No charges are currently made
for taxes other than state premium taxes. However, we reserve the right to
deduct charges in the future for federal, state, and local taxes or the economic
burden resulting from the application of any tax laws that we determine to be
attributable to the Contracts.
Portfolio Expenses
The value of the assets in the Variable Account reflects the value of
Portfolio shares and therefore the fees and expenses paid by each Portfolio. A
complete description of the fees, expenses, and deductions from the Portfolios
are found in the Funds' prospectuses. (See "The Portfolios," page 11.) Current
prospectuses for the Funds can be obtained by calling the Service Center at
800-838-0650, or by writing to theService Center, Charles Schwab & Co., Inc.,
P.O. Box 7785, San Francisco, California 94120-9420.
Transfer Fee
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There will be a $10 (or 2% of the amount of the transfer, whichever is
less) charge for each transfer in excess of ten transfers in any Contract Year.
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals or transfers from a Guarantee Period of the Fixed Account, see "The
Fixed Account," page 16.
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ANNUITY PAYMENTS
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Election of Annuity Date and Annuity Form
The Annuity Date is the date that your Account Value (less any applicable
premium taxes) is applied to provide the annuity payments under your selected
annuity form (unless your entire Account Value has been withdrawn or the death
benefit has been paid to the Beneficiary prior to that date). When the contract
is issued, the designated annuity form is a Life Annuity with period certain of
120 months (10 years). Before the Annuity Date, and while the Annuitant is
living, you may change the Annuity Date or annuity form by telephone or written
request. The request for change of the Annuity Date or annuity form must be
received by the Service Center at least 30 days prior to the Annuity Date. We
will provide you with at least 90 days notice of your Annuity Date so you can
change the date or the annuity form, if you so desire.
The Annuity Date must not be earlier than the first day of the calendar
month coinciding with or next following the first Contract Anniversary. The
latest Annuity Date which may be elected is the first day of the calendar month
immediately preceding the month of the Annuitant's 85th birthday. The Annuity
Date must be the first day of a calendar month and initially will be the first
day of the month prior to the Commencement of Annuity Payment Date selected by
you at the time the application is completed. The first annuity payment will be
on the Commencement of Annuity Payment Date, which is the first day of the month
immediately following the Annuity Date.
Fixed Annuity Payment
The amount of each annuity payment is fixed and will remain constant
pursuant to the terms of the annuity form elected (variable annuity payment
options are not currently offered). On the Annuity Date, the Account Value, less
any applicable premium taxes, will be transferred to our general account assets.
The amount of annuity payments will be established by the fixed annuity form
selected and the age and sex (unless unisex rates are required by law) of the
Annuitant. The annuity payments will not reflect investment experience after the
Annuity Date. The fixed annuity payment amounts are determined by applying the
Annuity Purchase Rate specified in your Contract to the annuity form selected by
you.
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Payments may change after the death of the Annuitant under some annuity forms;
the amounts of these changes are fixed on the Annuity Date.
Choice of Annuity Forms
You may choose any of the four annuity forms described below. Subject to
our approval, you may select any other annuity forms then being offered by us.
(1) Life Annuity. Payments start on the first day of the month immediately
following the Annuity Date, if the Annuitant is living. Payments end with the
payment due just before the Annuitant's death. There is no death benefit under
this form. It is possible that only one payment will be made under this form if
the Annuitant dies before the second payment is due; only two payments will be
made if the Annuitant dies before the third payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the Annuity Date, if the Annuitant is living.
Payments will continue for as long as the Annuitant lives. After the Annuitant
dies, payments will be made to the Contingent Annuitant, if living, for as long
as the Contingent Annuitant lives. The continued payments can be in the same
amount as the original payments, or in an amount equal to one-half or two-thirds
thereof. Payments will end with the payment due just before the death of the
Contingent Annuitant. There is no death benefit after both die. If the
Contingent Annuitant does not survive the Annuitant, payments will end with the
payment due just before the death of the Annuitant. It is possible that only one
payment or very few payments will be made under this form, if the Annuitant and
Contingent Annuitant die shortly after payments begin.
The request for this form must: (a) name the Contingent Annuitant and (b)
state the percentage of payments for the Contingent Annuitant. Once Annuity
Payments start under this annuity form, the person named as Contingent
Annuitant, for purposes of being the measuring life, may not be changed. We will
require proof of age for the Annuitant and for the Contingent Annuitant before
payments start.
(3) Life Annuity With Period Certain. Payments start on the first day of
the month immediately
following the Annuity Date, if the Annuitant is living. Payments will be made
for the longer of: (a) the
Annuitant's life; or (b) the period certain. The period certain may be 120 or
180 or 240 months, but in
no event may it exceed the life expectancy of the Annuitant.
If the Annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the Annuitant's
death. No benefit will then be payable to the Annuitant's Beneficiary.
If the Annuitant dies during the period certain, the rest of the period
certain payments will be made to the Annuitant's Beneficiary, who may elect to
receive the commuted value of these payments in a
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single sum. We will determine the commuted value by discounting the rest of the
payments at the then current rate of interest used by us for commuted values.
If after the Annuitant's death, you have not elected to have the commuted
value paid in a single sum and if the Annuitant's Beneficiary dies before all of
the payments under the period certain have been made, you may designate a Payee
to receive any remaining payments. If the Annuitant's Beneficiary dies before
receiving all of the remaining period certain payments and a designated Payee
does not survive the Annuitant's Beneficiary for at least 30 days, then the
remaining payments will be paid to you, if living, otherwise in a single sum to
your estate.
The request for this form must: (a) state the length of the period certain
and (b) name the
Annuitant's Beneficiary.
(4) Joint and Survivor Annuity. Payments will be made to the Annuitant,
starting on the first day of the month immediately following the Annuity Date,
if and for as long as the Annuitant and the Joint Annuitant are living. After
the Annuitant or the Joint Annuitant dies, payments will continue for as long as
the survivor lives. Payments will be made to the survivor for his or her life.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that only one
payment or very few payments will be made under this form if the Annuitant and
the Joint Annuitant both die shortly after payments begin.
The request for this form must: (a) name the Joint Annuitant; and (b)
state the percentage of continued payments for the survivor. Once payments start
under this annuity form, the person named as Joint Annuitant, for the purpose of
being the measuring life, may not be changed. We will need proof of age for the
Joint Annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
annuity form not described in this section subject to our agreement and any
applicable state or federal law or regulation. Requests for any other annuity
form must be made in writing to our Service Center at least 30 days before the
Annuity Date.
* * *
For annuity forms involving life income, the actual age and/or sex of the
Annuitant, or a Joint or Contingent Annuitant will affect the amount of each
payment. We reserve the right to ask for satisfactory proof of the Annuitant's
(or Joint or Contingent Annuitant's) age. We may delay annuity payments until
satisfactory proof is received. Since payments to older Annuitants are expected
to be fewer in number, the amount of each annuity payment under a selected
annuity form will be greater for older Annuitants than for younger Annuitants.
In the event that an annuity form is not selected at least 30 days before the
Annuity Date, we will make annuity payments in accordance with the "Life Annuity
With Period Certain" of 120 months, and the applicable provisions of the
Contract.
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The Annuity Date and annuity forms available for Qualified Contracts may
also be controlled by endorsements, the plan documents, or applicable law.
If the amount of the monthly annuity payment would be less than $150 or if
your Account Value (less any applicable premium taxes) is less than $5,000, we
reserve the right to offer a less frequent mode of payment or to pay that amount
in a lump sum cash payment to you.
Once payments start under the annuity form selected by the Owner: (a) no
changes can be made in the annuity form, (b) no additional Purchase Payments
will be accepted under the Contract, and (c) no further withdrawals, other than
withdrawals made to provide annuity benefits, will be allowed.
You may, at any time after the Annuity Date, request, in a manner and form
acceptable to us, the Service Center to change the Payee of annuity benefits
being provided under the Contract. The effective date of change in Payee will be
the later of: (a) the date we receive the notice for such change; or (b) the
date specified by you. If the Contract is issued as an IRA, you may not change
the Payee on or after the Annuity Date.
* * *
A portion or the entire amount of the annuity payments may be taxable as
ordinary income. If, at the time the annuity payments begin, we have not
received a proper written election not to have federal income taxes withheld, we
must by law withhold such taxes from the taxable portion of such annuity
payments and remit that amount to the federal government (an election not to
have taxes withheld is not permitted for certain Qualified Contracts). State
income tax withholding may also apply. (See "Federal Tax Matters," page 41.)
Alternate Fixed Annuity Rates
The amount of any fixed annuity payments will be determined on the Annuity
Date by using either the guaranteed fixed annuity rates or our current single
Purchase Payment fixed annuity rates at that time, whichever would result in a
higher amount of monthly fixed annuity payments.
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FEDERAL TAX MATTERS
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Introduction
The following discussion is a general description of federal tax
considerations relating to the Contracts and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon our understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Contract may be purchased on a non-tax qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). Qualified Contracts are designed
for use in connection with plans entitled to special income tax treatment under
sections 401 or 408 of the Internal Revenue Code of 1986, as amended ("Code").
The ultimate effect of federal income taxes on the amounts held under a
Contract, on annuity payments, and on the economic benefit to you, the
Annuitant, or the Beneficiary may depend on the type of retirement plan, and on
the tax status of the individual concerned. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of the Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of the Contract. The following discussion assumes that a Qualified
Contract is purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
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Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general. We
believe that an Owner who is a natural person generally is not taxed on
increases (if any) in the value of an Account Value until distribution occurs by
withdrawing all or part of the Account Value (e.g., withdrawals or annuity
payments under the annuity form elected). For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Account Value (and
in the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Account Value over the
"investment in the contract" (discussed below) during each taxable year. There
are some exceptions to this rule and a prospective Owner that is not a natural
person may wish to discuss these with a competent tax adviser.
The following discussion generally applies to a Contract owned by a
natural person.
Withdrawals
In the case of a withdrawal under a Qualified Contract, including
withdrawals under the Automatic Payout Option, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the individual's total accrued benefit under the retirement plan.
The "investment in the contract" generally equals the amount of any
non-deductible Purchase Payments paid by or on behalf of any individual. For a
Contract issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from a Qualified Contract.
With respect to Non-Qualified Contracts, partial withdrawals, including
systematic withdrawals, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. If a partial withdrawal made from the Fixed
Account is subject to an interest adjustment, the Account Value immediately
before the withdrawal will not be altered to take into account the interest
adjustment. As a result, for purposes of determining the taxable portion of the
partial withdrawal, the Account Value will be treated as including the amount
deducted from the Fixed Account due to the interest adjustment. Full surrenders
are treated as taxable income to the extent that the amount received exceeds the
"investment in the contract."
Annuity Payments
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Although the tax consequences may vary depending on the annuity form
elected under the Contract, in general, only the portion of the annuity payment
that represents the amount by which the Account Value exceeds the "investment in
the contract" will be taxed; after the investment in the contract is recovered,
the full amount of any additional annuity payments is taxable. For fixed annuity
payments, in general there is no tax on the portion of each payment which
represents the same ratio that the "investment in the contract" bears to the
total expected value of the annuity payments for the term of the payments;
however, the remainder of each annuity payment is taxable. Once the investment
in the Contract has been fully recovered, the full amount of any additional
annuity payments is taxable. If the annuity payments cease as a result of an
Annuitant's death before full recovery of the "investment in the contract," you
should consult a competent tax adviser regarding the deductibility of the
unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified Contract, there
may be imposed a federal income tax penalty equal to 10% of the amount treated
as taxable income. In general, however, there is no penalty tax on
distributions: (1) made on or after the date on which the Owner attains age
591/2; (2) made as a result of death or disability of the Owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the lives or life expectancies of the Owner and a
"designated beneficiary." Other tax penalties may apply to certain distributions
pursuant to a Qualified Contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the death of an
Owner or the Annuitant. Generally such amounts are includable in the income of
the recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender, as described above, or (2) if distributed
under an annuity form, 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
Contract remains the amount of any Purchase Payments paid which were not
excluded from gross income.
Transfers, Assignments, or Exchanges
A transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, or the exchange of a
Contract may result in certain tax consequences to the Owner that are not
discussed herein. An Owner contemplating any such designation, transfer,
assignment, or exchange of a Contract should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.
Multiple Contracts
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All deferred, non-qualified annuity contracts that are issued by us (or
our affiliates) to the same Owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includable in gross
income under section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of section
72(e) through the serial purchase of annuity contracts or otherwise. Congress
has also indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Withholding
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Certain distributions from Qualified Contracts are subject to
mandatory federal income tax withholding. (See discussion of this election under
"Withdrawals" on page .)
Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although, as of the date of this prospectus, Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law and the law may change. Federal estate tax consequences and state and local
estate, inheritance, and other tax consequences of ownership or receipt of
distributions under a Contract depend on the individual circumstances of each
Owner or recipient of the distribution. A competent tax adviser should be
consulted for further information.
Qualified Plans
The Contract is designed for use with several types of qualified plans.
The tax rules applicable to qualified plans, including restrictions on
contributions and benefits, taxation of distributions, and any tax
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penalties, vary according to the type of plan and the terms and conditions of
the plan itself. Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000 annually,
distributions that do not satisfy specified requirements, and certain other
transactions with respect to qualified plans. Therefore, no attempt is made to
provide more than general information about the use of the Contract with the
various types of qualified plans. Owners, Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under qualified plans
may be subject to the terms and conditions of the plans themselves, regardless
of the terms and conditions of the Contract. Qualified plans are also subject to
distribution and other requirements that are not incorporated in the
administration of the Contracts. Owners, participants, and Beneficiaries are
responsible for determining that contributions, distributions, and other
transactions with respect to the Contracts comply with applicable law. Following
are brief descriptions of the various types of qualified plans in connection
with which Transamerica will issue the Contract. Contracts for all types of
qualified plans may not be available in all states. When issued in connection
with a qualified plan, the Contract will be amended as necessary to conform to
the requirements of the Code.
Qualified Pension and Profit Sharing Plans.
Section 401(a) of the Code permits corporate employers to establish
various types of retirement plans for employees. Such retirement plans may
permit the purchase of the Contract in order to provide retirement savings under
the plans. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10," also permits self-employed
individuals to establish qualified plans for themselves and their employees.
Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
to their specific needs. The Contract is designed to invest retirement savings
and not to distribute retirement benefits. Adverse tax consequences to the plan,
to the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.
Individual Retirement Annuities
The Contract is designed for use with IRA rollovers. Section 408 of the
Code permits eligible individuals to contribute to an individual retirement
program known as an Individual Retirement Annuity (each referred to as an
"IRA"). Also, distributions from certain other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. The sale of a Contract for
use with an IRA may be subject to special disclosure requirements of the
Internal Revenue Service. Purchasers of the Contract for use with IRA's will be
provided with supplemental information required by the Internal Revenue Service
or other appropriate agency. Such purchasers will have the right to revoke their
purchase within seven days of the earlier of the establishment of the IRA or
their purchase. Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000 annually,
distributions that do not satisfy specified requirements, and certain other
transactions. If a Qualified Contract is issued in connection with an employer's
Simplified Employee Pension ("SEP") plan,
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Owners, Annuitants and Beneficiaries are cautioned that the rights of any person
to any of the benefits under the Qualified Contract may be subject to the terms
and conditions of the plan itself, regardless of the terms and conditions of the
Contract. A Qualified Contract will be amended as necessary to conform to the
requirements of the Code. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRA's.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
General
At the time the Initial Purchase Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Non-Qualified Contract or a
Qualified Contract. If the Initial Purchase Payment is derived from an exchange
or surrender of another annuity contract, we may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity contract. We will require that persons purchase separate
Contracts if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate Contract would require the minimum
Initial Purchase Payment stated above. Additional Purchase Payments under a
Contract must qualify for the same federal income tax treatment as the Initial
Purchase Payment under the Contract; we will not accept an additional Purchase
Payment under a Contract if the federal income tax treatment of such Purchase
Payment would be different from that of the Initial Purchase Payment.
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PERFORMANCE DATA
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From time to time, we may advertise yields and average annual total
returns for the Sub-Accounts of the Variable Account. In addition, we may
advertise the effective yield of the Money Market Sub- Account. These figures
will be based on historical information and are not intended to indicate future
performance.
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in that
Sub-Account is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
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The yield of a Sub-Account (other than the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Sub-Account
over a specified thirty-day period. The yield is calculated by assuming that the
income generated by the investment during that thirty-day period is generated
each thirty-day period over a twelve-month period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any premium taxes that
may be applicable to a particular Contract. To the extent that premium taxes are
applicable to a particular Contract, the yield of that Contract will be reduced.
For a description of the methods used to determine yield and total returns, see
the Statement of Additional Information.
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for various
periods of time including, but not limited to, a period measured from the date
the Sub-Account commenced operations. When a Sub-Account has been in operation
for 1, 5, and 10 years, respectively, the average annual total return for these
periods will be provided. The average annual total return quotations will
represent the average annual compounded rates of return that would equate an
initial investment of $1,000 to the redemption value of that investment
(excluding premium taxes) as of the last day of each of the periods for which
total return quotations are provided. For additional information regarding
yields and total returns calculated using the standard formats briefly described
herein, please refer to the Statement of Additional Information.
Performance information for any Sub-Account reflects only the performance
of a hypothetical Contract under which Account Value is allocated to a
Sub-Account during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies and characteristics of the Portfolios in which the
Sub-Account invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and promotional literature may also contain other information
including (1) the ranking of any Sub-Account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, Morningstar, Value Line, IBC/Donoghue's Money
Fund Report, Financial Planning Magazine, Money Magazine, Bank Rate Monitor,
Standard & Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate accounts
or other investment products on overall performance or other criteria, and (2)
the effect of tax-deferred compounding on Sub-Account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
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We may from time to time also disclose cumulative (non-annualized) total
returns for the Sub- Accounts. We may from time to time also disclose yield and
standard total returns for any or all Sub- Accounts.
We may also advertise performance figures for the Sub-Accounts based on
the performance of a Portfolio prior to the time the Variable Account commenced
operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
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DISTRIBUTION OF THE CONTRACTS
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Charles Schwab & Co., Inc. ("Schwab") is the principal underwriter and
distributor of the Contracts.
Schwab is registered with the Commission as a broker/dealer and is a member
of the National
Association of Securities Dealers, Inc. ("NASD"). Its principal offices are
located at P.O. Box 7785, San
Francisco, California 94120-9420, telephone 800-838-0650.
Certain administrative services are provided by Schwab to assist
Transamerica in the processing of the Contracts, which services are described in
written agreements between Schwab and Transamerica.
- ------------------------------------------------------------------------------
VOTING RIGHTS
- ------------------------------------------------------------------------------
To the extent required by applicable law, all Portfolio shares held in the
Variable Account will be voted by us at regular and special shareholder meetings
of the respective Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or if we determine that we are allowed to
vote all Portfolio shares in our own right, we may elect to do so.
Before the Annuity Date, you, the Owner, have the voting interest. The
number of votes which are available to you will be calculated separately for
each Sub-Account. That number will be determined by applying your percentage
interest, if any, in a particular Sub-Account to the total number of votes
attributable to that Sub-Account. You hold a voting interest in each Sub-Account
to which your Contract Value is allocated. You have no voting interest after the
Annuity Date.
The number of votes of a Portfolio will be determined as of the date
coincident with the date established by that Portfolio for determining
shareholders eligible to vote at the meeting of the Funds.
- 46 -
46
<PAGE>
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the respective Funds.
Shares as to which no timely instructions are received and shares held by
us as to which Owners have no beneficial interest will be voted in proportion to
the voting instructions which are received with respect to all Contracts
participating in the Sub-Account. Voting instructions to abstain on any item to
be voted upon will be applied on a pro rata basis to reduce the votes eligible
to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the appropriate
Portfolio.
It should be noted that generally the Funds are not required to, and do
not intend to, hold annual or other regular meetings of shareholders.
- ------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- ------------------------------------------------------------------------------
There is at present no pending material legal proceeding to which the
Variable Account is a party
or to which the assets of the Variable Account are subject. We are involved
in various kinds of litigation
which, in management's judgment, is not of material importance in relation to
our total assets or to the assets of the Variable Account.
- ------------------------------------------------------------------------------
LEGAL MATTERS
- ------------------------------------------------------------------------------
Advice regarding certain legal matters concerning the federal securities
laws applicable to the issue and sale of the Contract has been provided by
Sutherland, Asbill & Brennan. The organization of Transamerica, Transamerica's
authority to issue the Contract, and the validity of the form of the Contract
have been passed upon by James W. Dederer, Executive Vice President, Secretary,
and General Counsel of Transamerica.
- ------------------------------------------------------------------------------
ACCOUNTANTS
- ------------------------------------------------------------------------------
The consolidated financial statements of Transamerica Occidental Life
Insurance Company at December 31, 1995, and for each of the three years in the
period then ended, and the financial statements for the Variable Account at
December 31, 1995, have been audited by Ernst & Young LLP,
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<PAGE>
Independent Auditors, as set forth in their report appearing in the Statement of
Additional Information, and are included in reliance upon such reports given
upon the authority of such firm experts in accounting and auditing.
- ------------------------------------------------------------------------------
AVAILABLE INFORMATION
- ------------------------------------------------------------------------------
We have filed a registration statement ("Registration Statement") with the
Commission under the 1933 Act relating to the Contracts offered by this
Prospectus. This Prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto, and reference is hereby made to the
Registration Statement and exhibits for further information relating to us and
the Contracts. Statements contained in this Prospectus, as to the content of the
Contracts and other legal instruments, are summaries. For a complete statement
of the terms thereof, reference is made to the instruments as filed as exhibits
to the Registration Statement. The Registration Statement and its exhibits may
be inspected and copied at the offices of the Commission located at 450 Fifth
Street, N.W., Washington, D.C.
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48
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
A Statement of Additional Information is available upon request which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
TABLE OF CONTENTS
Page
THE CONTRACT (Page 20)...................... 3
ADDITIONAL DEFINITIONS ..................... 3
NET INVESTMENT FACTOR (Page 25)............. 4
GENERAL PROVISIONS.......................... 5
CALCULATION OF PERFORMANCE DATA (Page 46)... 8
HISTORIC PERFORMANCE DATA................... 11
TERMINATION OF DOLLAR COST AVERAGING ....... 13
FEDERAL TAX MATTERS (Page 41)............... 14
DISTRIBUTION OF THE CONTRACTS............... 16
SAFEKEEPING OF ACCOUNT ASSETS............... 16
TRANSAMERICA (Page 11)...................... 17
STATE REGULATION............................ 17
RECORDS AND REPORTS......................... 17
FINANCIAL STATEMENTS (Page 9)............... 17
Schwab Investment Advantage(TM) Variable Annuity issued by Transamerica
Occidental Life Insurance Company, Policy form 1-504 11-194, Certificate number
GNC-37-193.
- 49 -
49
<PAGE>
va5sai.3 STATEMENT OF ADDITIONAL INFORMATION
April 20, 1996
for the
SCHWAB INVESTMENT ADVANTAGETM
A VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
Issued by
Transamerica Occidental Life
Insurance Company
1150 South Olive
Los Angeles, California 90015
(213) 742-2111
This Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the deferred variable annuity contract
("Contract") offered by Transamerica Occidental Life Insurance Company
("Transamerica") and its Separate Account VA-5 ("Variable Account"). You may
obtain a copy of the Prospectus dated May 1, 1996, as supplemented from time to
time, by writing to the Service Center, Charles Schwab & Co., Inc., P.O. Box
7785, San Francisco, California 94120-9420, or calling (800) 838-0650. 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, 1996
- 50 -
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT (page 20)........................... 3
ADDITIONAL DEFINITIONS .......................... 3
NET INVESTMENT FACTOR (page 25).................. 4
GENERAL PROVISIONS............................... 5
CALCULATION OF PERFORMANCE DATA.................. 8
HISTORIC PERFORMANCE DATA (page 46).............. 11
TERMINATION OF DOLLAR COST AVERAGING............. 13
FEDERAL TAX MATTERS (page 41).................... 14
DISTRIBUTION OF THE CONTRACTS.................... 16
SAFEKEEPING OF ACCOUNT ASSETS.................... 16
TRANSAMERICA (page 11)........................... 17
STATE REGULATION................................. 17
RECORDS AND REPORTS.............................. 17
FINANCIAL STATEMENTS (page 9).................... 17
(Additional page references refer to the current
Prospectus.)
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51
<PAGE>
THE CONTRACT
As a supplement to the description in the Prospectus, the following
provides additional information about the Contract which may be of interest to
you.
The contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "Contract" as used herein refers to both the individual contract and
each certificate issued under the group contract. The group contract has been
issued to a trust organized under Missouri law. However, the sole purpose of the
trust is to hold the Contract. You, the Owner, have all rights and benefits
under the Contract.
ADDITIONAL DEFINITIONS
Account: The account established and maintained for you under the Contract to
which your Net Purchase
Payments are credited.
Account Value: The Account Value is equal to the sum of (a) the Fixed
Accumulated Value, plus (b)
the Variable Accumulated Value.
Age: The applicable person's age nearest birthday.
Annuitant's Beneficiary: The person or persons named by you, the Owner, who may
receive the death benefits under the Contract if: (a) there is no named
Contingent Annuitant and the Annuitant dies before the Annuity Date; or (b) the
Annuitant dies after the Annuity Date under an Annuity Form containing a period
certain option.
Annuity Issue Date: The effective date of your Contract as shown on the
Contract.
Code: The U.S. Internal Revenue Code of 1986, as amended, and the rules and
regulations issued
thereunder.
Contingent Annuitant: The person who: (a) becomes the Annuitant if the Annuitant
dies before the Annuity Date; or (b) may receive benefits under the Contract if
the Annuitant dies after the Annuity Date under an Annuity Form containing a
contingent annuity option.
Contract Anniversary: The same month and day as the Annuity Issue Date in each
calendar year after the calendar year in which the Annuity Issue Date occurs.
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52
<PAGE>
Contract Year: A 12-month period from the Annuity Issue Date and ending with the
day before the Contract Anniversary and each twelve month period thereafter.
Owner's Beneficiary: The person who becomes the Owner of the Contract if the
Owner dies. If the
Contract has Joint Owners, the surviving Joint Owner will be the Owner's
Beneficiary.
Valuation Day: Any day the New York Stock Exchange is open for trading.
Valuation occurs currently
as of 4:00 p.m. ET each Valuation Day.
Valuation Period: The time interval between the closing of the New York Stock
Exchange on
consecutive Valuation Days.
Withdrawals: Refers to partial withdrawals, full surrenders, and withdrawals
under the Automatic Payout
Option that are paid in cash to you.
NET INVESTMENT FACTOR
For any Sub-Account of the Variable Account, the Net Investment Factor for
a Valuation Period, before the Annuity Date, is (a) divided by (b), minus (c).
Where (a) is
The net asset value per-share held in the Sub-Account, as of the end of
the Valuation Period,
plus or minus
The per-share amount of any dividend or capital gain distributions if the
"ex dividend" date occurs in the Valuation Period,
plus or minus
A per-share charge or credit as of the end of the Valuation Period for tax
reserves for realized and unrealized capital gains, if any.
Where (b) is
The net asset value per-share held in the Sub-Account as of the end of the
last prior Valuation Period.
Where (c) is
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53
<PAGE>
The daily charge of 0.002319% (0.85% annually) for assuming the mortality
and expense risks under this Contract times the number of calendar days in the
current Valuation Period, plus
The daily Administrative Expense Charge (currently zero) times the number
of calendar days in the current Valuation Period. This charge will not exceed
0.000411% (0.15% annually).
A Valuation Day is defined as any day that the New York Stock Exchange is
open.
Example of Variable Accumulation Unit Value Calculations
Assume the net asset value per share of a Portfolio at the end of the
current Valuation Period is $20.15; at the end of the immediately preceding
Valuation Period was $20.10; the Valuation Period is one day; and no dividends
or distributions caused the Portfolio shares to go "ex dividend" during the
current Valuation Period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for the Mortality and Expense Risk Charge 0.002319% (the
daily equivalent of the current charge of 0.85% on an annual basis) gives a Net
Investment Factor of 1.002464810. If the value of the Variable Accumulation Unit
for the immediately preceding Valuation Period had been 15.50000, the value for
the current Valuation Period would be 15.538204555 (15.5 X 1.002464810).
GENERAL PROVISIONS
IRS Required Distributions
If you have a Non-Qualified Contract and any Owner dies before the entire
interest in the Contract is distributed, the remaining value generally must be
distributed to the designated Beneficiary so that the Contract qualifies as an
annuity under the Code. (See "Federal Tax Matters," page 14.)
Non-Participating
The Contract is non-participating. No dividends are payable and the
Contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of any measuring life has been misstated, the Annuity
Payments under the Contract will be whatever the Annuity Purchase Amount applied
on the Annuity Date would purchase on the basis of the correct age or sex of you
and/or the other measuring life. Any overpayments or underpayments by
Transamerica as a result of any such misstatement may be respectively charged
against or credited to the Annuity Payment or Annuity Payments to be made after
the correction so as to adjust for such overpayment or underpayment.
Proof of Existence and Age
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54
<PAGE>
Before making any payment under the Contract, Transamerica may require
proof of the existence and/or proof of the age of you or any other measuring
life, or any other information Transamerica deems necessary in order to provide
benefits under the Contract.
Transamerica will not be liable for obligations which depend on receiving
information from or about a Payee or measuring life until such information is
received in a satisfactory form.
Assignment
No assignment of a Contract will be binding on Transamerica unless made in
writing and given to Transamerica at its Service Center. Transamerica is not
responsible for the adequacy of any assignment. Your rights and the interest of
any Annuitant or Beneficiary will be subject to the rights of any assignee of
record.
Annual Report
At least once each Contract Year prior to the Annuity Date, you will be
given a report of the current Account Value allocated to each Sub-Account. This
report will also include any other information required by law or regulation.
Incontestability
Each Contract is incontestable from the Annuity Issue Date.
Ownership
Only you will be entitled to the rights granted by the Contract or allowed
by Transamerica under the Contract. If you die, your rights belong to your
estate unless you have previously named an Owner's Beneficiary.
Entire Contract
The individual annuity Contract, or the Certificate and the group annuity
contract under which the certificate has been issued, makes the entire Contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any change in the Contract and then
only in writing. Transamerica will not be bound by any promise or representation
made by any other persons.
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55
<PAGE>
Transamerica may not change or amend the Contract, except as expressly
provided in the Contract without your consent. However, Transamerica may change
or amend the Contract if such change or amendment is necessary for the Contract
to comply with any state or federal law, rule or regulation.
Protection of Benefits
To the extent permitted by law, no benefit under the Contract will be
subject to any claim or process of law by any creditor.
Delay of Payments
Payment of any amounts due from the Variable Account generally will occur
within seven days from the date an acceptable Written Request, including all
completed forms Transamerica requires, is received at the Service Center, except
that Transamerica is permitted to postpone such payment if: (1) the New York
Stock Exchange is closed for reasons other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; or (2) an emergency exists as
defined by the Securities and Exchange Commission (Commission) or the Commission
requires that trading be restricted; or (3) the Commission permits a delay for
your protection.
Notices and Directions
We will not be bound by any authorization, direction, election or notice
which is not made in a manner and form acceptable to us and, if required to be
in writing, not received at our Service Center.
Any written notice requirement by us to you will be satisfied by our
mailing of any such required written notice by first-class mail to your last
known address as shown on our records.
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56
<PAGE>
CALCULATION OF PERFORMANCE DATA
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Securities and Exchange
Commission, Transamerica is required to compute the Money Market Sub-Account's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
Money Market Portfolio or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains and
losses on the sale of securities and unrealized appreciation and depreciation)
in the value of a hypothetical account having a balance of one unit of the Money
Market Sub-Account at the beginning of such seven-day period, dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this quotient on a
365-day basis. The net change in account value reflects the deductions for the
Mortality and Expense Risk Charge and Annual Contract Charge and income and
expenses accrued during the period. Because of these deductions, the yield for
the Money Market Sub-Account of the Variable Account will be lower than the
yield for the Money Market Portfolio or any comparable substitute funding
vehicle.
The Commission also permits Transamerica to disclose the effective yield
of the Money Market Sub-Account for the same seven-day period, determined on a
compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Portfolio or substitute funding vehicle, the types and quality of
portfolio securities held by the Money Market Portfolio or substitute funding
vehicle, and operating expenses.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current annualized yield
of one or more of the Sub-Accounts (except the Money Market Sub-Account) for
30-day periods. The annualized yield of a Sub-Account refers to the income
generated by the Sub-Account over a specified 30-day period. Because this yield
is annualized, the yield generated by a Sub-Account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per Variable Accumulation Unit earned during the
period by the price per unit on the last day of the period, according to the
following formula:
YIELD = 2[ {a-b + 1}6 - 1]
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<PAGE>
cd
Where:
a = net investment income earned during the period by the
Portfolio attributable to the
shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period
(net of reimbursements).
c = the average daily number of Variable Accumulation Units
outstanding during the
period.
d = the maximum offering price per Variable Accumulation
Unit on the last day of the
period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all Contracts.
Because of the charges and deductions imposed by the Variable Account, the
yield for the Sub- Account will be lower than the yield for the corresponding
Portfolio. The yield on amounts held in the Sub-Accounts normally will fluctuate
over time. Therefore, the disclosed yield for any given period is not an
indication or representation of future yields or rates of return. The
Sub-Account's actual yield will be affected by the types and quality of
portfolio securities held by the Portfolio and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average annual total
returns for one or more of the Sub-Accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P{1+T}n = ERV
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58
<PAGE>
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
All recurring fees that are charged to all Contracts are recognized in the
ending redeemable value.
Other Performance Data
Transamerica may from time to time also disclose cumulative total returns
in conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula.
CTR = {ERV/P}-1
Where:
CTR = the cumulative total return net of Sub-Account
recurring charges for the period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the
one, five, or ten-year period at the end of the one,
five, or ten-year period (or fractional portion
thereof).
P = a hypothetical initial payment of $1,000.
Hypothetical Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations. Such
performance information for the Sub-Account will be calculated based on the
performance of the corresponding Portfolio and the assumption that the Sub-
Account was in existence for the same periods as the Portfolio, with a level of
Contract charges currently in effect. The Portfolio used for these calculations
will be the actual Portfolio that the Sub-Account will invest in. This type of
hypothetical performance data may be disclosed on both an average annual total
return and a cumulative total return basis.
HISTORIC PERFORMANCE DATA
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<PAGE>
General Limitations
The figures below represent the past performance of the Sub-Accounts
and are not indicative of future performance. The figures may reflect the waiver
of advisory fees and reimbursement of other expenses.
The performance data for the Portfolios was provided by or on behalf of
the Portfolios. The Sub- Account performance data is derived from the data
provided for the Portfolios. None of the Portfolios is affiliated with
Transamerica. In preparing the tables below, Transamerica has relied on the data
provided by the Portfolios. While Transamerica has no reason to doubt the
accuracy of the figures provided for the Portfolios, Transamerica has not
verified these figures.
Sub-Account Performance Figures
The charts below show the historical performance data for the
Sub-Accounts since each Sub- Account's commencement of operations.
The average annual total returns for each Sub-Account is as follows:
<TABLE>
<CAPTION>
For the period from
SUB-ACCOUNT For the 1-year commencement of
(date of commencement of period ending Sub-Account operations
operation of each Sub-Account is 4/25/94) 12/31/95 to 12/31/95
<S> <C> <C>
Federated American Leaders Fund II 22.08% 20.97%
Federated Fund for U.S. Government Securities II 5.1% 5.57%
INVESCO VIF-High Yield 13.20% 10.87%
INVESCO VIF-Industrial Income 18.39% 16.63%
INVESCO VIF-Total Return 15.09% 13.48%
Janus Aspen Growth 19.03% 16.50%
Lexington Emerging Markets -7.15% -0.47%
Schwab Money Market 3.99% 3.82%
SteinRoe Capital Appreciation 6.54% 11.88%
Strong Discover Fund II 23.79% 19.32%
TCI Growth 26.30% 17.16%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The cumulative total return for each Sub-Account is as follows:
SUB-ACCOUNT For the period from
(date of commencement of commencement of Sub-Account
operation of each Sub-Account is 4/25/94) operations to 12/31/95
<S> <C>
Federated American Leaders Fund II 37.82%
Federated Fund for U.S. Government Securities II 9.56%
INVESCO VIF-High Yield 18.98%
INVESCO VIF-Industrial Income 29.60%
INVESCO VIF-Total Return 23.75%
Janus Aspen Growth 29.35%
Lexington Emerging Markets -0.79%
Schwab Money Market 6.52%
SteinRoe Capital Appreciation 20.82%
Strong Discovery Fund II 34.66%
TCI Growth 30.58%
</TABLE>
Money Market Sub-Account Yields
The annualized yield for the Schwab Money Market Sub-Account for the
seven-day period ending December 29, 1995 was 4.21%. The effective yield for the
Schwab Money Market Sub- Account for the seven-day period ending December 29,
1995, was 4.30%.
Hypothetical Sub-Account Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations. Such
performance information for the Sub-Account will be calculated based on the
performance of the corresponding Portfolio and the assumption that the Sub-
Account was in existence for the same periods as the Portfolio, with a level of
Contract charges currently in effect. The Portfolio used for these calculations
will be the actual Portfolio that the Sub-Account will invest in. This type of
hypothetical performance data may be disclosed on both an average annual total
return and a cumulative total return basis.
These figures are not an indication of the present, past, or future
performance of the Sub- Accounts. The figures may reflect the waiver of advisory
fees and reimbursement of other expenses.
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61
<PAGE>
<TABLE>
<CAPTION>
The hypothetical average annual total return for each Sub-Account is as
follows:
For the
period from
For the For the commencement
1-year 5-year of Portfolio
SUB-ACCOUNT period period operations
(date of commencement of ending ending to
operation of Corresponding Portfolio) 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
SteinRoe Capital Appreciation(12/30/88 ) 11.76% 18.10% 15.18%
Strong Discovery Fund II(5/4/92) 35.05% N/A 14.15%
TCI Growth(11/20/87 ) 31.70% 14.18% 12.33%
</TABLE>
<TABLE>
<CAPTION>
The hypothetical cumulative total return for each Sub-Account is as
follows:
For the period
For the For the from
1-year 5-year commencement
SUB-ACCOUNT period period of Portfolio
(date of commencement of operations ending ending operations to
of Corresponding Portfolio 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
SteinRoe Capital Appreciation(12/30/88 ) 11.76% 129.73% 169.00%
Strong Discovery Fund II(05/04/92) 35.05% N/A 62.30%
TCI Growth(11/20/87) 31.70% 94.10% 144.50%
TERMINATION OF DOLLAR COST AVERAGING
We reserve the right to send written notification to you as to the options
available if termination of Dollar Cost Averaging, either by you or by us,
results in the value in the receiving Sub-Account(s) to which monthly transfers
were made to be less than $1,000. You will have 10 days from the date our notice
is mailed to:
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<PAGE>
(a) transfer the value of the Sub-Account(s) to another Sub-Account with a
current value; or (b) transfer funds from another Sub-Account (either
$1,000 or the entire value of the Sub-Account)
into the receiving Sub-Account(s) to bring the value of that Sub-Account to at
least $1,000; or
(c) submit an additional Purchase Payment (subject to the $1,000 minimum)
to make the value of the Sub-Account equal to or greater than $1,000; or
(d) transfer the entire value of the receiving Sub-Account(s) back into
the Sub-Account from which the automatic transfers were made.
If no written election is made by you and received by us at our Service Center
prior to the end of the 10 day period, we reserve the right to transfer the
value of the receiving Sub-Account(s) back into the Sub-Account from which the
automatic transfers were made. Transfers made as a result of (a), (b), or (d)
above will not be counted for purposes of the ten free transfers per Contract
Year limitation.
FEDERAL TAX MATTERS
The Contract is designed for use by individuals in retirement plans which
may or may not be plans qualified for special tax treatment under sections 401
or 408 of the Internal Revenue Code of 1986, as amended (the "Code"). The
ultimate effect of federal income taxes on the Account Value, on Annuity
Payments, and on the economic benefit to you, the Annuitant or the Beneficiary
may depend on the type of retirement plan for which the Contract is purchased,
on the tax and employment status of the individual concerned and on
Transamerica's tax status. THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT
INTENDED AS TAX ADVICE. Any person concerned about these tax implications should
consult a competent tax adviser. This discussion is based upon Transamerica's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of these present federal income tax laws or of the
current interpretations by the Internal Revenue Service. Moreover, no attempt
has been made to consider any applicable state or other tax laws.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the Contract. Under existing federal income tax law,
Transamerica believes that the Variable Account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contract.
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63
<PAGE>
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the Variable Account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the Variable
Account, then Transamerica may impose a charge against the Variable Account
(with respect to some or all Contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contracts
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Portfolios be "adequately diversified" in
accordance with Treasury regulations in order for the Contract to qualify as
annuity contracts under federal tax law. The Variable Account, through the
Portfolios, intends to comply with the diversification requirements prescribed
by the Treasury in Reg.
Sec. 1.817-5, which affect how the Portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. Several years ago, the IRS 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. More recently, the Treasury Department announced, in connection with the
issuance of regulations concerning investment 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 contract owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
states that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
sub-accounts without being treated as owners of the underlying assets."
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of a Contract has the choice of more Sub-Accounts in which to
allocate net purchase payments and Contract Values, may be able to transfer
among Sub- Accounts more frequently, and the Sub-Accounts may have narrower
investment strategies, than in such rulings. These differences could result in
an Owner being treated as the owner of the assets of the Variable Account. In
addition, Transamerica does not know what standards will be set forth, if any,
in the regulations or rulings which the Treasury Department has stated it
expects to issue. Transamerica therefore reserves the right to modify the
Contract as necessary to attempt to prevent an Owner from being considered the
owner of a pro rata share of the assets of the Variable Account.
- 64 -
64
<PAGE>
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any Non-Qualified Contract to
provide that (a) if any Owner dies on or after the Annuity Date but prior to the
time the entire interest in the Contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death; and (b)
if any Owner dies prior to the Annuity Date, the entire interest in the Contract
will be distributed within five years after the date of the Owner's death. These
requirements will be considered satisfied as to any portion of your interest
which is payable to or for the benefit of a "designated beneficiary" and which
is distributed over the life of such "designated beneficiary" or over a period
not extending beyond the life expectancy of that Beneficiary, provided that such
distributions begin within one year of your death. Your "designated beneficiary"
is a natural person designated by you as a Beneficiary and to whom ownership of
the Contract passes by reason of death. However, if your "designated
beneficiary" is your surviving spouse, the Contract may be continued with the
surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to
comply with the requirements of section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. Transamerica
intends to review such provisions and modify them if necessary to assure that
they comply with the requirements of Code section 72(s) when clarified by
regulation or otherwise. Other rules may apply to Qualified Contracts.
DISTRIBUTION OF THE CONTRACTS
Charles Schwab & Co., Inc. ("Schwab"), located at P.O. Box 7785, San
Francisco, California 94120-
9420, (800) 838-0650, is the principal underwriter and distributor of the
Contracts. Schwab is registered
with the Commission as a broker/dealer and is a member of the National
Association of Securities
Dealers, Inc. ("NASD"). The offering of the Contracts is expected to be
continuous. No underwriting
commissions have been paid to Schwab since commencement of sales of the
Contracts.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Variable Account is held by Transamerica. The
assets of the Variable Account are kept separate and apart from Transamerica's
general account assets. Records are maintained of all purchases and redemptions
of Portfolio shares held by each of the Sub-Accounts.
- 65 -
65
<PAGE>
TRANSAMERICA
General Information and History
Transamerica Occidental Life Insurance Company was formerly known as
Occidental Life Insurance Company of California. The name change occurred
approximately on September 1, 1981.
Transamerica is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn wholly owned by Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in two primary businesses: finance and insurance.
Finance consists of consumer lending, commercial lending, leasing and real
estate services. Insurance comprises life insurance, asset management and
insurance brokerage.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all the
states where it is licensed to operate. The availability of certain Contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the Contract will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Variable Account will be
maintained by Transamerica or by our Service Center. As presently required by
the 1940 Act and regulations promulgated thereunder, which pertain to the
Variable Account, reports containing such information as may be required under
the 1940 Act or by other applicable law or regulation will be sent to you
semi-annually at your last known address of record.
FINANCIAL STATEMENTS
The consolidated financial statements of Transamerica should be considered
only as bearing on the ability of Transamerica to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
This Statement of Additional Information contains the financial statements
of the Variable Account as of December 31, 1995.
Schwab Investment Advantage(TM) Variable Annuity issued by Transamerica
Occidental Life Insurance Company, Policy form 1-504 11-194, Certificate number
GNC-37-193.
- 66 -
66
<PAGE>
Audited Financial Statements
Separate Account VA-5 of
Transamerica Occidental
Life Insurance Company
December 31, 1995
<PAGE>
- 2 -
REPORT OF INDEPENDENT AUDITORS
Unitholders of Separate Account VA-5 of Transamerica Occidental Life Insurance
Company Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VA-5 of Transamerica Occidental Life Insurance Company (comprised of the
Federated Equity Growth and Income Fund, Federated U.S. Government Bond Fund,
INVESCO VIF-Industrial Income Portfolio, INVESCO VIF-Total Return Portfolio,
INVESCO VIF-High Yield Portfolio, Janus Aspen Growth Portfolio, Lexington
Emerging Markets Fund, Schwab Money Market Portfolio, SteinRoe Capital
Appreciation Fund, Strong Discovery Fund II, TCI Balanced Portfolio and TCI
Growth Portfolio Sub-accounts) as of December 31, 1995, and the related
statement of operations for the year then ended, and the statements of changes
in net assets for the year then ended and the period from May 1, 1994
(commencement of operations) to December 31, 1994. These financial statements
are the responsibility of Separate Account VA-5'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. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the fund managers. 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
sub-accounts comprising Separate Account VA-5 of Transamerica Occidental Life
Insurance Company as of December 31, 1995, and the results of their operations
for the year then ended, and the changes in their net assets for the year ended
December 31, 1995 and the period from May 1, 1994 (commencement of operations)
to December 31, 1994 in conformity with generally accepted accounting
principles.
April 15, 1996
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-Account Sub-Account
<S> <C> <C> <C> <C>
ASSETS:
Investments, at fair value--Notes 1 and 2:
Federated Investors Insurance Management Series:
Equity Growth and Income-376,851.611 shares
at $12.80 per share (cost $4,485,815) $ 4,823,701
U.S. Government Bond-281,325.744 shares
at $10.29 per share (cost $2,825,272) $ 2,894,842
INVESCO Variable Investment Funds, Inc.:
INVESCO VIF-Industrial Income-539,497.739 shares
at $12.58 per share (cost $6,447,773) $ 6,786,882
INVESCO VIF-Total Return-433,299.505 shares
at $12.14 per share (cost $4,976,762) $ 5,260,256
INVESCO VIF-High Yield-342,049.523 shares
at $11.04 per share (cost $3,895,546)
Janus Aspen Growth-537,958.164 shares
at $13.45 per share (cost $6,623,037)
Lexington Emerging Markets-343,710.179 shares
at $9.38 per share (cost $3,287,611)
Schwab Money Market-16,476,429.440 shares
at $1.00 per share (cost $16,476,429)
SteinRoe Capital Appreciation-162,626.529 shares
at $16.33 per share (cost $2,484,932)
Strong Discovery Fund II-529,381.897 shares
at $13.44 per share (cost $6,609,998)
TCI Portfolios, Inc.:
TCI Balanced-46,001.447 shares
at $7.04 per share (cost $292,208)
TCI Growth-461,403.991 shares
at $12.06 per share (cost $5,560,001)
Receivable for unsettled investments 136,727 55,000 - 240,431
Dividends accrued - - - -
Due from Transamerica Life - - - 356,121
------------- ------------- ------------- -------------
TOTAL ASSETS $ 4,960,428 $ 2,949,842 $ 6,786,882 $ 5,856,808
LIABILITIES:
Payable for unsettled investments - - 29,455 -
Due to Transamerica Life 23,570 6,652 3,898 3,308
------------- ------------- ------------- -------------
TOTAL LIABILITIES 23,570 6,652 33,353 3,308
------------- ------------- ------------- -------------
NET ASSETS $ 4,936,858 $ 2,943,190 $ 6,753,529 $ 5,853,500
============= ============= ============= =============
Accumulation units outstanding 369,810.694 268,795.355 523,887.849 475,508.048
============= ============= ============= =============
Net asset value and redemption price per unit $ 13.349691 $ 10.949555 $ 12.891173 $ 12.309991
============= ============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Markets Market Appreciation Fund II Balanced Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,776,227
$ 7,235,537
$ 3,224,001
$ 16,476,429
$ 2,655,691
$ 7,114,893
$ 323,850
$ 5,564,532
41,173 55,268 - - - 136,070 - 135,775
- - - 10,253 - - - -
49,249 487 1,196 - - 44,926 692 -
- -------------- -------------- -------------- ---------------- ------------- ------------- -------------- -------------
3,866,649 7,291,292 3,225,197 16,486,682 2,655,691 7,295,889 324,542 5,700,307
- - 45,408 746,284 2,612 - 24,334 -
2,192 4,006 1,804 12,134 3,018 3,929 189 3,070
- -------------- -------------- -------------- ---------------- ------------- ------------- -------------- -------------
2,192 4,006 47,212 758,418 5,630 3,929 24,523 3,070
- -------------- -------------- -------------- ---------------- ------------- ------------- -------------- -------------
$ 3,864,457 $ 7,287,286 $ 3,177,985 $ 15,728,264 $ 2,650,061 $ 7,291,960 $ 300,019 $ 5,697,237
============== ============== ============== ================ ============= ============= ============== =============
325,562.577 567,398.939 333,248.590 14,778,494.692 234,375.748 501,172.961 25,564.912 452,055.571
============= ============== ============= ================ ============= ============== ============== ==============
$ 11.870090 $ 12.843319 $ 9.536380 $ 1.064267 $ 11.306890 $ 14.549788 $ 11.735577 $ 12.602957
============= ============= ============= ================ ============= ============= ============== ==============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C>
Investment income--Note 2 $ 45,545 $ 96,470 $ 102,520 $ 103,484
Expenses--Note 3:
Mortality and expense risk charge 18,530 13,831 27,755 28,489
------------- -------------- ------------- --------------
NET INVESTMENT INCOME (LOSS) 27,015 82,639 74,765 74,995
Net realized and unrealized gain (loss) on investments:
Realized gain (loss) on investments 197,397 4,992 425,165 228,436
Unrealized appreciation (depreciation) on investments 342,002 70,217 334,977 285,112
------------- -------------- ------------- --------------
NET GAIN (LOSS) ON INVESTMENTS 539,399 75,209 760,142 513,548
------------- -------------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 566,414 $ 157,848 $ 834,907 $ 588,543
============= ============== ============= ==============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Markets Market Appreciation Fund II Balanced Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<C> <C> <C> <C> <C> <C> <C> <C>
$ 173,848 $ 147,090 $ 31,316 $ 576,808 $ 22,669 $ 92,941 $ 7,645 $ 395
19,520 32,334 19,321 100,679 13,886 32,589 2,404 19,754
- ------------- ------------- -------------- -------------- -------------- ------------- ------------- -------------
154,328 114,756 11,995 476,129 8,783 60,352 5,241 (19,359)
338,745 208,076 (174,655) - (25,752)729 427,454 14,694 352,787
(120,441) 614,394 89,593 - 228,293 571,949 31,672 4,056
- -------------- ------------- -------------- -------------- ------------- ------------- -------------- -------------
218,304 822,470 (85,062) - 202,541 999,403 46,366 356,843
- ------------- ------------- -------------- -------------- ------------- ------------- -------------- -------------
$ 372,632 $ 937,226 $ (73,067) $ 476,129 $ 211,324 $ 1,059,755 $ 51,607 $ 337,484
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-Account Sub-Account
Increase in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 27,015 $ 82,639 $ 74,765 $ 74,995
Realized gain (loss) on investment transactions 197,397 4,992 425,165 228,436
Unrealized appreciation (depreciation) of investments 342,002 70,217 334,977 285,112
------------- -------------- ------------- --------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS 566,414 157,848 834,907 588,543
Change from accumulation unit transactions--Note 5 3,830,020 2,312,317 5,419,280 4,253,491
------------- -------------- ------------- --------------
TOTAL INCREASE IN NET ASSETS 4,396,434 2,470,165 6,254,187 4,842,034
Net assets at beginning of period 540,425 473,025 499,342 1,011,466
------------- -------------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 4,936,859 $ 2,943,190 $ 6,753,529 $ 5,853,500
============= ============== ============= ==============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Markets Market Appreciation Fund II Balanced Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<C> <C> <C> <C> <C> <C> <C> <C>
$ 154,328 $ 114,756 $ 11,995 $ 476,129 $ 8,783 $ 60,352 $ 5,241 $ (19,359)
338,745 208,076 (174,655) - (25,752) 427,454 14,694 352,787
(120,441) 614,394 89,593 - 228,293 571,949 31,672 4,056
- ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------
372,632 937,226 (73,067) 476,129 211,324 1,059,755 51,607 337,484
2,883,681 5,563,251 2,019,120 7,933,102 1,565,145 4,770,444 163,151 4,951,299
- ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------
3,256,313 6,500,477 1,946,053 8,409,231 1,776,469 5,830,199 214,758 5,288,783
608,144 786,809 1,231,932 7,319,033 873,592 1,461,761 85,261 408,454
- ------------- ------------- -------------- -------------- -------------- ------------- ------------- -------------
$ 3,864,457 $ 7,287,286 $ 3,177,985 $ 15,728,264 $ 2,650,061 $ 7,291,960 $ 300,019 $ 5,697,237
============= ============= ============== ============== ============== ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
Period from May 1, 1994 (commencement of operations) to December 31, 1994
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-Account Sub-Account
Increase in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (184) $ 1,541 $ 858 $ 6,653
Realized gain (loss) on investment transactions (142) 63 235 419
Unrealized appreciation (depreciation) of investments (4,116) (647) 4,132 (1,618)
------------- -------------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (4,442) 957 5,225 5,454
Change from accumulation unit transactions--Note 5 544,867 472,068 494,117 1,006,012
------------- -------------- ------------- --------------
TOTAL INCREASE IN NET ASSETS 540,425 473,025 499,342 1,011,466
Net assets at beginning of year - - - -
------------- -------------- ------------- --------------
NET ASSETS AT END OF YEAR $ 540,425 $ 473,025 $ 499,342 $ 1,011,466
============= ============== ============= ==============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Markets Market Appreciation Fund II Balanced Growth
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<C> <C> <C> <C> <C> <C> <C> <C>
$ 2,174 $ 808 $ 23,620 $ 62,907 $ 101,856 $ 66,126 $ 335 $ (640)
(58) (1,223) (6,830) 95,326 (31,112) 605 118 (57)
1,122 (1,894) (153,203) - (57,533) (67,054) (30) 475
- ------------- ------------- -------------- ------------- ------------- ------------- ------------- -------------
3,238 (2,309) (136,413) 158,233 13,211 (323) 423 (222)
604,906 789,118 1,368,345 7,160,800 860,381 1,462,084 84,838 408,676
- ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------
608,144 786,809 1,231,932 7,319,033 873,592 1,461,761 85,261 408,454
- - - - - - - -
- ------------- ------------- -------------- -------------- -------------- ------------- ------------- -------------
$ 608,144 $ 786,809 $ 1,231,932 $ 7,319,033 $ 873,592 $ 1,461,761 $ 85,261 $ 408,454
============= ============= ============== ============== ============== ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1--ORGANIZATION
Separate Account VA-5 of Transamerica Occidental Life Insurance Company
("Separate Account") was established by Transamerica Occidental Life Insurance
Company ("Transamerica Life") as a separate account under the laws of the State
of California on September 28, 1993. The Separate Account is registered with the
Securities and Exchange Commission (the Commission) under the Investment Company
Act of 1940 as a unit investment trust and is designed to provide annuity
benefits pursuant to deferred annuity contracts ("Contract") issued by
Transamerica Life. The Separate Account commenced operations when initial
deposits were received on May 1, 1994.
In accordance with the terms of the Contract, all payments allocated to the
Separate Account by contract owners must be allocated to purchase units of any
or all of the Separate Account's twelve sub-accounts, each of which invests
exclusively in a specific corresponding mutual fund portfolio. The mutual fund
portfolios are: Federated Equity Growth and Income Fund, Federated U.S.
Government Bond Fund, INVESCO VIF-Industrial Income Portfolio, INVESCO VIF-Total
Return Portfolio, INVESCO VIF-High Yield Portfolio, James Aspen Growth
Portfolio, Lexington Emerging Markets Fund, Schwab Money Market Portfolio,
SteinRoe Capital Appreciation Fund, Strong Discovery Fund II, TCI Balanced
Portfolio, and TCI Growth Portfolio Sub-accounts (together "the Funds"). The
Funds are open-end, diversified investment companies registered under the
Investment Company Act of 1940.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Separate Account have been prepared
on the basis of generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein. The
accounting principles followed and the methods of applying those principles are
presented below:
Investment Valuation--Investments in the Funds' shares are carried at fair (net
asset) value. Realized investment gains or losses on investments are determined
on a specific identification basis which approximates average cost. Investment
transactions are accounted for on the date the order to buy or sell is executed
(trade date). Investments have a cost basis for federal income tax purposes of
$63,965,384.
Investment Income--Investment income consists of dividend income (both ordinary
and capital gains) and is recognized on the ex-dividend date. All distributions
received are reinvested in the respective sub-accounts.
Federal Income Taxes--Operations of the Separate Account are part of, and will
be taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. No income taxes are payable by the
Separate Account.
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
NOTE 3--EXPENSES AND CHARGES
Mortality and expense risk charges are deducted by Transamerica Life from each
sub-account of the Separate Account on a daily basis which is equal, on an
annual basis, to 0.85% of the daily net asset value of the sub-account. This
amount can never increase and is paid to Transamerica Life. No administrative
expense charge is currently deducted from each sub-account but Transamerica Life
may deduct such a charge not to exceed a maximum effective annual rate of .15%
of the daily net asset value of the sub-account.
The following charges are deducted from a contract holder's account by
Transamerica Life and not directly from the Separate Account. An annual contract
charge of $25 (or 2% of the account value, if less) is deducted at the end of
each contract year. Additionally, there is a $10 (or 2% of the transfer amount,
if less) fee for each transfer in excess of 10 in any contract year.
NOTE 4--REMUNERATION
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
<TABLE>
<CAPTION>
NOTE 5--ACCUMULATION UNITS
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Year Ended December 31, 1995
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 33,989.997 18,385.047 25,300.404 10,131.169
Units redeemed (7,402.837) (3,990.595) (11,461.323) (3,408.666)
Units transferred 289,308.615 207,629.950 460,403.374 368,738.178
----------- ----------- ----------- ------------------
NET INCREASE 315,895.775 222,024.402 474,242.455 375,460.681
=========== =========== =========== ==================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 16,499.508 37,162.182 38,855.069 44,992,172.273
Units redeemed (91,623.325) (10,004.042) (11,008.681) (2,245,515.422)
Units transferred 339,845.043 461,165.599 182,344.438 (35,151,114.049)
----------- ----------- ----------- -------------------
NET INCREASE 264,721.226 488,323.739 210,190.826 7,595,542.802
=========== =========== =========== ===================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 19,939.843 32,820.394 937.287 29,225.415
Units redeemed (3,348.806) (13,397.004) (4,566.424) (1,154.368)
Units transferred 132,168.990 347,006.024 20,469.805 381,853.801
----------- ----------- -------------- -------------------
NET INCREASE 148,760.027 366,429.414 16,840.668 409,924.848
=========== =========== ============== ===================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
<TABLE>
<CAPTION>
NOTE 5--ACCUMULATION UNITS (continued)
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Year Ended December 31, 1995
Amounts:
<S> <C> <C> <C> <C>
Sales $ 408,171 $ 203,744 $ 312,007 $ 175,846
Redemptions (90,061) (41,338) (143,063) (40,073)
Transfers 3,511,910 2,149,911 5,250,336 4,117,718
---------------- --------------- --------------- -------------------
NET INCREASE $ 3,830,020 $ 2,312,317 $ 5,419,280 $ 4,253,491
================ ================ =============== ===================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 189,780 $ 446,328 $ 374,225 $ 46,958,378
Redemptions (1,040,853) (121,013) (102,596) (2,574,506)
Transfers 3,734,754 5,237,936 1,747,491 (36,450,770)
---------------- --------------- ---------------- -------------------
NET INCREASE $ 2,883,681 $ 5,563,251 $ 2,019,120 $ 7,933,102
================ ================ ================ ===================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 204,205 $ 449,177 $ 11,488 $ 374,646
Redemptions (35,770) (186,085) (53,666) (14,670)
Transfers 4,507,352 205,329 4,591,323
------------------ --------------- ---------------- -------------------
1,396,710
NET INCREASE $ 1,565,145 $ 4,770,444 $ 163,151 $ 4,951,299
================ =============== ================ ===================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
<TABLE>
<CAPTION>
NOTE 5--ACCUMULATION UNITS
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Period Ended December 31, 1994
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 1,090.515 3,063.597 2,802.131 579.992
Units redeemed (309.845) (312.928) - (627.201)
Units transferred 53,134.249 44,020.284 46,843.263 100,094.576
--------------- ---------------- --------------- -----------------
..
NET INCREASE 53,914.919 46,770.953 49,645.394 100,047.367
=============== ================ =============== =================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 1,535.672 3,132.662 3,158.884 15,008,329.434
Units redeemed - (158.427) (281.236) (61,840.317)
Units transferred 59,305.679 76,100.965 120,180.116 (7,763,537.227)
--------------- --------------- ---------------- ------------------
..
NET INCREASE 60,841.351 79,075.200 123,057.764 7,182,951.890
=============== =============== ================ ==================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 3,270.104 2,029.572 1,376.260 1,462.027
Units redeemed - - - -
Units transferred 82,345.617 132,713.975 7,347.984 40,668.696
--------------- ---------------- ---------------- ------------------
NET INCREASE 85,615.721 134,743.547 8,724.244 42,130.723
=============== ================ ================ ==================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
<TABLE>
<CAPTION>
NOTE 5--ACCUMULATION UNITS (continued)
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Period Ended December 31, 1994
Amounts:
<S> <C> <C> <C> <C>
Sales $ 8,979 $ 31,161 $ 28,046 $ 5,927
Redemptions (3,225) (3,161) - (6,309)
Transfers 539,113 444,068 466,071 1,006,394
---------------- ---------------- ---------------- -------------------
NET INCREASE $ 544,867 $ 472,068 $ 494,117 $ 1,006,012
================ ================ ================ ===================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 15,294 $ 31,557 $ 31,939 $ 15,096,940
Redemptions - (1,602) (3,159) (62,556)
Transfers 589,612 759,163 1,339,565 (7,873,584)
---------------- ---------------- ---------------- -------------------
NET INCREASE $ 604,906 $ 789,118 $ 1,368,345 $ 7,160,800
================ ================ ================ ===================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 35,953 $ 7,271 $ 13,266 $ 14,042
Redemptions - 15,849 - -
Transfers 824,428 1,438,964 71,572 394,634
---------------- ---------------- ---------------- -------------------
NET INCREASE $ 860,381 $ 1,462,084 $ 84,838 $ 408,676
================ ================ ================ ===================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5 OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
NOTE 6--INVESTMENT TRANSACTIONS
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C>
Aggregate purchases $ 5,249,466 $ 3,174,091 $ 7,460,216 $ 6,562,104
================= ================= ================= ==================
Aggregate proceeds from sales $ 1,508,385 $ 827,700 $ 1,795,488 $ 2,824,838
================= ================= ================= ==================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
Aggregate purchases $ 6,086,090 $ 7,641,899 $ 3,493,613 $ 64,714,418
================= ================= ================= ==================
Aggregate proceeds from sales $ 3,011,871 $ 2,015,452 $ 1,417,157 $ 55,565,772
================= ================= ================= ==================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Aggregate purchases $ 4,178,854 $ 7,918,365 $ 346,768 $ 8,013,522
================= ================= ================= ==================
Aggregate proceeds from sales $ 2,599,402 $ 3,279,296 $ 154,734 $ 3,214,456
================= ================= ================= ==================
</TABLE>
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1995
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1995
Audited Consolidated Financial Statements
Report of Independent Auditors........................... 1
Consolidated Balance Sheet............................... 2
Consolidated Statement of Income......................... 3
Consolidated Statement of Shareholder's Equity........... 4
Consolidated Statement of Cash Flows..................... 5
Notes to Consolidated Financial Statements............... 6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying consolidated balance sheet of Transamerica
Occidental Life Insurance Company and Subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note A, the Company changed its method of accounting for certain
debt securities effective January 1, 1994.
ERNST & YOUNG LLP
February 14, 1996
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1995 1994
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 25,997,403 $ 21,006,469
Equity securities available for sale 307,881 201,011
Mortgage loans on real estate 565,086 366,727
Investment real estate 38,376 69,246
Policy loans 426,377 412,938
Other long-term investments 62,536 50,079
Short-term investments 211,500 144,163
--------------------- ---------------------
27,609,159 22,250,633
Cash 49,938 42,916
Accrued investment income 394,008 363,121
Accounts receivable 174,266 202,456
Reinsurance recoverable on paid and unpaid losses 1,957,160 1,490,491
Deferred policy acquisitions costs 1,974,211 2,480,474
Deferred tax assets - 164,513
Other assets 257,333 241,733
Separate account assets 2,533,424 1,666,451
--------------------- ---------------------
$ 34,949,499 $ 28,902,788
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 22,057,773 $ 19,281,515
Reserves for future policy benefits 5,245,233 4,846,072
Policy claims and other 542,511 555,289
--------------------- ---------------------
27,845,517 24,682,876
Income tax liabilities 587,801 67,870
Accounts payable and other liabilities 534,866 567,300
Separate account liabilities 2,533,424 1,666,451
--------------------- ---------------------
31,501,608 26,984,497
Shareholder's equity:
Common Stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587 27,587
Additional paid-in capital 333,578 319,279
Retained earnings 2,171,412 1,921,232
Foreign currency translation adjustments (23,618) (28,347)
Net unrealized investment gains (losses) 938,932 (321,460)
--------------------- ---------------------
3,447,891 1,918,291
--------------------- ---------------------
$ 34,949,499 $ 28,902,788
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1995 1994 1993
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,811,888 $ 1,430,019 $ 1,212,680
Net investment income 1,972,759 1,771,575 1,724,301
Other operating revenue - 13,273 -
Net realized investment gains 28,112 20,730 44,887
--------------- --------------- ---------------
TOTAL REVENUES 3,812,759 3,235,597 2,981,868
Benefits:
Benefits paid or provided 2,587,468 2,116,125 1,993,013
Increase in policy reserves and liabilities 236,205 204,159 121,325
--------------- --------------- ---------------
2,823,673 2,320,284 2,114,338
Expenses:
Amortization of deferred policy acquisition costs 182,123 176,033 169,457
Salaries and salary related expenses 145,681 133,591 127,130
Other expenses 200,339 190,500 182,193
--------------- --------------- ---------------
528,143 500,124 478,780
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,351,816 2,820,408 2,593,118
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 460,943 415,189 388,750
Provision for income taxes 149,647 143,491 138,997
--------------- --------------- ---------------
NET INCOME $ 311,296 $ 271,698 $ 249,753
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Foreign Unrealized
Additional Currency Investment
Common Stock Paid-in Retained Translation Gains
Shares Amount Capital Earnings Adjustments (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 2,206,933 $ 27,587 $ 229,900 $ 1,495,781 $ (17,314) $ 74,643
Net income 249,753
Capital contributions from parent 89,379
Dividends declared (56,000)
Change in foreign currency
translation adjustments (3,740)
Change in net unrealized
investment gains (losses) (11,061)
Balance at December 31, 1993 2,206,933 27,587 319,279 1,689,534 (21,054) 63,582
Cumulative effect of change in
accounting for investments 795,187
Net income 271,698
Dividends declared (40,000)
Change in foreign currency
translation adjustments (7,293)
Change in net unrealized
investment gains (losses) (1,180,229)
Balance at December 31, 1994 2,206,933 27,587 319,279 1,921,232 (28,347) (321,460)
Net income 311,296
Capital contributions from parent 14,298
Dividends declared (61,114)
Change in foreign currency
translation adjustments 4,728
Change in net unrealized
investment gains (losses) 1,260,392
Balance at December 31, 1995 2,206,933 $ 27,587 $ 333,577 $ 2,171,414 $ (23,619) $ 938,932
============ ========== ============= ============ ============ =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1995 1994 1993
----------------- ------------------ ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 311,296 $ 271,698 $ 249,753
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (466,669) (290,926) (175,952)
Accounts receivable (58,866) (31,934) (183,598)
Policy liabilities 1,273,723 804,296 921,067
Other assets, accounts payable and other
liabilities, and income taxes (252,362) 133,499 135,658
Policy acquisition costs deferred (381,806) (394,858) (359,146)
Amortization of deferred policy acquisition costs 191,313 182,312 232,309
Net realized gains on investment transactions (37,247) (27,008) (107,769)
Other (22,917) (124,644) (107,831)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 556,465 522,435 604,491
INVESTMENT ACTIVITIES
Purchases of securities (5,667,539) (9,354,375) (11,878,171)
Purchases of other investments (330,503) (143,771) (157,368)
Sales of securities 3,587,367 4,607,572 5,054,460
Sales of other investments 155,084 143,815 177,064
Maturities of securities 341,485 2,251,763 4,433,933
Net change in short-term investments (67,337) 38,597 (57,625)
Other (35,384) (25,354) (25,655)
----------------- ----------------- -----------------
NET CASH USED BY
INVESTING ACTIVITIES (2,016,827) (2,481,753) (2,453,362)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 5,151,428 4,434,726 4,166,316
Withdrawals from policyholder contract deposits (3,624,044) (2,419,915) (2,313,176)
Capital contributions from parent or its affiliate - - 31,300
Dividends paid to parent (60,000) (40,000) (56,000)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,467,384 1,974,811 1,828,440
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH 7,022 15,493 (20,431)
Cash at beginning of year 42,916 27,423 47,854
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 49,938 $ 42,916 $ 27,423
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engages in providing life insurance,
pension and annuity products, reinsurance, structured settlements and
investments which are distributed through a network of independent and
company-affiliated agents and independent brokers. The Company's customers are
primarily in the United States and Canada.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying combined
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In March 1995, the Financial Accounting Standards
Board issued a new standard on accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The Company will adopt the
standard in 1996. The standard required that an impaired long-lived asset be
measured based on the fair value of the asset to be held and used or the fair
value less cost to sell of the asset to be disposed of. When adopted, this
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for impairment of loans, which requires that an impaired
loan be measured based on the present value of expected cash flows discounted at
the loan's effective interest rate or the fair value of the collateral if the
loan is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for certain investments in debt and equity securities
which requires the Company to report at fair value, with unrealized gains and
losses excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs, with any resultant adjustment also excluded
from earnings and reported on an after tax basis in shareholder's equity. As of
January 1, 1994, the impact of adopting the standard was to increase
shareholder's equity by $795.2 million (net of deferred policy acquisition cost
adjustment of $367.2 million and deferred taxes of $428.2 million) with no
effect on net income.
Principles of Consolidation: The financial statements include the accounts of
TOLIC and its subsidiaries, all of which operate primarily in the life insurance
industry. TOLIC is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. All significant intercompany balances and transactions have been
eliminated in consolidation.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995
-8-
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments: Investments are shown on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value
effective as of January 1, 1994. The Company does not carry any debt
securities principally for the purpose of trading. Prepayments are
considered in establishing amortization periods for premiums and
discounts and amortized cost is further adjusted for other-than-temporary
fair value declines. Derivative instruments are also reported as a
component of fixed maturities and are carried at fair value if designated
as hedges of securities available for sale or at amortized cost if
designated as hedges of liabilities. See Note M - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Investment real estate--at cost, less allowances for depreciation and
possible impairment.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investment are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and deferred income taxes as a separate component of
shareholder's equity and, accordingly, have no effect on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if unrealized gains or losses on securities available for sale were realized.
Changes in such adjustments are included in net unrealized investment
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
gains or losses on an after tax basis as a separate component of shareholder's
equity and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Investment risks associated with fair value
changes are borne by the contract holders. Accordingly, investment income and
realized gains and losses attributable to Separate Accounts are not reported in
the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on universal life and investment products
represent premiums received plus accumulated interest, less mortality charges on
universal life products and other administration charges as applicable under the
contract. Interest credited to these policies ranged from 2.8% to 10% in 1995
and 1994, and from 3.0% to 10.5% in 1993.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and annuities with life contingencies.
The reserve for future policy benefits for traditional life insurance products
has been provided on a net-level premium method based upon estimated investment
yields, withdrawals, mortality, and other assumptions which were appropriate at
the time the policies were issued. Such estimates are based upon past experience
with a margin for adverse deviation. Interest assumptions range from 4.3% in
earlier years to 9.5% on later issues. Reserves for future policy benefits are
evaluated as if unrealized gains or losses on securities available for sale were
realized and adjusted for any resultant premium deficiencies. Changes in such
adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1995, 1994, or 1993.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances. In 1993, the Company adopted this
method of accounting for its single premium immediate annuity contracts issued
under structured settlement arrangements based on a determination that such
contracts do not involve significant mortality risk. Accordingly, amounts
received by the Company as payments under these contracts are no longer included
in revenues but are reported as policyholder contract deposits.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns filed by Transamerica Corporation, which
by the terms of a tax sharing agreement generally requires TOLIC to accrue and
settle income tax obligations in amounts that would result from filing separate
tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
for independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained for
independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
Reclassifications: Certain reclassifications of 1994 and 1993 amounts have
been made to conform with the 1995
- -----------------
presentation.
NOTE B--INVESTMENTS
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale are as follows
(in thousands):
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gain Loss Value
---------------- --------------- --------------- -----------
December 31, 1995
- -----------------
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 92,958 $ 6,840 $ 99,798
Obligations of states and political
subdivisions 229,028 7,832 $ 572 236,288
Foreign governments 109,632 9,068 118,700
Corporate securities 11,945,631 1,126,903 30,58 13,041,953
Public utilities 4,338,637 390,237 2,909 4,725,965
Mortgage-backed securities 7,277,976 487,190 15,092 7,750,074
Redeemable preferred stocks 21,372 3,757 504 24,625
------ ----- --- ------
$ 24,015,234 $ 2,031,827 $ 49,658 $ 25,997,403
================ ================ ================ ================
December 31, 1994
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 218,404 $ 535 $ 19,885 $ 199,054
Obligations of states and political
subdivisions 220,127 3,586 8,123 215,590
Foreign governments 210,789 1,551 6,367 205,973
Corporate securities 9,517,763 133,191 396,488 9,254,466
Public utilities 3,948,366 48,455 234,885 3,761,936
Mortgage-backed securities 7,791,957 105,175 530,362 7,366,770
Redeemable preferred stocks 3,140 - 460 2,680
----- - --- -----
$ 21,910,546 $ 292,493 $ 1,196,570 $ 21,006,469
================ ================ ================ ================
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale at December 31,
1995, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1996 $ 590,327 $ 603,732
Due in 1997-2000 3,016,991 3,150,785
Due in 2001-2005 3,714,128 3,962,712
Due after 2005 9,394,440 10,505,474
------------ ---------------
16,715,886 18,222,703
Mortgage-backed securities 7,277,976 7,750,075
Redeemable preferred stock 21,372 24,625
---------------- ----------------
$ 24,015,234 $ 25,997,403
================ ===============
The cost and fair value of equity securities available for sale are as follows
(in thousands):
1995 1994
--------------- -----------
Cost $ 150,968 $ 142,831
26,316 26,m
Gross unrealized gain 163,264 69,693
Gross unrealized loss (6,351) (11,513)
--------------- ---------------
Fair values $ 307,881 $ 201,011
=============== ===============
The components of the carrying value of investment real estate are as follows (in thousands):
1995 1994
Cost $ 48,913 $ 89,992
26,316 26,m
Allowance for depreciation (10,537) (20,746)
--------------- ---------------
$ 38,376 $ 69,246
=============== ===============
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
As of December 31, 1995, the Company did not hold a total investment in any one
issuer, other than the United States Government or a Unites States Government
agency or authority, which exceeded 10% of total shareholder's equity.
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements were $22.0 million at December 31, 1995.
<TABLE>
<CAPTION>
Net investment income by major investment category is summarized as follows (in thousands):
1995 1994 1993
<S> <C> <C> <C>
Fixed maturities $ 1,904,519 $ 1,705,618 $ 1,657,178
Equity securities 3,418 5,587 7,624
Mortgage loans on real estate 40,702 40,030 44,230
Investment real estate 3,209 5,024 4,232
Policy loans 25,641 24,614 23,219
Other long-term investments 2,353 7,173 7,973
Short-term investment 13,286 9,689 5,584
---------------- ---------------- ----------------
1,993,128 1,797,735 1,750,040
Investment expenses (20,369) (26,160) (25,739)
---------------- ---------------- ----------------
$ 1,972,759 $ 1,771,575 $ 1,724,301
================ ================ ================
Significant components of net realized investment gains are as follows (in
thousands):
1995 1994 1993
---------------- ---------------- ----------
Net gains on disposition of investments in:
Fixed maturities $ 52,889 $ 7,181 $ 149,145
Equity securities 5,637 32,374 12,491
Other 2,327 2,546 1,607
---------------- ---------------- ----------------
60,853 42,101 163,243
Provision for impairment (23,551) (15,092) (55,504)
Accelerated amortization of DPAC (9,190) (6,279) (62,852)
---------------- ---------------- ----------------
$ 28,112 $ 20,730 $ 44,887
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1995 1994 1993
Gross gains $ 61,504 $ 46,702 $ 151,232106,649
Gross losses (8,615) (39,521) (2,087)
---------------- ---------------- ----------------
$ 52,889 $ 7,181 $ 149,145
================ ================ ================
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Fixed maturities $ 71,429 $ 92,145
Equity securities - 395
Mortgage loans on real estate 21,516 23,479
Investment real estate 16,207 14,656
Other long-term investments 11,025 11,125
---------------- ---------------
$ 120,177 $ 141,800
================ ===============
</TABLE>
<TABLE>
<CAPTION>
The components of changes in net unrealized investment gains (losses) in the
accompanying consolidated statement of shareholder's equity are as follows (in
thousands):
1995 1994 1993
---------------- ---------------- ----------
Changes in unrealized gains (losses):
<S> <C> <C> <C>
Fixed maturities $ 2,886,246 $ (2,494,478) $ 10
Equity securities 98,733 (39,756) (15,287)
---------------- ---------------- ----------------
2,984,979 (2,534,234) (15,277)
Change in related DPAC adjustments (706,915) 718,498 -
Change in policy liability adjustments (339,000) - -
Related deferred taxes (678,672) 635,507 4,216
---------------- ---------------- ----------------
$ 1,260,392 $ (1,180,229) $ (11,061)
================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
Proceeds from disposition of investment in fixed maturities available for sale
were $3,802.6 million in 1995, $6,737.7 million in 1994 and $9,187.1 million in
1993.
<PAGE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1995 1994 1993
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 2,480,474 $ 1,929,332 $ 1,811,992
Cumulative effect of change in
accounting for investments - (367,154) -
Amounts deferred:
Commissions 298,698 305,858 288,195
Other 83,108 89,000 70,951
Amortization attributed to:
Net gain on disposition of investments (9,190) (6,279) (62,852)
Operating income (182,123) (176,033) (169,457)
Fair value adjustment (706,915) 718,498 -
Foreign currency translation adjustment 10,159 (12,748) (9,497)
---------------- ---------------- ----------------
Balance at end of year $ 1,974,211 $ 2,480,474 $ 1,929,332
================ ================ ================
</TABLE>
NOTE D--POLICY LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Liabilities for investment-type products $ 17,948,652 $ 15,862,970
Liabilities for non-traditional life insurance
products 4,109,121 3,418,545
------------ -------------
$ 22,057,773 $ 19,281,515
=============== ================
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $339 million as of December 31, 1995.
<PAGE>
NOTE E--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Current tax liabilities $ 35,689 $ 67,870
Deferred tax liabilities 552,112 -
---------------- ---------------
$ 587,801 $ 67,870
================ ===============
</TABLE>
<TABLE>
<CAPTION>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Deferred policy acquisition costs $ 696,728 $ 650,207
Unrealized investment gains (losses) 505,579 (173,094)
Life insurance policy liabilities (601,875) (586,025)
Provision for impairment of investments (42,062) (49,630)
Other-net (6,258) (5,971)
---------------- ---------------
$ 552,112 $ (164,513)
================ ===============
</TABLE>
TOLIC offsets all deferred tax assets and liabilities and presents them in a
single amount in the consolidated balance sheet.
<TABLE>
<CAPTION>
Components of provisions for income taxes are as follows (in thousands):
1995 1994 1993
---------------- ---------------- -----------
<S> <C> <C> <C>
Current tax expense: $ 115,614 $ 204,087 $ 162,408
Deferred tax expense (benefit) 34,033 (60,596) (26,947)997
Adjustment for enacted change in tax laws - - 3,536
---------------- ---------------- ----------------
$ 149,647 $ 143,491 $ 138,997
================ ================ ================
</TABLE>
<PAGE>
NOTE E--INCOME TAXES (Continued)
<TABLE>
<CAPTION>
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1995 1994 1993
---------------- ---------------- ----------
Income before income taxes:
<S> <C> <C> <C>
Income from U.S. operations $ 425,946 $ 389,778 $ 367,560
Income from foreign operations 34,997 25,411 21,190
--------------- --------------- ---------------
460,943 415,189 388,750
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 161,330 145,316 136,063
Income not subject to tax (685) (910) (535)
Low income housing credits (3,137) (902) -
Adjustment for enacted change in tax laws - - 3,536
Other, net (7,861) (13) (67)
--------------- --------------- ---------------
$ 149,647 $ 143,491 $ 138,997
=============== =============== ===============
</TABLE>
Low income housing credits are recognized over the productive life of acquired
assets. In 1995, the Company recognized a $4.4 million tax benefit related to
the favorable settlement of a prior year tax matter.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1995 was $138 million. At
December 31, 1995, $1,788.9 million was available for payment of dividends
without such tax consequences. No income taxes have been provided on the
policyholders' surplus account since the conditions that would cause such taxes
are remote.
Income taxes of $153.3 million, $195.4 million and $162.2 were paid principally
to the parent in 1995, 1994 and 1993, respectively.
<PAGE>
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1995
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $ 264,153,296
==================== =================== =================== ===================
Premiums and other
considerations $ 1,857,449 $ 1,079,303 $ 1,033,752 $ 1,811,898
==================== =================== =================== ===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 849,800 $ 2,587,468
==================== =================== =================== ===================
1994
Life insurance in force,
at end of year $ 191,884,093 $ 115,037,553 $ 158,882,366 $ 235,728,906
==================== =================== =================== ===================
Premiums and other
considerations $ 1,085,555 $ 689,615 $ 1,034,079 $ 1,430,019
==================== =================== =================== ===================
Benefits paid or
provided $ 2,338,370 $ 867,341 $ 645,096 $ 2,116,125
==================== =================== =================== ===================
1993
Life insurance in force,
at end of year $ 180,902,966 $ 95,719,350 $ 149,728,434 $ 234,912,050
==================== =================== =================== ===================
Premiums and other
considerations $ 1,273,293 $ 953,489 $ 892,876 $ 1,212,680
==================== =================== =================== ===================
Benefits paid or
provided $ 2,142,424 $ 633,782 $ 484,371 $ 1,993,013
==================== =================== =================== ===================
</TABLE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before
<PAGE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
retirement. Annual contributions to the plans generally include a provision for
current service costs plus amortization of prior service costs over periods
ranging from 10 to 30 years. Assets of the plans are invested principally in
publicly traded stocks and bonds.
The Company's total pension costs recognized for all plans were $2.5 million in
1995, $4.9 million in 1994 and $4.1 million in 1993, of which $2.0 million in
1995, $4.7 million in 1994 and $3.3 million in 1993, respectively, related to
the plan sponsored by Transamerica Corporation.
The plans sponsored by the Company are not material to the consolidated
financial position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1995, 1994 and 1993.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include premiums for employee benefits (none in 1995, $5.5 million in 1994, and
$7.3 million in 1993), loans and advances, investments in a money market fund
managed by an affiliated company, rental of space, and other specialized
services. At December 31, 1995, pension funds administered for these related
companies aggregated $933.3 million and the investment in an affiliated money
market fund, included in short-term investments, was $55.2 million.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies in exchange for consideration with a fair value of $49.7
million, comprising mortgage loans of $35.1 million and cash of $14.6 million.
The excess of fair value of the consideration received over the book value of
the real estates transferred, net of related tax payable to the parent, is
included as a capital contribution.
During 1993, the Company transferred equity securities with a cost of $110.7
million and agreed to pay $31.3 million to Transamerica Corporation in exchange
for a note receivable of $200 million. The excess of fair value of the
consideration received over the cost of the assets transferred is included as a
capital contribution.
The note matures in 2013 and bears interest at 7%.
NOTE I--OTHER OPERATING REVENUE
In 1994, the Company disposed of an investment in an affiliate which had been
accounted for under the equity method. Total consideration of $23.3 million was
received from the sale, resulting in income of $13.3 million.
<PAGE>
NOTE J-LEASES
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expense for equipment and properties was $25.3
million in 1995, $17.9 million in 1994, and $15 million in 1993.
The following is a schedule by years of future minimum
rental payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1995 (in
thousands):
Year ending December 31:
1996 $ 20,011
1997 15,298
1998 11,429
1999 8,423
2000 5,897
Thereafter 24,445
$ 85,503
NOTE K--LITIGATION
The Company is a defendant in various legal actions arising from the normal
course of operations. Contingent liabilities arising from litigation are not
considered material in relation to the consolidated financial position and
results of operations of the Company.
NOTE L--REGULATORY MATTERS
<TABLE>
<CAPTION>
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of the Company's state of incorporation. Such
regulations include the risk based capital requirement and the restriction on
the payment of dividends. Generally, dividends during any year may not be paid,
without prior regulatory approval, in excess of the greater of 10% of the
Company's statutory capital and surplus as of the preceding year end or the
insurance Company's statutory net income from operations for the preceding year.
The insurance department of the domiciliary state recognizes these amounts as
determined in conformity with statutory accounting practices prescribed or
permitted by the insurance department, which vary in some respects from
generally accepted accounting principles. The Company's statutory net income and
statutory capital and surplus which are represented by TOLIC's net income and
capital and surplus are summarized as follows (in thousands):
1995 1994 1993
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 131,607 $ 175,850 $ 192,978
Statutory capital and surplus, at
end of year 1,115,691 947,164 801,722
</TABLE>
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
-----------------------------------------
1995 1994
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities $ 25,997,403 $ 25,997,403 $ 21,006,469 $ 21,006,469
Equity securities 307,881 307,881 201,011 201,011
Mortgage loans on real estate 565,086 671,835 366,727 382,164
Policy loans 426,377 408,088 412,938 383,531
Short-term investments 211,500 211,500 144,163 144,163
Cash 49,938 49,938 42,916 42,916
Accrued investment income 394,008 394,008 363,121 363,121
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 8,080,139 7,518,211 7,425,778 6,898,534
Single premium immediate annuities 4,123,954 4,677,652 3,735,691 3,510,764
Guaranteed investment contracts 2,958,850 2,998,047 2,382,195 2,336,682
Other deposit contracts 2,785,709 2,848,301 2,319,306 2,243,992
Off-balance-sheet assets (liabilities):
Exchange derivatives designated as
hedges of liabilities in a:
Receivable position - 23,881 - 4,974
Payable position - (3,086) - (24,625)
</TABLE>
Exchange derivatives, which require no premium payments at initiation, consist
principally of interest rate swap agreements and conditional derivatives, which
require premium payments at initiation, consist principally of swaptions and
interest rate floor and cap agreements.
The Company enters into various interest rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
income. The differential to be paid or received on those interest rate swap
agreements that are designated as hedges of financial liabilities is recorded on
an accrual basis as a component of benefits paid or provided. While the Company
is not exposed to credit risk with respect to the notional amounts of the
interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1995, there were no unfunded
interest rate swap agreements.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. The conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1995
Interest rate swap agreements designated as
hedges of securities available for sale,
where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 235,173 7.99% $ (9,307)
Floating rate interest 140,000 5.65% 137
Floating rate interest based on one
index and receives floating rate
interest based on another index 65,000 242
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 741
Floating rate interest 934,678 6.17% 17,169
Floating rate interest based on one
index and receives floating rate
interest based on another index 152,000 (108)
560,500 6.46% 35,820
250,000 5.93% 792
1,367,140 5.52% 55,540
December 31, 1994
Interest rate swap agreements designated as
hedges of securities available for sale,
where TLC pays:
Fixed rate interest 178,777 7.20% (1,305)
Floating rate interest 96,000 4.96% (2,975)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
Pays floating rate interest: 601,545 5.88% (19,651)
Interest rate floor agreements 560,500 6.46% 10,948
Interest rate cap agreements 100,000 5.00% 1,333
Swaptions and other 200,000 7.00% 5,313
</TABLE>
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1995, the Company had no significant concentration of credit risk.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statement and Exhibit
(a) Financial Statements
All required financial statements are included in Parts A or B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Transamerica
Occidental Life Insurance
Company authorizing establishment of the Variable Account. (6)
(2) Not Applicable.
(3) Principal Underwriting Agreement between Transamerica
Occidental Life
Insurance Company and Charles Schwab & Co., Inc. (12)
(4) Group Contract Form, Certificate Form, Individual Contract
Form, and
Endorsements.(7)
(a) Group Contract Form and Endorsements.
(i) Form of Flexible Purchase Payment Deferred
Group Annuity
Contract (Form No. GNP-215-193).
(ii) Form of Dollar Cost Averaging Option
Endorsement to Contract
(Form No. GPM-020-193).
(iii) Form of Automatic Payout Option Endowment
to Contract (Form
No. GPM-021-193).
(iv) Form of Systematic Withdrawal Option
Endorsement to Contract
(Form No. GPM-022-193).
(v)
Form of Fixed Account Rider to Group Contract.(10)
(b) Certificate of Participation Form ant Endorsements.
(i) Form of Certificate of Participation (
Form No. GNC-020-193).
(ii) Form of IRA Endorsement to Certificate
(Form No. GCE-020-193).
(iii) Form of Benefit Distribution Endorsement
to Certificate (Form No.
GCE-021-193).
(iv) Form of Dollar Cost Averaging Option
Endorsement to Certificate
(Form No. GCE-022-193).
(v) Form of Automatic Payout Option Endorsement
to Certificate (Form
No. GCE-023-193).
(vi) Form of Systematic Withdrawal Option
Endorsement to Certificate
(Form No. GCE-024-193).
(c) Individual Contract Form and Endorsements.
(i) Form of Flexible Purchase Payment
Deferred Individual Annuity
Contact (Form No. 1-504 11-194).
(ii) Form of IRA Endorsement to Individual
Contract (Form No. 1-007
- 67 -
<PAGE>
100 194).
(iii) Form of Benefit Distribution Endorsement
to Individual Contract
(Form No. 1-007 101-194).
(iv) Form of Dollar Cost Averaging Option
Endorsement to Individual
Contract (Form No. 1-007 102-194).
(v) Form of Automatic Payout Endorsement to
Individual Contract
(Form No. 1-007 103-194).
(vi) Form of Systemative Withdrawal Option
Endorsement to Individual Contract (Form No. 1-007 104-194).
(vii)
Form of Fixed Account Rider to Individual Contract.(10)
(5) (a) Form of Acceptance of Group Annuity Contract
(Form No. GNA-212-193).(7)
(b) Form of Variable Annuity Application for Certificate
and Individual Contract
(Form No. GNA-213-913).(7)
(6) (a) Restated Articles of Incorporation of Transamerica
Occidental Life Insurance
Company. (1)
(b) Restated By-Laws of Transamerica Occidental Life
Insurance Company. (1)
(7) Not applicable.
(8) Participation Agreements between Transamerica Occidental Life
Insurance Company,
the Funds, the Fund Advisers, and Charles Schwab & Co., Inc
(9)
(9) Opinion and Consent of Counsel. (12)
(10) (a) Consent of Counsel. (12)
(b) Consent of Independent Auditors. (12)
(11) No financial statements are omitted from item 23.
(12) Not applicable.
(13) Performance Data Calculations. (11)
(14) Not applicable.
(15) Powers of Attorney.
Richard N. Latzer (3)
Kent L. Colwell (3) Charles E. LeDoyen (3)
Thomas J. Cusack (8) Karen MacDonald (12)
John A. Fibiger (8) Gary U. Rolle' (3)
Richard H. Finn (5) James B. Roszak (3)
David E. Gooding (3) Williams E. Simms (4)
Edgar H. Grubb (3) Nooruddin S. Veerjee (2)
Frank C. Herringer (3) Robert A. Watson (12)
(1) Incorporated by reference to the like-numbered exhibit to the initial
filing of Registration Statement of Transamerica Occidental Life Insurance
Company's Separate Account VA-2NL on Form N4, File No. 33-52300 (September 23,
1992).
(2) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 1 to the Registration
Statement of Transamerica Occidental Life Insurance Company's Separate Account
VA-2L on Form N-4, File No.
33-49998 (April 30, 1993).
(3) Incorporated by reference to Exhibit 7(c) of Post-Effective Amendment
No. I to the Registration Statement of
Transamerica Occidental Life Insurance Company's Separate Account VL on Form
S-6, File No. 33-28107 (April 30,
1990).
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<PAGE>
(4) Incorporated by reference to Exhibit 7(t) of Post-Effective
Amendment No. 2 to the Registration Statement of
Transamerica Occidental Life Insurance Company's Separate Account VL on Form
S-6, File No. 33-28107 (April 30,
1991).
(5) Incorporated by reference to the like-numbered exhibit to the initial
filing of the Registration Statement of Transamerica Occidental Life Insurance
Company's Separate Account VA-2L on Form N 4, File No. 33-49998 (July 24, 1992).
(6) Incorporated by reference to the like-numbered exhibit to the initial
filing of the Registration Statement of Transamerica Occidental Life Insurance
Company's Separate Account VA-S on Form N-4, File No. 33-71746 (November 17,
1993).
(7) Incorporated by reference to the like-numbered exhibit to
Pre Effective Amendment No. 1 to the Registration
Statement of Transamerica Occidental Life Insurance Company's Separate Account
VA-5 on Form N-4, File No.
33-71746 (February 2, 1994).
(8) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 4 to the Registration
Statement of Transamerica Occidental Life Insurance Company's Separate Account
VA-2L on Form N-4, File No. 33
19998 (April 29, 1994).
(9) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 1 to this
Form N-4 Registration Statement, File No. 33-71746 (May 2, 1994).
(10) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 2
to this Form N-4 Registration Statement, File No. 33-71746 (March 1, 1995).
(11) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 3 to
this Form N-4 Registration Statement File No. 33-71746 (April 28, 1995).
(12) Filed herewith.
Item 25. List of Directors of Transamerica Occidental Life Insurance Company
Frank C. Herringer
Kent L. Colwell Richard N. Latzer
Thomas J. Cusack Charles E. LeDoyen
James W. Dederer Karen MacDonald
John A. Fibiger Gary U. Rolle'
Richard H. Finn James B. Roszak
David E. Gooding William E. Simms
Edgar H. Grubb Nooruddin S. Veerjee
Robert A. Watson
List of Officers for Transamerica Occidental Life Insurance Company
Thomas J. Cusack President and Chief Executive Officer
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<PAGE>
John A. Fibiger, FSA
Chairman
James B. Roszak President, Life Insurance Division and Chief
Marketing Officer
William E. Simms President - Reinsurance Division
James W. Dederer, CLU Executive Vice President, General
Counsel and Corporate Secretary
David E. Gooding Executive Vice President and Chief
Information Officer
Charles E. LeDoyen
President-Structured Settlements Division
Bruce Clark Senior Vice President and Chief Actuary
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
Louise K. Neal Senior Vice President
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Senior Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
Nooruddin S. Veerjee, FSA President - Group Pension Division
Darrel K.S. Yuen
President-Asian Operations
Richard N. Latzer Chief Investment Officer
Gary U. Rolle', CFA Chief Investment Officer
Glen E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Kent L. Colwell Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
Sharon K. Kilmer Investment Officer
Lyman Lokken Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
John J. Strain Investment Officer
Jeffrey S. Van Harte Investment Officer
Lennart H. Walin Investment Officer
Paul Wintermute Investment Officer
William D. Adams Vice President
Sandra Bailey-Whichard Vice President
Nicki Bair Senior Vice President
Dennis Barry Vice President
Laurie Bayless Vice President
Marsha Blackman Vice President
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Vice President and Chief Actuary
- 70 -
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<PAGE>
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
Peter DeWolf Vice President
Mary J. Dinkel, CLU Vice President
Randy Dobo Vice President and Actuary
Thomas P. Dolan, FLMI Vice President
John V. Dohmen Vice President
Gail DuBois Vice President and Associate Actuary
Ken Ellis Vice President
George Garcia Vice President and Chief Medicare Officer
David M. Goldstein Vice President and Associate General Counsel
John D. Haack Vice President
Paul Hankwitz, MD Vice President and Chief Medical Director
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko Vice President
William M. Hurst Vice President and Associate General Counsel
James M. Jackson Vice President and Deputy General Counsel
Allan H. Johnson, FSA Vice President and Actuary
James D. Lamb, FSA Vice President and Chief Actuary
Ronald G. Larson, FLMI Regional Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Thomas Liu Vice President
Katherine Lomeli Vice President and Assistant Secretary
Philip E. McHale, FLMI Vice President
Vic Modugno Vice President and Associate Actuary
Mischelle Mullin Vice President
Wayne Nakano, CPA Vice President and Controller
Paul Norris Vice President and Actuary
John W. Paige, FSA Vice President and Associate Actuary
Stephen W. Pinkham Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Joel D. Seigle Vice President
Sandra Smith Vice President
James O. Strand Vice President
Deborah Tatro Vice President
Lawrence Taylor Vice President
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
William R. Wellnitz, FSA Senior Vice President and Actuary
Anthony Wilkey Vice President
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<PAGE>
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Flora Bahaudin Second Vice President
David Barcellos Vice President
Michael C. Barnhart Second Vice President
Dan Bass , ASA Second Vice President
Frank Beardsley Vice President
Esther Blount Second Vice President
Benjamin Bock Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Art Cohen Second Vice President
Gloria Durosko Second Vice President
Reid A. Evers Vice President and Associate General Counsel
David Fairhall Second Vice President and Associate Actuary
Selma Fox Second Vice President
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
Sharon Haley Second Vice President
Zahid Hussain Second Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Ronald G. Keller Second Vice President
Ken Kiefer Second Vice President
Dean LeCesne Second Vice President
Marilyn McCullough Vice President
Carl Marcero Second Vice President
Lisa Moriyama Second Vice President
Joseph K. Nelson Second Vice President
John Oliver Second Vice President
Daragh O'Sullivan Second Vice President
Stephanie Quincey Second Vice President
James R. Robinson Second Vice President
John J. Romer Vice President
Thomas M. Ronce Second Vice President and Assistant General Counsel
Hugh Shellenberger Second Vice President
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Second Vice President
David Stone Second Vice President
John Tillotson Second Vice President
Janet Unruh Second Vice President and Assistant General Counsel
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<PAGE>
Colleen Vandermark Vice President
Susan Viator Second Vice President
Richard T. Wang Second Vice President
James B. Watson Second Vice President and Assistant General Counsel
Joanne E. Whitaker Second Vice President
Sheila Wickens, MD Second Vice President and Medical Director
William Wojciechowski Second Vice President
Michael B. Wolfe Vice President
Wilbur L. Fulmer Tax Officer
James Wolfenden Statement Officer
Item 26. Person Controlled by or Under Common Control With the Depositor or
Registrant.
The Depositor, Transamerica Occidental Life Insurance Company
(Transamerica), is wholly owned by Transamerica Insurance Corporation of
California. The Registrant is a segregated asset account of Transamerica.
The following chart indicates the persons controlled by or under common
control with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
*Coast Service Company - California
*Inter-America Corporation - California
*LMS Co. - California
*Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. (25% ownership) - Delaware
River Thames Insurance Company Ltd. (51% ownership) - United Kingdom
*RTI Holdings, Inc. - Delaware
*TCS Inc. - Delaware
*Trans International Entities Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
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<PAGE>
Criterion Investment Management Company - Texas
*Transamerica Corporation (Oregon) - Oregon
ss.Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
Transamerica Financial Services Finance Company - Delaware (TFG owns
100% of common stock; TFC owns 100% of preferred stock)
Transamerica HomeFirst, Inc. - California
Transamerica Finance Corporation - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Corporation, California -
California
Transamerica Insurance Finance Corporation, Canada -
Canada
Transamerica Insurance Finance Company (U.K.) - Maryland
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
Transamerica Insurance Administrators, Inc. - Delaware
First Credit Corporation - Delaware
*Pacific Agency, Inc. - Indiana
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation - Washington
Transamerica Financial Consumer Discount Company - Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services - Wyoming
Transamerica Financial Services Company - Ohio
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - Arizona
Transamerica Financial Services, Inc. - Hawaii
Transamerica Financial Services, Inc. - Kansas
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services (Inc.) - Oklahoma
Transamerica Financial Services of Dover, Inc. - Delaware
TELCO Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
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<PAGE>
Transamerica Joint Ventures, Inc. - Delaware
BWAC Seventeen, Inc. - Delaware
*Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada -
Canada
*TCF Commercial Leasing Corporation, Canada - Ontario
Transamerica Commercial Finance France S.A. - France
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited -
United Kingdom (51%)
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmattschappij B.V. - Netherlands
*Transamerica Finanzierungs GmbH - Germany
(BWAC Twenty-One, Inc./Transamerica GmbH Inc.)
Transamerica Finanzierungs GmbH - Germany
TA Leasing Holding Co., Inc. - Delaware
Transamerica Leasing Inc. - Delaware
Transamerica Leasing Holdings, Inc. - Delaware
Greybox Services Ltd. - United Kingdom
Greybox L.L.C. - Delaware
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing Srl. - Italy
Transamerica Container Acquisition Corporation - Delaware
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil S/C Ltda. - Brazil
Transamerica Leasing GmbH - Germany
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing Limited - United Kingdom
ICS Terminals (U.K.) Limited - United Kingdom
Transamerica Leasing Proprietary Limited - South Africa
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing (Belgium) N.V. -
Belgium
Transamerica Trailer Leasing (Netherlands) B.V. - Netherlands
Transamerica Trailer Leasing A/S - Denmark
Transamerica Trailer Leasing GmbH - Germany
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<PAGE>
Transamerica Trailer Leasing S.A. - France
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Spain, S.A. - Spain
Transamerica Transport Inc. - New Jersey
*Transamerica Homes, Inc. - Delaware
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
*Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas, Inc. - Texas
TBK Insurance Agency of Ohio - Ohio
Transamerica Financial Resources Insurance Agency of Alabama, Inc. -
Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts,
Inc. - Massachusetts
Transamerica Securities Sales Corporation - Maryland
Transamerica International Insurance Services, Inc. - Delaware
Bulkrich Trading Limited (50%) - Hong Kong
Home Loans & Finance Limited - United Kingdom
Transamerica Occidental Life Insurance Company - California
Bulkrich Trading Limited (50%) - Hong Kong
First Transamerica Life Insurance Company - New York
*NEF Investment Company - Delaware
Transamerica Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Missouri
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
TC Cable, Inc. (75% ownership)
*Transamerica International Limited - Canada
Transamerica Investment Services, Inc. - Delaware
Transameric Investors, Inc. - Maryland
*Transamerica Land Capital, Inc. - California
*Bankers Mortgage Company of California - California
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<PAGE>
ss.Transamerica LP Holdings Corp. - Delaware
oTransamerica Real Estate Tax Service
oTransamerica Flood Hazard Certification - New Jersey
Transamerica Realty Services, Inc. - Delaware
*The Gilwell Company - California
Pyramid Investment Corporation - Delaware
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Transamerica Properties, Inc. - Delaware
Transamerica Real Estate Management Co. - California
Transamerica Retirement Management Corporation - Delaware
Ventana Inn, Inc. - California
*Transamerica Systems Corporation - Delaware
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
oA Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contract/Certificate Owners
As of April 1, 1996, there were 1472Owners of Non- Qualified Individual
Contracts and34 Owners of Qualified Individual Contracts.
Item 28. Indemnification
Transamerica's Bylaws provide in Article V as follows:
Section 1. Right to Indemnification.
Each person who was or is a party or is threatened to be made a party to or is
involved, even as a witness, in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation that
was predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent Hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or- amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expense, liability, and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes and penalties, amounts
paid or to be pad in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter Expenses");
provided however. that except as to actions to enforce indemnification rights
pursuant to
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<PAGE>
Section 3 of this Article, the corporation shall indemnify any Agent seeking
indemnification in connection with a Proceeding (or part thereof) initiated by
such person only if the Proceeding (or part thereof) we authorized by the Board
of Directors of the corporation. The right to indemnification conferred in this
Article shall be a contract right. [It is the Corporation's intent that the
bylaws provide indemnification in excess of that expressly permitted by Section
317 of the California General Corporation Law, as authorized by the
Corporation's Articles of Incorporation.]
Section 2. Authority to Advance Expenses.
Expenses incurred by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be pad by the corporation in advance of the final
disposition of such Proceeding, provided however. that if required by the
California General Corporation Law, as amended, such Expanses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article or otherwise. Expenses incurred by other Agents of the corporation
(or by the directors or officers not acting in their capacity as such, including
service with respect to Employee benefit plans) may be advanced upon the receipt
of a similar undertaking, if required by law, and upon such other terms and
conditions as the Board of Directors deems appropriate. Any obligation to
reimburse the corporation for Expense advances shall be unsecured and no
interest shall be charged thereon.
Section 3. Right of Claimant to Bring Suit.
If a claim under Section I or 2 of this Article is not paid in full by the
corporation within 30 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to h paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. Lee -burden of proving such a defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the-claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of.conduct.
Section 4. Provisions Nonexclusive.
The rights conferred on any person by this Article shill not be exclusive of any
other rights that such person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
The corporation may purchase and maintain insurance to protect itself and any
Agent against any Expense asserted against or incurred by such person, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article [provided that,
in cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the California
General Corporation Law, as amended].
Section 6. Survival of Rights.
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<PAGE>
The rights provided by this Article shall continue as to a person who has ceased
to be an Agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Section 7. Settlement of Claims.
The corporation shall not be liable to indemnify any Agent under this Article
(a) for any amounts paid in settlement of any action or claim effected without
the corporation's written consent, which consent shall not be unreasonably
withheld; or (b) for any judicial award, if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
Section 8. Effect of Amendment
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
Section 9. Subrogation.
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the Agent, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring suit to enforce such rights.
Section 10. No Duplication of Payments.
The corporation shall not he liable under this Article to make any payment in
connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling person of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Occidental Life Insurance
Company are covered under a Directors and Officers liability program which
includes direct coverage to directors and officers (Coverage A) and corporate
reimbursement (Coverage B) to reimburse the Company for indemnification of its
directors and officers. Such directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers. In general, the term "loss" means any amount which the
insureds are legally obligated to pay for a claim for Wrongful Acts. In general,
the term "Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $65,000,000 for Coverage A and
$55,000,000 for Coverage B for the period 11/25/93 to 11/25/94. Coverage B is
subject to a self insured retention of $5,000,000. The primary policy under the
program is with Corporate Officers and Directors Assurance Holding Limited
(CODA).
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Item 29. Principal Underwriter
The business, profession, vocation or employment of a substantial
nature in which each director and/or executive officer of Schwab and/or the
Investment Manager is or has been engaged during the past two fiscal years for
his or her own account in the capacity of director, officer, employee, partner
or trustee is indicated in the table below. The principal business address for
each of the Schwab directors and/or officers listed below is 101 Montgomery
Street, San Francisco, California 94104.
<TABLE>
<CAPTION>
NAME OF DIRECTOR
AND/OR OFFICER NAME OF COMPANY CAPACITY
<S> <C> <C> <C> <C> <C> <C>
Charles R. Schwab Charles Schwab & Co., Inc. Chairman and Director
The Charles Schwab Corporation Chairman, Chief Executive Officer
and Director
Charles Schwab Investment Chairman and Director
Management, Inc.
The Charles Schwab Trust Chairman and Director
Company
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer
and Director
The Charles Schwab Corporation President, Chief Operating Officer
and Director
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<PAGE>
Charles Schwab Investment Director
Management, Inc.
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
and Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January 1996; Senior Executive
Vice President and Chief Operating
Officer until January 1995
The Charles Schwab Corporation Executive Vice President until
January 1996; Senior Executive
Vice President until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President - Schwab
Institutional
The Charles Schwab Corporation Executive Vice President - Schwab
Institutional
The Charles Schwab Trust Company Director and Executive Vice
President
A. John Gambs Charles Schwab & Co., Inc. Executive Vice President, Chief
Financial Officer and Director
The Charles Schwab Corporation Executive Vice President and Chief
Financial Officer
Charles Schwab Investment Chief Financial Officer and
Management, Inc. Director
The Charles Schwab Trust Chief Financial Officer
Company
Mayer & Schweitzer, Inc. Director
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
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<PAGE>
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President -
Business Strategy
Charles Schwab & Co., Inc. Executive Vice President -
Business Strategy
Timothy F. McCarthy Charles Schwab Investment Chief Executive Officer
Management, Inc.
Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds
The Charles Schwab Corporation Executive Vice President - Mutual
Funds
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
October 1995
Fidelity Investment Advisor Group President until 1994
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President -
Electronic Brokerage
The Charles Schwab Corporation Executive Vice President -
Electronic Brokerage
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President - Retail
Brokerage
The Charles Schwab Corporation Executive Vice President - Retail
Brokerage
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - Capital
Markets and Trading until February
1996
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
- 82 -
C-82
<PAGE>
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President - Human
Resources and Corporate Support
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
Commercial Credit Corporation Managing Director until February
1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice
President
The Charles Schwab Corporation Treasurer and Senior Vice
President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp Charles Schwab & Co., Inc. Senior Vice President -
SchwabFunds
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer
Stephen B. Ward Charles Schwab Investment Senior Vice President and Chief
Management, Inc. Investment Officer
Frances Cole Charles Schwab Investment Vice President, Chief Counsel,
Management, Inc. Chief Compliance Officer and
Assistant Corporate Secretary
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Corporate Secretary
Management, Inc.
The Charles Schwab Trust Assistant Corporate Secretary
Company
- 83 -
C-83
<PAGE>
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Assistant Corporate Secretary
Management, Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary until
Company February 1996
David H. Lui Charles Schwab Investment Vice President and Senior Counsel
Management, Inc.
Christina M. Perrino Charles Schwab Investment Vice President and Senior Counsel
Management, Inc.
</TABLE>
- 84 -
<PAGE>
- 85 -
<PAGE>
- 86 -
<PAGE>
The following table lists the amounts of commissions paid to the co-underwriter
during the last fiscal year.
<TABLE>
<CAPTION>
Name of
Principal Net Underwriting Compensation on Brokerage
Underwriter Discounts & Commission Redemption Commissions Compensation
<S> <C> <C> <C> <C>
Schwab -0- -0- -0- -0-
</TABLE>
Item 30. Location and Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by Transamerica or the Service Office
at their administrative offices.
Item 31. Management Services
All management contracts are discussed in Parts A or B.
Items 32. Undertakings
- 87 -
<PAGE>
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a Certificate offered by the
Prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to Transamerica at the address or phone number listed
in the Prospectus.
- 88 -
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, Transamerica Occidental Life Insurance Company certifies that this
Amendment meets the requirements of Securities Act Rule 485(b) for effectiveness
of this Registration Statement and has caused this Registration Statement to be
signed on its behalf by the undersigned in the City of Los Angeles, State of
California on the 26th day of April, 1996.
SEPARATE ACCOUNT VA-5
OF TRANSAMERICA OCCIDENTAL LIFE
INSURANCE COMPANY
(REGISTRANT)
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
(DEPOSITOR)
----------------------------
Aldo Davanzo, Vice President and
Assistant Secretary
As Required by the Securities Act of 1933, this Post-Effective
Amendment No. 4 to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* Director, President April 26, 1996
Thomas J. Cusack and Chief Executive Officer
David R. Carpenter and Chief Executive Officer
______________________* Director and Chairman April 26, 199 6
John A. Fibiger
______________________* Director April 26, 1996
Kent L. Colwell
- 89 -
<PAGE>
______________________* Director April 26, 1996
Richard I. Finn
______________________* Director April 26, 1996
David E. Gooding
______________________* Director April 26, 1996
Edgar H. Grubb
______________________* Director April 26, 1996
Frank C. Herringer
______________________* Director April 26, 1996
Richard N. Latzer
______________________* Director April 26, 1996
Charles E. LeDoyen
______________________* Director April 26, 1996
Karen MacDonald
______________________* Director April 26, 1996
Gary U. Rolle'
______________________* Director April 26, 1996
James B. Roszak
______________________* Director April 26, 1996
William E. Simms
______________________* Director April 26, 1996
Nooruddin S. Veerjee
______________________* Director April 26, 199 6
Robert A. Watson
______________________
*By: James W. Dederer
</TABLE>
On April 26, 1996 as Attorney-in-Fact pursuant to
powers of attorney previously filed and filed herewith, and in his
own capacity as Executive Vice President, General Counsel,
Corporate Secretary and Director
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
No. of Exhibit No.
(3)(A) Principal Underwriting Agreement between
Transamerica Occidental Life Insurance Company
and Charles Schwab and Co., Inc. C-26
(3)(B) Agency Agreement
(9) Opinion and Consent of Counsel C-27
(10) (a) Consent of Counsel C-28
(b) Consent of Independent Auditors C-30
(15) Power of Attorney C-32
- 91 -
<PAGE>
EXHIBIT (3)
PRINCIPAL UNDERWRITING AGREEMENT BETWEEN
TRANSAMERICA OCCIDENTAL LIFE INSURNACE COMPANY
AND
CHARLES SCHWAB AND CO., INC.
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
PRINCIPAL UNDERWRITING AGREEMENT made this ____ day of
__________, 1994, by and between Charles Schwab & Co., Inc. (the "Underwriter")
and Transamerica Occidental Life Insurance Company (the "Insurance Company"), on
its own behalf and on behalf of its Separate Account VA-5 (the "Account"), a
separate account of the Insurance Company, as follows:
WHEREAS, the Account was established under authority of a
resolution of the Insurance Company's Board of Directors on September 28, 1993,
in order to set aside and invest assets attributable to certain flexible
purchase payment variable annuity contracts (the "Contracts," as specified in
Schedule A hereto) issued by the Insurance Company; and
WHEREAS, the Underwriter is registered as a broker-dealer with
the Securities and Exchange Commission (the "SEC") 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 "NASD"); and
WHEREAS, the Insurance Company and the Account desire to have
the Contracts sold and distributed through the Underwriter and the Underwriter
is willing to sell and distribute such Contracts under the terms stated herein.
NOW THEREFORE, the parties hereto agree as follows:
1. The Insurance Company grants to the Underwriter the right to be, and
the Underwriter agrees to serve as, the exclusive distributor and exclusive
principal underwriter of the Contracts during the term of this Agreement in
accordance with the marketing plan and plan of operations mutually agreed to by
the parties and as amended or revised from time to time. The Underwriter agrees
to use its best efforts to solicit applications for the Contracts, and to
undertake, at its own expense to perform all duties and functions which are
necessary and proper for the distribution of the Contracts.
2. All purchase payments for the Contracts shall be remitted promptly
in full together with such application, forms and any other required
documentation to the Insurance Company or its agent. Purchase payments for the
Contracts may be made (a) by checks or money orders drawn to the order of
"Transamerica Occidental Life Insurance Company;" or (b) by authorized debit of
the applicant's account with the Underwriter and wire transfer of proceeds to
the Insurance Company; or (c) by wire transfer to such account as the Insurance
Company may specify; or (d) by such other means as may be agreed to by the
Insurance Company. The Underwriter shall hold purchase payments received by it
on behalf of the Insurance Company in a fiduciary capacity.
<PAGE>
3. The Underwriter agrees to offer the Contracts for sale
in accordance with the registration statement therefor then in
effect.
4. The Insurance Company represents and warrants that the Contracts are
or will be registered under the Securities Act of 1933 (the "1933 Act") and that
the Contracts will be issued in compliance in all material respects with all
applicable federal and state laws. The Insurance Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under
Section 10506 of the California Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the Investment Company Act
of 1940 (the "1940 Act") to serve as a segregated investment account for the
Contracts.
The Insurance Company shall be responsible for the
qualification and/or registration of the Contracts under applicable federal and
state laws and for providing a list to the Underwriter prior to the offering of
all states where the Contracts are qualified for sale and any restrictions or
conditions applicable in such states, and the Insurance Company shall
immediately notify the Underwriter of any changes in such qualifications,
registrations, restrictions or conditions. On behalf of the Account, the
Insurance Company shall furnish the Underwriter with copies of all prospectuses,
statements of additional information, financial statements and other documents
in such quantities which the Underwriter reasonably requests for use in
connection with the distribution of the Contracts. The Insurance Company shall
provide the Underwriter with drafts of all amendments to the registration
statement for the Contracts under the 1933 Act one week prior to filing such
statement with the SEC.
5. The Underwriter represents that it is duly registered as a
broker-dealer under the 1934 Act and is a member in good standing of the NASD
and, to the extent necessary to offer the Contracts and otherwise enter into and
carry out all transactions contemplated by this Agreement, has obtained or will
obtain all approvals, licenses, authorizations, orders or consents, and shall be
duly registered or otherwise qualified under the securities and insurance laws
of any state or other jurisdiction where offers or sales of the Contracts may be
made. The Underwriter shall be bonded as required by all applicable laws and
regulations. The Underwriter shall be responsible for carrying out its sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities laws and regulations and state
insurance laws and regulations.
2
<PAGE>
Without limiting the generality of the foregoing, the Underwriter
agrees that it shall be fully responsible for:
(a) ensuring that no associated person (as defined in Article
I of the NASD's By-Laws) of the Underwriter shall offer or sell the
Contracts on its behalf, or sign an application or enrollment form as
agent, or receive compensation for soliciting purchases of the
Contracts (sometimes referred to as a Schwab Annuity Specialist or
"SAS"), until such person is duly registered as a representative of the
Underwriter, duly licensed and appointed by the Insurance Company, and
appropriately licensed, registered or otherwise qualified to offer and
sell such Contracts under the federal securities laws and any
applicable securities and insurance laws of each state or other
jurisdiction in which such Contracts may be lawfully sold, in which the
Insurance Company is licensed to sell the Contracts and in which such
persons shall offer or sell the Contracts; and
(b) training, supervising and controlling of all such persons
for purposes of complying on a continuous basis with the NASD Rules of
Fair Practice and with federal and state securities law requirements
applicable in connection with the offering and sale of the Contracts.
In this connection, the Underwriter shall:
(1) conduct such training (including the preparation and
utilization of training materials) of SASs as in the opinion
of the Underwriter is necessary to accomplish the purposes of
this Agreement;
(2) establish and implement reasonable written procedures for
supervision of sales practices of SASs, agents,
representatives or brokers selling the Contracts;
(3) take reasonable steps to ensure that its associated
persons shall not make recommendations to an applicant to
purchase a Contract and shall not sell a Contract in the
absence of reasonable grounds to believe that the purchase of
the Contract is suitable for such applicant; and
(4) establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of the SASs and
submit reports to the Insurance Company as may be agreed to
between the parties from time to time.
(c) developing sales materials for the Contracts and filing such
materials as necessary with the NASD, subject to approval of all such materials
by the Insurance Company.
3
<PAGE>
6. (a) The Underwriter shall furnish, or cause to be furnished, to the
Insurance Company, each piece of sales literature or other promotional material
that the Underwriter develops or uses and in which the Insurance Company, the
Account, or the Contracts are named, at least 10 (ten) Business Days prior to
its use. No such material shall be used if the Insurance Company objects to such
use within 5 (five) Business Days after receipt of such material.
(b) The Insurance Company shall furnish, or shall cause to be
furnished, to the Underwriter, each piece of sales literature or other
promotional material in which the Underwriter is named at least 10 (ten)
Business Days prior to its use. No such material shall be used if the
Underwriter objects to such use within 5 (five) Business Days after receipt of
such material.
(c) The Underwriter shall not make any representations on
behalf of the Insurance Company or concerning the Insurance Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Account, or in sales literature of other
promotional material approved by the Insurance Company or its designee, except
with the permission of the Insurance Company.
(d) The phrase "sales literature or other promotional
material" includes, but is not limited to, advertisements (such as material
published, or designed for use in, a newspaper, magazine, or other periodicals,
radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature (i.e., any
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published articles), and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
7. The Insurance Company and the Underwriter in its capacity as
broker-dealer shall cause to be maintained and preserved for the periods
prescribed such accounts, books, and other documents as are required of them by
the Investment Company Act of 1940, the 1934 Act, and any other applicable
securities laws and regulations. The books, accounts and records of the
Insurance Company, the Account, and the Underwriter as to all transactions
hereunder shall be maintained so as to disclose clearly and accurately the
nature and details of the transactions. The Insurance Company, as agent for the
Underwriter, shall be responsible for sending all required confirmations on
customer transactions in compliance with applicable
4
<PAGE>
securities laws and regulations, as modified by any exemption or other relief
obtained by the Insurance Company or Underwriter. The Underwriter shall cause
the Insurance Company to be furnished with such reports as the Insurance Company
may reasonably request for the purpose of meeting its reporting and
recordkeeping requirements under the securities and insurance laws of any
applicable states or jurisdictions.
8. Each party to this agreement shall bear all expenses of fulfilling
its duties and obligations hereunder. With respect to the printing and mailing
of prospectuses, these obligations and the responsible parties include those
listed below:
Printing Costs Mailing Costs
Annuity Product Prospectus
For Marketing Purposes Schwab Schwab
For New Policy Issue Transamerica Transamerica
For Annual Updates Transamerica Transamerica
Sub-Account Prospectuses
For Marketing Purposes Fund Schwab
For New Policy Issue Fund Transamerica
For Annual Updates Fund Schwab
As used above, the "Fund" can mean either the fund, the adviser, or the
fund's distributor.
9. (a) The Insurance Company shall immediately notify the Underwriter
of (i) the issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to the Contract's Registration
Statement or Prospectus, (ii) any request by the SEC for any amendment to the
Contract's Registration Statement or Prospectus, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of interests in the Contracts, and (iv) any other
action or circumstances that may prevent the lawful offer or sale of any of the
Contracts in any state or jurisdiction. The Insurance Company will make every
reasonable effort to prevent the issuance of any stop order, cease and desist or
similar order and if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
(b) The Underwriter shall immediately notify the Insurance
Company of (i) the issuance by any regulatory body of any order having a
material effect with respect to the Underwriter, (ii) the initiation of any
proceeding for any purpose relating to the sale of the Contracts, and (iii) of
any other actions or circumstances that may prevent the lawful offer or sale of
any of the Contracts in any state or jurisdiction. In addition, the Underwriter
shall promptly advise the Insurance
5
<PAGE>
Company if any of their SASs is or becomes subject to any proceedings or is
sanctioned or suspended (i) by the SEC or NASD, (ii) by any Court for securities
law violations, or (iii) by any state regulatory authority. Each party shall
promptly notify the other party of any written customer complaints regarding the
Contracts or the sale thereof and the proposed response thereto, and each party
shall cooperate in the proposed response to and the resolution of customer
complaints.
10. Indemnification:
10(a). Of the Underwriter With Respect to the
Registration Statement and Prospectus for the
Contracts or Sales Literature.
The Insurance Company shall indemnify and hold harmless the Underwriter
against any and all losses, claims, damages or liabilities (or actions in
respect thereof), to which the Underwriter may become subject, including amounts
paid in settlement with the written consent of the Insurance Company, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or the Prospectus,
or Sales Literature for the Contracts or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
will reimburse the Underwriter for reasonable legal or other expenses reasonably
incurred by them in connection with investigating or defending against such
loss, claim, damage, liability or action in respect thereof; provided, however,
that the Insurance Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or Prospectus or Sales Literature
for the Contracts in reliance upon and in conformity with information furnished
in writing by the Underwriter, or any affiliate of the Underwriter, or any Fund
participating in the Account, or any affiliate of such Fund, for use in the
preparation thereof, and provided, however, that the Insurance Company shall not
be liable in any such cases to the extent that any such loss, claim damages,
liability, or action arises out of or is based on any matter relating to the
mutual funds (or portfolios thereof) in which the Account invests ("Funds"). The
indemnities in this paragraph 10(a) shall, upon the same terms and conditions,
extend to and inure to the benefit of each director and officer of the
Underwriter and any person controlling the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act.
6
<PAGE>
10(b). Of The Company With Respect to the Registration
Statement and Prospectus or Sales Literature for
the Contracts.
Except as provided in paragraph 10(c) below, the Underwriter shall
indemnify and hold harmless the Insurance Company against any losses, claims,
damages or liabilities (or actions in respect thereof), to which the Insurance
Company may become subject, including amounts paid in settlement with the
written consent of the Underwriter, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, Prospectus or Sales Literature for the Contracts, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, Prospectus or Sales Literature in reliance upon
and in conformity with information furnished in writing by the Underwriter for
use in the preparation thereof; and will reimburse the Insurance Company for
reasonable legal or other expenses reasonably incurred by the Insurance Company
in connection with investigating or defending against any such loss, claim,
damage, liability or action. The indemnities in this paragraph 10(b) shall, upon
the same terms and conditions, extend to and inure to the benefit of each
director and officer of the Insurance Company and any person controlling the
Insurance Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act.
10(c). Of The Insurance Company With Respect to Other
Matters.
(i) The Underwriter shall indemnify and hold harmless the Insurance
Company from any losses, claims, damages or liabilities (or actions in respect
thereof) to which the Insurance Company may become subject, including amounts
paid in settlement with the written consent of the Underwriter, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or result from gross negligence , illegal or fraudulent acts or omissions by
the Underwriter or its officers, directors, employees, agents, SASs or
principals, including, but not limited to, solicitation of Contracts, and will
reimburse the Insurance Company for reasonable legal or other expenses
reasonably incurred by the Insurance Company in connection with investigating or
defending against any such loss, claim, damage, liability or action, except as
stated below in subparagraph 10(c)(iii).
(ii) The Underwriter shall indemnify and hold harmless the
7
<PAGE>
Insurance Company for any losses, claims, damages or liabilities (or actions in
respect thereof) to which the Insurance Company may become subject, including
amounts paid in settlement with the written consent of the Underwriter, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any unauthorized use of sales materials or
advertisements or any oral or written misrepresentations or any unlawful sales
practices concerning the Contracts by the Underwriter or its officers,
directors, employees, agents, SASs or principals, and will reimburse the
Insurance Company for reasonable legal or other expenses reasonably incurred by
the Insurance Company in connection with investigating or defending against any
such loss, claim, damage, liability or action, except as stated below in
subparagraph 10(c)(iii) except if such loss, claim, damage or liability arises
or results from information provided by the Insurance Company and relied on by
Underwriter.
(iii) Scope of Indemnities. The indemnities in this paragraph 10(c)
shall, upon the same terms and conditions, extend to and inure to the benefit of
each director and officer of the Insurance Company and any person controlling
the Insurance Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act. The indemnities in this paragraph 10(c) shall not
extend to losses, claims, damages or liabilities (or actions in respect thereof)
arising out of death claims or claims related to the mortality risk of the
Contracts.
10(d). Of the Underwriter With Respect to Other Matters.
The Insurance Company shall indemnify and hold harmless the
Underwriter, against any losses, claims, damages or liabilities (or actions in
respect thereof) to which the Underwriter may become subject, including amounts
paid in settlement with the written consent of the Insurance Company, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or result from gross negligence, illegal or fraudulent acts or
omissions by the Insurance Company or its employees, officers, directors, agents
or principals and will reimburse the Underwriter, for reasonable legal or other
expenses reasonably incurred by the Underwriter in connection with investigating
or defending against any such loss, claim, damage, liability or action except
that this indemnification shall not apply to Underwriter's willful misfeasance,
bad faith, gross negligence or reckless disregard of duties. The indemnities in
this paragraph 10(d) shall, upon the same terms and conditions, extend to and
inure to the benefit of each director and officer of the Underwriter, and any
person controlling the Underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act.
8
<PAGE>
10(e). Notice of Actions.
(i) Notice Required. Within a reasonable time after service on an
indemnified party of the summons or other first legal process giving information
of the nature of an action (or after such indemnified party shall have received
notice of such service on any designated agent), the Insurance Company shall, if
a claim in respect thereof is to be made against the Underwriter, notify the
Underwriter in writing of the commencement thereof and the Underwriter shall, if
a claim in respect thereof is to be made against the Insurance Company, notify
the Insurance Company in writing of the commencement thereof; but the omission
so to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than pursuant to this
Section 10. In case any such action shall be brought against any indemnified
party, and an indemnifying party shall have been notified of the commencement
thereof as aforesaid, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel approved
by such indemnified party, which approval shall not be unreasonably withheld.
After notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnified party shall cooperate
fully in such defense and the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(ii) Effect of Notice. Any notice given by the indemnifying party to an
indemnified party of participation in or control of the litigation of any claim
by the indemnifying party will in no event be deemed to be an admission by the
indemnifying party of liability, culpability or responsibility, and the
indemnifying party will remain free to contest liability with respect to the
claim among the parties or otherwise.
11. The Insurance Company will consult with and provide 10 (ten)
business days advance notice to the Underwriter before making any changes to the
Annuity Contracts.
12. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts, and the investment managers enrolled in Schwab's
Financial Advisor Service Program and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come
9
<PAGE>
into the public domain, except as permitted by this Agreement for as otherwise
necessary to service the Contracts and/or respond to appropriate regulatory
authorities. Nothing in this Section 12 shall prevent Schwab from using the list
of contractholders for marketing purposes. In no event shall the names and
addresses of owners or prospective owners be furnished by the Insurance Company
to any other company or person (except as required by law or regulation) or used
to solicit sales of any kind, including but not limited to any other products,
securities or services. Without limiting the foregoing, no party hereto shall
disclose any information that another party reasonably considers to be
proprietary. The intent of this Section 12 is that no party or any affiliate
thereof shall utilize, or permit to be utilized, its knowledge of the other
party which is derived as a result of the relationship created by this Agreement
and any related agreements, except to the extent necessary by the terms of this
Agreement or the related agreements.
13. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable annuity operations of the Insurance Company are
being conducted in a manner consistent with the California Variable Annuity
Regulations then in effect and any other applicable law or regulations.
14. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and Federal laws or under any other contract.
15. The Underwriter shall be responsible for selecting the mutual fund
portfolios in which the Account will invest and for determining that such
portfolios are suitable for the Contracts, but no such portfolios will be added
to or deleted from those available under the Contracts without the consent of
the Insurance Company, which consent shall not be withheld unreasonably.
16. The term "Schwab Investment Advantage" is a trademark of the
Underwriter, and the Insurance Company acknowledges that is has no rights to use
that term (except as may be set forth in a license agreement between the parties
to this Agreement).
10
<PAGE>
17. (a) This Agreement may be terminated by either party
hereto upon 6 (six) months' notice to the other party.
(b) This Agreement may be terminated at any time upon
the mutual written consent of the parties thereto.
(c) This Agreement shall automatically be terminated
in the event of its assignment.
(d) In the event of any material breach (as defined below) of
this Agreement by any party, the aggrieved party may, at its option, terminate
this Agreement by giving notice of termination, effective upon the date
specified in such termination notice. This remedy shall be in addition to any
other remedies available under this Agreement or at law.
18. The Insurance Company shall be deemed to have materially breached
this Agreement and failed to perform hereunder upon the occurrence of any of the
following events:
(a) The Insurance Company shall become insolvent
or otherwise admit in writing its inability to pay its debts when they become
due, seek protection under any law for the protection of insolvents, or have a
receiver, rehabilitator, conservator or similar official appointed for it under
any law pertaining to the insolvency of the Insurance Company; or
(b) The Insurance Company shall breach any
material provision of this Agreement and such breach shall remain uncured for
more than 30 days following the Insurance Company's receipt of the Underwriter's
written notice of such breach.
19. The Underwriter shall be deemed to have materially breached this
Agreement and failed to perform hereunder upon the occurrence of any of the
following events:
(a) The Underwriter shall become insolvent or
otherwise admit in writing its inability to pay its debts when they become due,
become bankrupt, seek protection under any law for the protection of insolvents,
or have a receiver, rehabili- tator, conservator or similar official appointed
for it under any law pertaining to the Underwriter's insolvency; or
(b) The Underwriter shall breach any material
provision of this Agreement and such breach shall remain uncured for more than
30 days following the Underwriter's receipt of written notice by the Insurance
Company of such breach.
20. Upon termination of this Agreement, all authorizations,
rights and obligations shall cease except the obligations to
settle accounts hereunder, including purchase payments
subsequently received for Contracts in effect at the time of
11
<PAGE>
termination or issued pursuant to applications received by the
Insurance Company prior to termination.
21. Nothing in this Agreement shall be deemed to impose any limitation
on the rights of the Insurance Company (a) to immediately terminate the
Insurance Company's appointment of any SAS under the law of any state, with
reasonable cause and with ten (10) business days advance written notice, and (b)
to require the Underwriter to immediately terminate any agreement between the
Underwriter and any such SAS to the extent necessary to preclude any such SAS
from representing the Insurance Company.
22. This Agreement shall be subject to the provisions of the Investment
Company Act of 1940 and the 1934 Act and the rules, regulations, and rulings
thereunder and of the NASD, from time to time in effect, including such
exemptions from the Investment Company Act as the Securities and Exchange
Commission may grant, and the terms hereof shall be interpreted and construed in
accordance therewith. Without limiting the generality of the foregoing, the term
"assigned" shall not include any transaction exempted from Section 15(c)(2) of
the Investment Company Act.
23. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties are entitled to under state
and federal laws. Failure of either party to insist upon strict compliance with
any of the conditions of this Agreement shall not be construed as a waiver of
any of the conditions, but the same shall remain in full force and effect. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.
24. The Underwriter shall submit to all regulatory and administrative
bodies having jurisdiction over the operations of the Account, present or
future, any information, reports or other material which any such body by reason
of this Agreement may request or require pursuant to applicable laws or
regulations.
25. If any provisions of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
26. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of
California.
27. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by
arbitration in the forum jointly selected by the Insurance
12
<PAGE>
Company and the Underwriter (but if applicable law requires some other forum,
then such other forum) in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction
thereof.
28. All notices hereunder are to be made in writing and
shall be given:
if to Transamerica to:
President, Living Benefits Division
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
with a simultaneous copy to:
Regina M. Fink, Esq., Law Department
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
if to Schwab to:
General Counsel
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their respective officials thereunder duly
authorized and seals to be affixed, as of the day and year first above written.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By______________________________________________________
Title____________________________________________________
CHARLES SCHWAB & CO., INC.
By______________________________________________________
Title____________________________________________________
13
<PAGE>
EXHIBIT (3)(B)
AGENCY AGREEMENT
<PAGE>
AGENCY AGREEMENT
AGREEMENT dated as of ______________ 1994, by and between
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY ("Transamerica"),
and Charles Schwab & Co., Inc. ("Schwab").
WITNESSETH:
WHEREAS, Schwab is an insurance agent and desires to
distribute certain contracts issued by Transamerica; and
WHEREAS, Transamerica desires to issue certain variable annuity
contracts through Schwab acting as insurance agent for such products;
NOW, THEREFORE, in consideration of their mutual promises, Transamerica
and Schwab hereby agree as follows:
1. Definitions
Affiliate -- With respect to a person, any other person controlling,
controlled by or under common control with, such person.
Application -- An application for a Contract.
Contracts -- The class or classes of variable annuity contracts set
forth on Schedule 1 to this Agreement, as amended from time to time.
"Class of Contracts" shall mean those Contracts issued by Transamerica
on the same policy form or forms and covered by the same Registration
Statement.
Annuity Service Center -- Schwab Annuity Service Center, P.O Box 7785,
San Francisco, CA 94120-9420, (800) 838-0650 or such other location as
may be designated in writing.
Representative -- When used with reference to Schwab or Transamerica,
an individual who is an associated person, as that term is defined in
the Securities Exchange Act of 1934, thereof.
Territory -- The states or other jurisdictions of the United States set
forth on Schedule 2 to this Agreement, as amended from time to time and
in all cases excluding New York.
2. Distribution Activities
a. Appointment and Authority
(1) Transamerica appoints Schwab, and Schwab accepts
such appointment, as its exclusive insurance agent in the
Territory for sales of the Contracts. It is understood
<PAGE>
that, pursuant to the Principal Underwriting Agreement, Transamerica
has granted to Schwab the right to be the exclusive distributor and the
exclusive principal underwriter of the Contracts in the Territory.
Transamerica hereby authorizes Schwab to solicit Applications and
Purchase Payments directly from customers and prospective customers in
the Territory.
(2) The Contracts shall be solicited and sold by licensed
Representatives who are employees of Schwab. Schwab has the power and
authority to select and recommend Schwab Representatives for
appointment as agents of Transamerica, and only Representatives so
recommended by Schwab shall become agents of Transamerica with
authority under this Agreement to engage in solicitation activities
with respect to the Contracts. Schwab shall be solely responsible for
background investigations of the Schwab Representatives to determine
their qualifications, good character and moral fitness to sell the
Contracts. Transamerica shall appoint in the appropriate states or
jurisdictions such selected and recommended agents, provided that
Transamerica reserves the right, which right shall not be exercised
unreasonably, to refuse to appoint as agent any Schwab Representative
or, once appointed, to terminate the same at any time with or without
cause. In the event Transamerica elects to exercise its right to refuse
to appoint or to terminate the appointment of a recommended agent it
shall not act except upon ten (10) days prior written notice to Schwab.
(3) Schwab and Schwab Representatives shall not have
authority, and shall not grant authority to Schwab Representatives, on
behalf of Transamerica: to make, alter or discharge any Contract or
other contract entered into pursuant to a Contract; or to waive any
Contract forfeiture provisions to extend the time of paying any
Purchase Payment. Schwab shall not expend, nor contract for the
expenditure of, the funds of Transamerica. Schwab shall not possess or
exercise any authority on behalf of Transamerica other than that
expressly conferred on Schwab by this Agreement.
b. Solicitation Activities, Applications and Premiums
Schwab shall use its best efforts to market the Contracts in
accordance with the marketing plan and plan of operations mutually
agreed to by the parties and as amended or revised from time to time.
Solicitation activities shall be subject to applicable securities and
insurance and other laws and regulations, this Agreement and the
policies and procedures of Transamerica.
2
<PAGE>
(1) Transamerica and Schwab shall develop together
Applications and other materials for use by Schwab in
its solicitation activities with respect to the
Contracts. Transamerica shall notify Schwab in
writing of those states or jurisdictions which
require delivery of a Statement of Additional
Information with a Prospectus to a prospective
purchaser.
(2) Schwab shall require that Schwab Representatives
appointed by Transamerica as agents not make
recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to
believe that the purchase of the Contract is suitable
for the applicant. While not limited to the
following, a determination of suitability shall be
based on information supplied to a Schwab
Representative after a reasonable inquiry concerning
the applicant's insurance and investment objectives
and financial situation and needs.
(3) All Purchase Payments paid, under the Schwab
Investment Advantage Variable Annuity Contract by
check or money order that are collected by the Schwab
Annuity Service Center shall be remitted promptly in
full, together with any Applications, forms and any
other required documentation, to Transamerica. Checks
or money orders in payment of Purchase Payments shall
be drawn to the order of "Transamerica Occidental
Life Insurance Company." Purchase Payments may be
transmitted by wire order to the Schwab Annuity
Service Center in accordance with Transamerica's
written procedures. If any Purchase Payment is held
at any time by Schwab, Schwab shall hold such
Purchase Payment in a fiduciary capacity. All such
Purchase Payments, whether by check, money order or
wire, shall be the property of Transamerica.
(4) Schwab acknowledges that Transamerica shall have
the unconditional right to reject, in whole or in
part, any Application.
(5) It is specifically understood and agreed that no
policy will be solicited or negotiated by Schwab with
or concerning any New York resident, or with any
person located in New York, either as insured or
owner, either in New York or anywhere else.
3
<PAGE>
c. Independent Contractor
Schwab shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and
nothing herein contained shall constitute Schwab or Schwab
Representatives or employees as employees of Transamerica in connection
with the distribution of the Contracts.
d. Supervision
Schwab shall train, supervise and be responsible (to the
extent required by applicable insurance law) for the conduct of the
Schwab Representatives in their solicitation of Applications and
Premiums, and shall supervise their compliance with applicable rules
and regulation of any insurance regulatory agencies that have
jurisdiction over variable insurance product activities.
e. Regulations
Schwab shall observe and comply with the applicable state
insurance laws and regulations and Transamerica's procedures and
policies.
3. Compensation
Transamerica shall have no obligation for payment of any
commissions or other compensation for the services of Schwab
Representatives. Any compensation to Schwab's Representatives will be
the sole obligation of Schwab.
4. Expenses
a. Expenses
Except as set forth in this Agreement each party to this
Agreement shall bear all expenses of fulfilling its duties and
obligations hereunder.
b. Appointment Fees
Fees imposed by state insurance regulatory authorities for
appointment or renewal thereof of Schwab and Schwab Representatives
appointed as agents of Transamerica shall be paid by Transamerica.
5. Licensing
a. It is understood that neither Schwab, nor its employees
may engage in services which would require insurance
agent licensing in the state where such activities are
4
<PAGE>
performed unless and until Schwab and the employee are
properly licensed to perform such services in the particular
state or other jurisdiction involved as required by the
applicable laws and regulations of said state or other
jurisdiction. Schwab further agrees to undertake all actions
necessary, including license and examination fees, to effect
licensing of itself and its employees and renewals thereof as
required for the business of this Agreement. Transamerica
agrees to take all actions necessary, including the payment of
all appointment filing fees, to effect the appointment of
Schwab, its employees and renewals thereof as required for the
business of this Agreement. "Properly licensed" includes the
filing of an appointment by Transamerica , Schwab and/or other
person when required by the laws or regulations of the
applicable jurisdiction.
b. It is further understood and agreed that Schwab will
undertake to effect and maintain licensing for itself
and Schwab Representatives as may otherwise be required
by the National Association of Securities Dealers, Inc.
and the Securities and Exchange Commission.
6. Complaints and Investigations Proceedings
Transamerica and Schwab shall notify each other promptly in
writing of any customer complaint or notice of any investigation or
proceeding. Schwab and Transamerica shall cooperate fully in responding
to any customer complaint and in any regulatory or judicial
investigation or proceeding in connection with the offering or sale of
the Contracts distributed under this Agreement.
7. Indemnification
a. By Transamerica
Transamerica shall indemnify and hold harmless Schwab and its
affiliates and each person who controls or is an associated person with
Schwab and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted),
to which Schwab and/or any such person may become subject, under any
statute or regulation, any National Association of Securities Dealers
rule or interpretation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
5
<PAGE>
(1) result of any breach by Transamerica of any
provision of this Agreement; or
(2) proximately result from any activities of
Transamerica's officers, directors, employees or
agents or their failure to take action in connection
with the sale, processing or administration of the
Contracts.
This indemnification shall be in addition to any liability that
Transamerica may otherwise have; provided, however, that no person
shall be entitled to indemnification pursuant to this provision if such
loss, claim, damage or liability is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the person
seeking indemnification.
b. By Schwab
Schwab shall indemnify and hold harmless Transamerica and each
person who controls or is an associated person with Transamerica and
any officer, director, employee or agent of the foregoing, against any
and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which
Transamerica and/or any such person may become subject under any
statute or regulation, any NASD rule or interpretation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon:
(1) the breach by Schwab of any provision of this
Agreement;
(2) any unlawful sales practices by Schwab or a Schwab
Representative under state insurance laws but not
including any violations resulting from a failure to
comply with such laws to the extent that such
compliance is a responsibility of Transamerica's
under such laws, this Agreement or otherwise; or
(3) claims by agents or employees of Schwab or Schwab
Representatives for commissions or other
compensation or remuneration of any type.
This indemnification shall be in addition to any liability that Schwab
may otherwise have; provided, however, that no person shall be entitled
to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or
6
<PAGE>
reckless disregard of duty by the person seeking
indemnification.
c. General
After receipt by a party entitled to indemnification
("indemnified party") under this Section of notice of the commencement
of any action, if a claim in respect thereof is to be made against any
person obligated to provide indemnification under this Section
("indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party shall not relieve the indemnifying party of any
liability under this Section 6, except to the extent that the omission
results in a failure of actual notice to the indemnifying party and
such indemnifying party is damaged solely as a result of the failure to
give such notice. The indemnifying party, upon the request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
from and against any loss or liability by reason of such settlement or
judgment.
The indemnification provisions contained in this Section shall
remain operative and in full force and effect, regardless of (1) any
investigation made by or on behalf of Transamerica or Schwab or by or
on behalf of any controlling person thereof, and (3) any termination of
this Agreement. A successor by law of Schwab or Transamerica, as the
case may be, shall be entitled to the benefits of the indemnification
provisions contained in this Section .
7
<PAGE>
This Section shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall
survive any such termination.
8. Termination
a. This Agreement may be terminated by either party with
or without cause upon six months written notice.
b. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent
of the other party.
c. This Agreement may be terminated by written notice to the
other party upon termination of the Principal Underwriting
Agreement and the Administrative Services Agreement between
Transamerica and Schwab.
d. This Agreement may be terminated, immediately with written
notice, at the option of either party to this Agreement upon
the other party's material breach of any provision of this
Agreement or of any material misrepresentation made in this
Agreement, unless such breach has been cured within 30 days
after receipt of written notice of breach from the
non-breaching party.
e. Upon termination of this Agreement all authorizations, rights
and obligations shall cease except (1) the obligation to
settle accounts hereunder; and (2) the provisions contained in
Sections 4, 5, 6 and 7 hereof.
9. Miscellaneous
a. Confidentiality
Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts, and the investment managers enrolled in Schwab's Financial
Advisor Service Program and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain, except as permitted by this Agreement for as otherwise necessary
to service the Contracts and/or respond to appropriate regulatory authorities.
Nothing in this Section 9 shall prevent Schwab from using the list of
contractholders for marketing purposes. In no event shall the names and
addresses of owners or prospective owners be furnished by the Insurance Company
to any other company or person (except as required by law
8
<PAGE>
or regulation) or used to solicit sales of any kind, including but not limited
to any other products, securities or services. Without limiting the foregoing,
no party hereto shall disclose any information that another party reasonably
considers to be proprietary. The intent of this Section 9 is that no party or
any affiliate thereof shall utilize, or permit to be utilized, its knowledge of
the other party which is derived as a result of the relationship created by this
Agreement and any related agreements, except to the extent necessary by the
terms of this Agreement or the related agreements.
b. Binding Effect
Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action by such party and when so executed
and delivered this Agreement shall be the valid and binding obligation of such
party enforceable in accordance with its terms. This Agreement shall be binding
on and shall inure to the benefit of the respective successors and assigns of
the parties hereto provided that neither party shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other party.
c. Amendment of Schedules
The parties to this Agreement may amend subject to reasonable
prior written notice Schedules 1 and 2 to this Agreement from time to
time to reflect additions of or changes in any class of Contracts,
Separate Accounts, Funds and Fund Series that have been agreed upon by
the parties. Transamerica may amend Schedule 2 from time to time to
reflect additions to or deletions from the list of jurisdictions in
which Transamerica is qualified to offer the Contracts. Schwab may
amend from time to time to reflect changes in its licensing status. The
provisions of this Agreement shall be equally applicable to each such
class of Contracts, Separate Accounts and Funds that may be added to
the Schedules, unless the context otherwise requires. Any other changes
in the terms and provisions of this Agreement shall be made by written
agreement between Transamerica and Schwab.
d. Rights, Remedies, etc. Are Cumulative
The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws. Failure of either party
to insist upon strict compliance with any of the conditions of this
Agreement
9
<PAGE>
shall not be construed as a waiver of any of the conditions, but the
same shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
e. Notices
All notices hereunder are to be made in writing and shall be
given:
if to Transamerica to:
President, Living Benefits Division
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
with a simultaneous copy to:
Regina M. Fink, Esq., Law Department
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
If to Schwab to:
General Counsel
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
f. Arbitration
Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration in a
forum jointly selected by Transamerica and Schwab (but, if applicable
law requires some other forum, then such other forum) in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
10
<PAGE>
g. Interpretation; Jurisdiction
This Agreement constitutes the whole agreement between the
parties hereto with respect to the subject matter hereof, and
supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to such subject matter.
No prior writing by or between the parties with respect to the subject
matter hereof shall be used by either party in connection with the
interpretation of any provision of this Agreement. This Agreement shall
be construed and the provisions hereof interpreted under and in
accordance with the internal laws of the State of California without
giving effect to principles of conflict of laws. However, no decision,
question, dispute or issue arising from or in any way related to the
matters referred to in Section 2(b)(5) will be submitted to or subject
to arbitration, and no arbitrator shall be empowered to consider or
decide any such decision, question, dispute, issue or matter.
h. Severability
This is a severable Agreement. In the event that any provision
of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention
of the parties hereto that such provision shall be enforced to the
extent permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly enforceable as
if the provision at issue had never been a part hereof.
i. Section and Other Headings
The headings contained in this Agreement are included for
convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or effect.
j. Counterparts
This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same
instrument.
11
<PAGE>
IN WITNESS WHEREOF, each party hereto represents that the officer signing this
Agreement on the party's behalf is duly authorized to execute this Agreement;
and the parties hereto have caused this Agreement to be duly executed by such
authorized officers on the date specified below.
TRANSAMERICA OCCIDENTAL LIFE
INSURANCE COMPANY
By:_________________________________
Name:_______________________________
Title:______________________________
CHARLES SCHWAB & CO., INC.
By:_________________________________
Name:_______________________________
Title:______________________________
12
<PAGE>
Schedule 1
Contracts Subject to Agency Agreement
Effective April 14, 1994
Group Product
Variable Annuity Application Form No. GNA-213-194 (See notes below)
Certificate of Participation Form No. GNC-37-193
IRA Endorsement Form No. GCE-020-193
Benefit Distribution Endorsement Form No. GCE-021-193
Dollar Cost Averaging Option Endorsement Form No. GCE-022-193
Automatic Payout Option Endorsment Form No. GCE-023-193
Systematice Withdrawal option Endorsement Form No. GCE-024-193
Individual Product
Flexible Purchase Payment Deferred Variable Annuity Contract
Form No. 1-504 11-194
IRA Endorsement Form No. 1-007 100-194
Benefit Distribution Endorsement Form No. 1-007 101-194
Dollar Cost Averaging Option Endorsement Form No. 1-007 102-194
Automatic Payout Option Endorsement Form No. 1-007 103-194
Systematic Withdrawal optin Endorsment Form No. 1-007 104-194
NOTES:
For Arizona, use GNA-213-194(AZ); for Florida, use GNA-213-194(FL); for
Minnesota, use GNA-213-194(MN); for Ohio, use GNA-213-194(OH). Revised
Application Form No. GNA-214-194 replaces GNA-213-193.
13
<PAGE>
Schedule 2
List of Jurisdictions in Which Transamerica
is Qualified to Offer the Contracts
Effective April 14, 1994
Arkansas
California
Connecticut
Delaware
Georgia
Hawaii
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisisana
Maine
Maryland
Michigan
Minnesota
Missississippi
Nebraska
Nevada
New Hampshire
New Mexico
Ohio
Oklahoma
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
West Virginia
Wisconsin
Wyoming
Other States will be added as approved.
14
<PAGE>
EXHIBIT (9)
OPINION AND CONSENT OF COUNSEL
<PAGE>
April 17, 1996
Transamerica Occidental Life
Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Gentlemen:
With reference to the Post-Effective Amendment No. 4 to the Registration
Statement on Form N-4 filed by Transamerica Occidental Life Insurance
Company and its Separate Account VA-5 with the Securities and Exchange
Commission covering certain variable annuity contracts (File No. 33-
71746), I have examined such documents and such law as I considered
necessary and appropriate, and on the basis of such examinations, it is my
opinion that:
1.) Transamerica Occidental Life Insurance Company is duly
organized and validly existing under the laws of the State of
California.
2.) The variable annuity contracts, when issued as contemplated
by the said Form N-4 Registration Statement, as amended,
will constitute legal, validly issued and binding obligations
of
Transamerica Occidental Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the said Post-
Effective Amendment No. 4 to the Form N-4 Registration Statement and to
the reference to my name under the caption "Legal Matters" in the
Prospectus contained in the said Post-Effective Amendment No. 4. In
giving this consent, I am not admitting that I am in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
James W. Dederer
Executive Vice President,
General Counsel and
Corporate Secretary
<PAGE>
EXHIBIT (10) (a)
CONSENT OF COUNSEL
<PAGE>
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2402
Telephone: 202-383-0100
Fax: 202-637-3593
Frederick R. Bellamy
Direct Line: 202-383-0126
MCI Mail: 649-7433
April 17, 1996
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Re: Separate Account VA-5
File No. 33-71746
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters"
in the Prospectus filed as part of Post-Effective Amendment No. 4 to the
Form
N-4 Registration Statement for Separate Account VA-5. 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
BY: Frederick R. Bellamy
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EXHIBIT (10) (b)
CONSENT OF INDEPENDENT AUDITORS
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CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial
Information" and "Accountants" in the Prospectus and to the use of our
reports
dated April 15, 1996 and February 14, 1996 on Separate Account VA-5 of
Transamerica Occidental Life Insurance Company and Transamerica Occidental Life
Insurance Company, respectively, contained in the Statement of
Additional Information.
Ernst & Young LLP
Los Angeles, California
April 26, 1996
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EXHIBIT (15)
POWER OF ATTORNEY
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POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life
Insurance Company, a California corporation (the "Company"),
hereby constitutes and appoints Aldo Davanzo, James W. Dederer,
Charles E. LeDoyen and David E. Gooding and each of them (with
full power to each of them to act alone), her true and lawful
attorney-in-fact and agent, with full power of substitution to
each, for her and on her behalf and in her name, place and stead,
to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 and
under the Investment Company Act of 1940 with respect to any
variable life insurance or annuity policies: registration
statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all
amendments and supplements thereto, with all exhibits and all
instruments necessary or appropriate in connection therewith,
each of said attorneys-in-fact and agents and her or their
substitutes being empowered to act with or without the others or
other, and to have full power and authority to do or cause to be
done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect
thereto to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
her hand, this _________ day of January, 1996.
_____________________________
Karen MacDonald
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life
Insurance Company, a California corporation (the "Company"),
hereby constitutes and appoints Aldo Davanzo, James W. Dederer,
Charles E. LeDoyen and David E. Gooding and each of them (with
full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution to
each, for his and on his behalf and in his name, place and stead,
to execute and file any of the documents referred to below
relating to registrations under the Securities Act of 1933 and
under the Investment Company Act of 1940 with respect to any
variable life insurance or annuity policies: registration
statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all
amendments and supplements thereto, with all exhibits and all
instruments necessary or appropriate in connection therewith,
each of said attorneys-in-fact and agents and his or their
substitutes being empowered to act with or without the others or
other, and to have full power and authority to do or cause to be
done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect
thereto to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand, this _________ day of January, 1996.
_____________________________
Robert A. Watson
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