As filed with the Securities and Exchange Commission on April 28, 1997,
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. 5 |X|
------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendme t No. 6 |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 Sutherland, Asbill & Brennan, L.L.P.
and 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, 1996 was filed on February 26,
1997. .
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b)
|X| on May 1, 1997 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on ________________ pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii
|_| on ________________ pursuant to
paragraph (a)(ii) of Rule 485
If appropropriate, check the following box:
|_| this Post-Effective Amendment designates
a new effective date for a previously
filed Post-Effective Amendment.
<PAGE>
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
<S> <C>
1. Cover Page............................................... Cover Page
2. Definitions.............................................. Definitions
3. Synopsis................................................. 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
<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
</TABLE>
<PAGE>
DISTINCT ASSETS FROM TRANSAMERICAsm
A VARIABLE ANNUITY
Issued by
Transamerica Occidental Life
Insurance Company
The Distinct Assets from Transamericasm, a Variable Annuity, (formerly called
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 option, or from a choice of Annuity Payment Options.
The Contract is not currently being sold. However, additional Purchase Payments
may be made to existing contracts. There are no sales charges, redemption,
surrender or withdrawal charges.
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 or series thereof) offered by fund families such
as American Century, Federated, INVESCO, Janus, Lexington, Schwab Funds(R),
Stein Roe, and Strong. 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, 1997
<PAGE>
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.
ii
<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
59 1/2 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 also be subject to an interest adjustment which
will reduce the interest earned to 3% per year on the amount withdrawn.
For information about your Contract contact the Service
Center, at 800-258-4260 or P.O. Box
31848 Charlotte, North Carolina 28231-1848.
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, 1997 (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
Transamerica at 800-258-4260 or P.O. Box 31848, Charlotte, North Carolina
28231-1848.
iii
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS............................................................ iv
KEY FEATURES OF THE CONTRACT........................................... 1
CONDENSED FINANCIAL INFORMATION........................................ 8
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE VARIABLE
ACCOUNT........................................................... 10
THE PORTFOLIOS......................................................... 11
THE FIXED ACCOUNT...................................................... 15
THE CONTRACT........................................................... 18
PURCHASE PAYMENTS...................................... 19
ACCOUNT VALUE.......................................................... 21
TRANSFERS.............................................................. 23
CASH WITHDRAWALS....................................................... 25
TELEPHONE TRANSACTIONS................................................. 28
DEATH BENEFIT.......................................................... 29
CHARGES AND DEDUCTIONS................................................. 31
ANNUITY PAYMENTS....................................................... 34
FEDERAL TAX MATTERS.................................................... 38
PERFORMANCE DATA....................................................... 43
DISTRIBUTION OF THE CONTRACTS.......................................... 45
VOTING RIGHTS.......................................................... 45
LEGAL PROCEEDINGS...................................................... 46
LEGAL MATTERS.......................................................... 46
ACCOUNTANTS............................................................ 47
AVAILABLE INFORMATION.................................................. 47
STATEMENT OF ADDITIONAL INFORMATION--TABLE OF CONTENTS................. 48
- ----------------------------------------------------------------------
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.
iv
<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 named on the application and whose life is used to
determine the amount of monthly annuity payments on the Annuity Date. The
Annuitant cannot be changed after the Contract has been issued, except upon the
Annuitant's death prior to the Annuity Date if a Contingent Annuitant has
previously been named. In the case of a Qualified Contract, the Owner must be
the Annuitant.
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 by Transamerica or a certificate
issued by Transamerica which evidences coverage under a group annuity.
Code: The Internal Revenue Code of 1986, as amended and the rules and
regulations issued thereunder.
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.
Net Purchase Payment: A Purchase Payment reduced by any applicable premium tax
charge (including charge for retaliatory premium taxes) (see "Premium Taxes,"
page 33 ).
Owner or You: The person(s) who, while living, control(s) all rights and
benefits under the Contract. Joint Owners must be husband and wife as of the
Annuity Issue Date, in most states. Qualified Contracts cannot have Joint
Owners.
Payee: The person who receives the annuity payments after the Annuity Date. The
Payee will be the Annuitant unless, in the case of a non-qualified contract, you
designate that some other person to be the Payee.
v
<PAGE>
Portfolio: (1) A separate "series" or portfolio of investments within a mutual
fund or (2) a mutual fund available
for investment under the Contract.
Qualified Contract: A Contract used in connection with an individual retirement
annuity ("IRA") which receives special federal income tax treatment under
Section 408 of the Code.
Receipt: Receipt and acceptance by us at our Service Center.
Service Center: The Annuity Service Center, P.O. Box
31848, Charlotte, North Carolina 28231-1848, telephone 800-258-4260.
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 SubAccount of the Variable Account held for the Contract prior
to the Annuity Date.
We, our, us, or Transamerica: Transamerica Occidental Life Insurance Company.
vi
<PAGE>
KEY FEATURES OF THE CONTRACT
Distinct Assets from Transamericasm, a Variable Annuity (formerly called 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 option, 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 individual 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
American Century VP Capital Appreciation
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
Money Market Schwab Money Market Portfolio
The American Century VP Capital Appreciation was called the TCI Growth Portfolio
previous to May 1, 1997. 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, P.O. Box 31848, Charlotte, North Carolina 28231-1848, telephone
800-258-4260. (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
1
<PAGE>
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 15.)
How to Invest. Effective May 1, 1997, new Contracts will not be sold. After May
1, 1997, additional Purchase Payments of at least $1,000 may be made to
Contracts purchased before May 1, 1997. Sales of new Contracts may resume in the
future. (See "Purchase Payments," page 19.)
Charges and Deductions Under the Contract. The Contract is a "no load" variable
annuity and imposes no sales charges, redemption or withdrawal charges.
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 Accumulated
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 31.)
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
2
<PAGE>
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
15.)
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 an
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 15.) Transamerica may
delay payment of any withdrawal from the Fixed Account for up to six months.
(See "Cash Withdrawals," page 25.)
Annuity Forms. Beginning on the first day of the month immediately following the
Annuity Date you select (which generally may not be later than the 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 an 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 person(s) to whom benefits are payable may
elect to receive the Death Benefit proceeds as a lump sum or as Annuity
Payments.
Customer Service. Transamerica's professionals are available toll-free to assist
you. If you have any questions about your Contract, please telephone the Service
Center 800-258-4260 or write to the Service Center P.O. Box 31848, Charlotte,
North Carolina 28231-1848. All inquiries should include the Contract Number,
your name and the Annuitant's name. As a Contract Owner you will receive
confirmations regarding any transactions relating to your Contract, as well as a
quarterly contract statements and the Annual and SemiAnnual Reports of the
Portfolios.
3
<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 31 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.
4
<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> <C>
American Century VP Capital Appreciation (2) 1.00% 0.00% 1.00%
- ---------------------------------------------------------------- ----- ----- -----
Federated American Leaders Fund II............................ 0.53% 0.32% 0.85%
Federated Fund for U.S. Government Securities II.............. 0.00% 0.80% 0.80%
INVESCO VIF-High Yield Portfolio.............................. 0.60% 0.27% 0.87%
INVESCO VIF-Industrial Income Portfolio....................... 0.75% 0.20% 0.95%
INVESCO VIF-Total Return Portfolio............................ 0.75% 0.19% 0.94%
Janus Aspen Growth Portfolio.................................. 0.65% 0.04% 0.69%
Lexington Emerging Markets Fund............................... 0.85% 0.79% 1.64 %
Schwab Money Market Portfolio................................. 0.44% 0.06% 0.50%
SteinRoe Capital Appreciation Fund............................ 0.50% 0. 25% 0. 75%
Strong Discovery Fund II...................................... 1.00% 0.31% 1.31%
</TABLE>
(1) The figures given above are based on expenses that would have been incurred
in the absence of expense offset arrangements, if any, for 1996. If expense
offset arrangements were in place, the actual amount paid by the Portfolio would
be less than that specified above; see the Portfolios' prospectuses for more
information. Additionally, 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: 1.07%% for Federated American Leaders Fund II;
1.81%% for Federated Fund for U.S. Government Securities II; 1.32%% for INVESCO
VIF-High Yield Portfolio; 1.19%% for INVESCO VIF-Industrial Income Portfolio;
1.30%% for INVESCO VIF-Total Return Portfolio; 0.83% for Janus Aspen Growth
Portfolio; 2.23% for Lexington Emerging Markets Fund; and 0.95%% for Schwab
Money Market Portfolio. See the Portfolios' prospectuses for a discussion of fee
waiver and expense reimbursements.
(2) The American Century VP Capital Appreciation was called the TCI Growth
Portfolio previous to May 1, 1997.
5
<PAGE>
EXAMPLES(1)
The following chart reflects the $25 Annual Contract Charge as an
annual charge of 0.042% of assets based on an approximate average Account Value
of $60,000.. The chart assumes 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
33).
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>
American Century VP Capital Appreciation 19.28 59.64 102.54 222.01
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............... 17.90 55.46 95.50 207.49
INVESCO VIF-Industrial Income Portfolio........ 18.71 57.91 99.64 216.03
INVESCO VIF-Total Return Portfolio............. 18.61 57.61 99.12 214.97
Janus Aspen Growth Portfolio................... 16.09 49.93 86.13 188.01
Lexington Emerging Markets Fund................ 25.63 78.80 134.63 286.72
Schwab Money Market Portfolio.................. 14.23 44.25 76.48 167.76
SteinRoe Capital Appreciation Fund............. 16.69 51.78 89.26 194.55
Strong Discovery Fund II....................... 21.32 65.84 112.97 243.28
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT
TO THE GUARANTEES IN THE CONTRACT.
The assumed 5% annual return is only hypothetical. It is not a representation of
past or future returns. Future returns could be greater or less than this
assumed rate.
(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.
(2) The American Century VP Capital Appreciation was called the TCI Growth
Portfolio previous to May 1, 1997.
6
<PAGE>
7
<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 38.)
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 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 38.)
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, 1996.
Financial statements for the Variable Account and Transamerica and reports of
the independent certified public accountants are available in the Statement of
Additional Information.
<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> <C>
American Century VP Balanced (1) $9.798 $9.773 8,724.244
American Century VP Capital Appreciation(2) $9.666 $9.695 42,130.724
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
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Strong Discovery Fund II $10.723 $10.848 134,743.547
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
American Century VP Balanced(1) $9.773 $11.736 25,564.912
American Century VP Capital Appreciation (2) $9.695 $12.603 452,055.571
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 $9.536 333,348.590
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
Accumulation Accumulation No. of Units
Unit Values Unit Values Outstanding
as of as of as of
Sub-Accounts 1/1/96 12/31/96 12/31/96
American Century VP Balanced (1) $11.736 $13.054 16,117.850
American Century VP Capital Appreciation (2) $12.603 $11.942 425,786.350
Federated America Leaders Fund II $13.350 $16.092 918,872.236
Federated Fund for U.S. Government Securities II $10.950 $11.313 543,849.780
INVESCO VIF-High Yield Portfolio $11.870 $13.722 549,414.323
INVESCO VIF-Industrial Income Portfolio $12.891 $15.629 901,758.145
INVESCO VIF-Total Return Portfolio $12.310 $13.693 672,805.354
Janus Aspen Growth Portfolio $12.843 $15.084 1,209,092.299
Lexington Emerging Markets Fund $9.536 $10.161 570,871.216
Schwab Money Market Portfolio $1.064 $1.108 20,961,560.414
SteinRoe Capital Appreciation Fund $11.307 $14.232 700,859.132
Strong Discovery Fund II $14.550 $14.543 601,379.985
</TABLE>
(1)The American Century VP Balanced was called the TCI Balanced Portfolio prior
to May 1, 1997. The American Century VP Balanced Sub-Account, which 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
American Century VP Balanced Sub-Account is no longer available for investment.
(2)The American Century VP Capital Appreciation was called the TCI Growth
Portfolio prior to May 1, 1997.
9
<PAGE>
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 safety or 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 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 14.)
10
<PAGE>
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.
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation: 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.
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.
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, consideration in the selection of portfolio
securities. The Industrial Income Portfolio normally invests at least 65%
of its total assets in dividend-paying common stocks 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
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<PAGE>
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.
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 growth of capital, the Fund
pursues this objective by investing primarily in common stocks,
convertible securities, and other securities having common stock
characteristics selected for prospective capital growth.
Strong Discovery Fund II, Inc.
Strong Discovery Fund II: Seeks capital growth. The Fund invests in
securities that the Fund's investment adviser believes represent
attractive growth opportunities. The Fund normally emphasizes equity
investments, although it has the flexibility to invest in any security the
Fund's investment adviser believes has the potential for capital
appreciation.
The American Century VP Capital Appreciation is advised by American
Century Investment Management, Inc. of Kansas City, Missouri, advisers to the
American Century family of mutual funds. 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.
12
<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 800-258-4260
or by writing to the Service Center, P.O. Box 31848, Charlotte, North Carolina
28231-1848. 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.
Transamerica reserves 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 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-
13
<PAGE>
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.
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 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 Purchase Payments 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
14
<PAGE>
Guarantee Period as of the effective date of the transfer.
Each Guarantee Period will have its own Guaranteed Interest Rate and
Expiration Date. The Guaranteed Interest Rate applicable to a Guarantee Period
will depend on the date the Guarantee Period is established and the duration
chosen by the Owner. A Guarantee Period chosen may not extend beyond the Annuity
Date.
Transamerica reserves the right to 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.
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.
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
15
<PAGE>
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.
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 used 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 Contract 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 and Joint Owners cannot be named. In addition,
minimum distributions from IRAs 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 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 special
tax
16
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treatment, to the Individual Retirement Annuity.
PURCHASE PAYMENTS
Purchase Payments
All Purchase Payments should be paid to the Service Center by a check
payable to Transamerica. A confirmation will be issued to you upon the
acceptance of each Purchase Payment. Acceptance of Purchase Payments by
Transamerica is subject to there being sufficient information in a form
acceptable to us, and we reserve the right to reject any Purchase Payment.
Purchase Payments may be made at any time prior to the Annuity Date, as
long as the Annuitant (or Contingent Annuitant, if applicable) is living.
Additional Purchase Payments must be at least $1,000. In addition, minimum
allocation amounts apply (see "Allocation of Purchase Payments" below). Purchase
Payments made by check are credited to your Contract as of the date of receipt
of the payment at the Service Center.
17
<PAGE>
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 may allocate, in a form and manner acceptable to Transamerica, 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. (A Net Purchase Payment is the
Purchase Payment less any applicable premium taxes, including any retaliatory
premium taxes.) Any allocation percentage for a SubAccount must be at least 10%.
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 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.
ACCOUNT VALUE
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 prior to the Annuity Date.
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
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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 less any premium taxes applicable to those withdrawals.
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.
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. Variable Accumulation Units for Purchase Payments
allocated to Sub-Account(s) 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").
TRANSFERS
In General
Prior to the Annuity Date you may transfer all or part of your Account
Value among and between the SubAccounts 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 SubAccount(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 25.)
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 within the Contract.
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 15.) 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 to require that all transfer requests be
made by the Owner(s) 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 Owner(s); 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
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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.
CASH WITHDRAWALS
Withdrawals
You (the Owner) may withdraw from the Contract all or part of your Account
Value at any time during the life of the Owner or 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.
Partial withdrawals must be at least $1,000. Partial withdrawals from the
Variable Account 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 15.)
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
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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 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. 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 currently 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 38.)
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.
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 IRAs which meet the requirements of the Code, reference should
be made to the Code and the terms of the particular IRA 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. We reserve the right, upon advance written notice to
the Owner, to change the day of the month on which withdrawals are made under
this option. To ensure that your instructions regarding withholding are
followed, requests for systematic withdrawal must be in a manner and form
acceptable to the Service
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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 pro-rata from
all Sub-Accounts with value on the date of each systematic withdrawal.
When using systematic withdrawals, an Owner may not simultaneously
participate in the Automatic Payout Option.
Systematic withdrawals may be taxable, subject to income tax withholding,
and subject to the 10% penalty tax. (See "Federal Tax Matters," page 38.)
Qualified Contracts 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 38.)
The Systematic Withdrawal Option is not available with respect to the
Fixed Account. Therefore, it may be necessary to transfer amounts from the Fixed
Account to the Variable Account to continue Systematic withdrawals and if such
transfers are from a Gruarantee Period before its Expiration Date, the amount
will be subject to an interest adjustment.
Automatic Payout Option ("APO") For Qualified Contracts
Prior to the Annuity Date, for Qualified Contracts (IRAs) only, you may
elect the Automatic Payout Option ("APO") to satisfy minimum distribution
requirements under Section 408(b)(3) of the Code with regard to this Contract.
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 and APO cannot be elected later than the month immediately
preceding the month in which you attain age 84.
The APO may not be elected while systematic withdrawals are in effect.
Payments will continue unless terminated by you or automatically
terminated by us as stated in the Contract.
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
Section 408(b)(3) or $1,000.
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
Sub-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
subject to the Code's minimum distribution requirement, you must consider all
such plans in the calculation of your minimum annual distribution requirement,
but Transamerica will make calculations and distributions with regard to this
Contract only. 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.
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APO withdrawals may be taxable and subject to income tax withholding.
APO is not available with respect to the Fixed Account. Therefore, it may
be necessary to transfer amounts from the Fixed Account to the Variable Account
to continue APO withdrawals and if such transfers are from a Gruarantee Period
before its Expiration Date, the amount will be subject to an interest
adjustment.
TELEPHONE TRANSACTIONS
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.
DEATH BENEFIT
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 30). 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 Sub-Accounts as allocated by
the Owner (unless the allocation is changed by the beneficiary or
beneficiaries), 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.
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 38.)
Designation of Beneficiaries
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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 Annuitant's Beneficiary. If there
is a Contingent Annuitant, then the Contingent Annuitant will become the
Annuitant and no Death Benefit will be payable.
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.
CHARGES AND DEDUCTIONS
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 charge) is invested in the Contract.
As more fully described below, charges under the Contract are assessed
only as deductions for premium taxes,
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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.
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. 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 SubAccount.
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
applicable to such withdrawals (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, then the Annual Contract Charge will be
deducted on a pro rata basis from all Guarantee Periods under the Fixed Account.
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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. We
will provide you at least 30 days written notice before any such charge is
imposed.
Premium Tax Charge
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
800-258-4260 or by writing to the Service Center, P.O. Box 1848, Charlotte,
North Carolina 28231-1848.
Transfer Fee
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 15.
ANNUITY PAYMENTS
Election of Annuity Date and Annuity Form
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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. 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
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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 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 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. 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 selection of the Joint and Survivor Annuity form may have adverse tax
consequences and competent tax and legal counsel should be sought before you
select it.
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
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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.
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 tax charge) 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. State income tax
withholding may also apply. (See "Federal Tax Matters," page 38.)
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
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 special
tax treatment ("Qualified Contract"). Qualified Contracts are designed for use
in connection with plans entitled to special income tax treatment under Section
408 of the 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 special 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.
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
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. Qualified Contracts cannot be assigned or pledged.
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.
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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. The "investment in the Contract" generally is
equal to the amount of Purchase Payments made. 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
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.
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Required Distributions upon Owner's Death
Notwithstanding any provision of the Contract or this prospectus to the
contrary, no payment of benefits provided under the Contract will be allowed
that does not satisfy the requirements of Section 72(s) of the Code.
Notwithstanding any other provision of the Contract or this prospectus,
if the Owner dies before the Annuity Date, the Death Benefit payable to the
Owner's Beneficiary will be distributed as follows:
(a) the Death Benefit must be completely distributed within five
years of the Owner's date of death;
or
(b) the Owner's Beneficiary may elect, within the one year period
after the Owner's date of death, to receive the Death Benefit
in the form of an annuity from us, provided that: (1) such
annuity is distributed in substantially equal installments
over the life of such Owner's Beneficiary or over a period not
extending beyond the life expectancy of such Owner's
Beneficiary; and (2) such distributions begin not later than
one year after the Owner's date of death.
Notwithstanding (a) and (b) above, if the sole Owner's Beneficiary is
the deceased Owner's surviving spouse, then such spouse may elect, within the
one year period after the Owner's date of death, to continue the contract under
the same terms as before the Owner's death. Upon receipt of such election from
the spouse, in a form and manner acceptable to us, at our Service Office: (1)
all rights of the spouse as Owner's Beneficiary under the contract in effect
prior to such election will cease; (2) the spouse will become the Owner of the
contract and will also be treated as the Contingent Annuitant, if none has been
named and only if the deceased Owner was the Annuitant; and (3) all rights and
privileges granted by the contract or allowed by Transamerica will belong to the
spouse as Owner of the Contract. This election will be deemed to have been made
by the spouse if such spouse makes a Purchase Payment to the Contract or fails
to make a timely election as described in this paragraph.
If the Owner's Beneficiary is a nonspouse, the distribution provisions described
in subparagraphs (a) and (b) above, will apply even if the Annuitant and/or
Contingent Annuitant are alive at the time of the Owner's death. If the
nonspouse Owner's Beneficiary is not an individual, then only a cash payment
will be paid.
If no election is received by us from a nonspouse Owner's Beneficiary within the
one year period after the Owner's date of death, then we will pay the Death
Benefit to the Owner's Beneficiary in a cash payment. The Death Benefit will be
determined as of the date we make the cash payment. Such cash payment will be in
full settlement of all our liability under the contract.
If the Annuitant dies after the annuity starts, any benefit payable
will be distributed at least as rapidly as under the Annuity Form then in
effect.
If the Owner dies after the annuity starts, any benefit payable will
continue to be distributed at least as rapidly as under the Annuity Form then in
effect. All of the Owner's rights granted under the contract or allowed by us
will pass to the Owner's Beneficiary.
Joint Ownership - For purposes of this section, if the contract has
Joint Owners we will consider the date of death of the first Joint Owner as the
death of the Owner and the surviving Joint Owner will become the Owner of the
Contract.
Transfers, Assignments, or Exchanges
Transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is
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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
All deferred, non-qualified 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. (See discussion of this election under "Withdrawals" on page 39.)
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.
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Qualified Plans --- 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 certain limits annually,
distributions that do not satisfy specified requirements, and certain other
transactions. In addition, IRAs are subject to limitations on the amount that
can be contributed and deducted and the time when distributions can commence. 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.
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
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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.
PERFORMANCE DATA
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.
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 SubAccount 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,
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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.
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.
DISTRIBUTION OF THE CONTRACTS
Transamerica Securities Sales Corporation is the principal underwriter
and distributor of the Contracts. TSSC is registered with the Commission as a
broker/dealer and is a member
of the National Association of Securities Dealers, Inc. ("NASD"). Its principal
offices are located at
1150 South Olive, Los Angeles, CA 90015,
telephone 213-741-7702.
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. 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
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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, LLP. 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, 1996, and for each of the three years in the
period then ended, and the financial statements for the Variable Account at
December 31, 1996, have been audited by Ernst & Young LLP, 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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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 18)........................................ 3
ADDITIONAL DEFINITIONS ....................................... 3
NET INVESTMENT FACTOR (Page 22)............................... 4
GENERAL PROVISIONS............................................ 5
CALCULATION OF PERFORMANCE DATA (Page 43)..................... 8
HISTORIC PERFORMANCE DATA..................................... 11
TERMINATION OF DOLLAR COST AVERAGING ......................... 13
FEDERAL TAX MATTERS (Page 38)................................. 14
DISTRIBUTION OF THE CONTRACTS................................. 16
SAFEKEEPING OF ACCOUNT ASSETS................................. 16
TRANSAMERICA (Page 10)........................................ 17
STATE REGULATION.............................................. 17
RECORDS AND REPORTS........................................... 17
FINANCIAL STATEMENTS (Page 8)................................. 17
Distinct Assets from Transamericasm, a Variable Annuity issued by Transamerica
Occidental Life Insurance Company, Policy form 1-504 11-194, Certificate number
GNC-37-193.
39
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for the
DISTINCT ASSETS FROM TRANSAMERICAsm
A VARIABLE ANNUITY
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, 1997, as supplemented from time to
time, by writing to the Service Center, at 800-258-4260 or P.O. Box 31848,
Charlotte, North Carolina 28231-1848. Terms used in the current Prospectus for
the Contract are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT.
Dated May 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT (page 18)..................................... 3
ADDITIONAL DEFINITIONS .................................... 3
NET INVESTMENT FACTOR (page 22)............................ 4
GENERAL PROVISIONS......................................... 5
CALCULATION OF PERFORMANCE DATA............................ 8
........................
TERMINATION OF DOLLAR COST AVERAGING....................... 13
FEDERAL TAX MATTERS (page 38).............................. 14
DISTRIBUTION OF THE CONTRACTS.............................. 16
SAFEKEEPING OF ACCOUNT ASSETS.............................. 16
TRANSAMERICA (page 10)..................................... 17
STATE REGULATION........................................... 17
RECORDS AND REPORTS........................................ 17
FINANCIAL STATEMENTS (page 8).............................. 17
(Additional page references refer to the current
Prospectus.)
2
<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.
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.
3
<PAGE>
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
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
4
<PAGE>
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
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. Qualified Contracts are not transferable or assignable.
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
5
<PAGE>
representation made by any other persons.
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.
6
<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]
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.
7
<PAGE>
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 SubAccounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P{1+T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion 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-
8
<PAGE>
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.
9
<PAGE>
10
<PAGE>
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:
(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 SubAccount 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.
11
<PAGE>
FEDERAL TAX MATTERS
The Contract is designed for use by individuals in retirement plans which
may be qualified for special tax treatment under Section 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.
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 Contracts to qualify as
annuity contracts under federal tax law. The Variable Account, through the
Portfolios, intends to comply with the diversification requirements prescribed
by the Treasury in Reg. Sec. 1.817-5, which affect how the Portfolios' assets
may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate 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
12
<PAGE>
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.
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 designed 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
Transamerica Securities Sales Corporation, located at 1150 South Olive
Street, Los Angeles, California 90015, (213) 741-7702, is the principal
underwriter and distributor of the Contracts. Transamerica Securities Sales
Corporation is registered with the Commission as a broker/dealer and is a member
of the National Association of Securities Dealers, Inc. ("NASD"). Effective May
1, 1997, the Contracts are no longer being offered; after May 1, 1997,
additional Purchase Payments may be made to contracts purchased before May 1,
1997. No underwriting commissions have been paid to Charles Schwab & Co., Inc.,
the previous distributor, or to Transamerica Securities Sales Corporation 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.
13
<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 included in this
Statement of Additional Information should be considered only as bearing on the
ability of Transamerica to meet its obligations under the Contracts. They should
not be considered as bearing on the investment performance of the assets held in
the Variable Account.
This Statement of Additional Information contains the financial statements
of the Variable Account as of December 31, 1996.
Distinct Assets from Transamericasm, a Variable Annuity issued by Transamerica
Occidental Life Insurance Company, Policy form 1-504 11-194, Certificate number
GNC-37-193.
14
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1996
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1996
Audited Consolidated Financial Statements
Report of Independent Auditors............................. 1
Consolidated Balance Sheet................................. 2
Consolidated Statement of Income........................... 3
Consolidated Statement of Shareholder's Equity............. 4
Consolidated Statement of Cash Flows....................... 5
Notes to Consolidated Financial Statements................. 6
<PAGE>
-2-
2721:T-10
3/20/97
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, 1996 and
1995, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note A, the Company changed its method of accounting for certain
debt securities effective January 1, 1994.
ERNST & YOUNG LLP
February 12, 1997
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1996 1995
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 26,980,676 $ 25,997,403
Equity securities available for sale 471,734 307,881
Mortgage loans on real estate 716,669 565,086
Real estate 24,876 38,376
Policy loans 442,607 426,377
Other long-term investments 66,686 62,536
Short-term investments 135,726 211,500
--------------------- ---------------------
28,838,974 27,609,159
Cash 35,817 49,938
Accrued investment income 404,866 394,008
Accounts receivable 297,967 174,266
Reinsurance recoverable on paid and unpaid losses 829,653 1,957,160
Deferred policy acquisitions costs 2,138,203 1,974,211
Other assets 256,382 257,333
Separate account assets 3,527,950 2,533,424
--------------------- ---------------------
$ 36,329,812 $ 34,949,499
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 22,718,955 $ 22,057,773
Reserves for future policy benefits 5,275,149 5,245,233
Policy claims and other 502,331 542,511
--------------------- ---------------------
28,496,435 27,845,517
Income tax liabilities 388,852 587,801
Accounts payable and other liabilities 560,663 534,866
Separate account liabilities 3,527,950 2,533,424
--------------------- ---------------------
32,973,900 31,501,608
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 335,619 333,578
Retained earnings 2,467,406 2,171,412
Foreign currency translation adjustments (24,472) (23,618)
Net unrealized investment gains 549,772 938,932
--------------------- ---------------------
3,355,912 3,447,891
--------------------- ---------------------
$ 36,329,812 $ 34,949,499
===================== =====================
</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
1996 1995 1994
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,798,034 $ 1,811,888 $ 1,430,019
Net investment income 2,077,232 1,972,759 1,771,575
Other operating revenue - - 13,273
Net realized investment gains 17,471 28,112 20,730
--------------- --------------- ---------------
TOTAL REVENUES 3,892,737 3,812,759 3,235,597
Benefits:
Benefits paid or provided 2,714,841 2,587,468 2,116,125
Increase in policy reserves and liabilities 57,968 236,205 204,159
--------------- --------------- ---------------
2,772,809 2,823,673 2,320,284
Expenses:
Amortization of deferred policy acquisition costs 235,180 182,123 176,033
Salaries and salary related expenses 158,699 145,681 133,591
Other expenses 224,084 200,339 190,500
--------------- --------------- ---------------
617,963 528,143 500,124
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,390,772 3,351,816 2,820,408
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 501,965 460,943 415,189
Provision for income taxes 164,685 149,647 143,491
--------------- --------------- ---------------
NET INCOME $ 337,280 $ 311,296 $ 271,698
=============== =============== ===============
</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, 1994 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 14,299
parent
Dividends declared (61,116)
Change in foreign currency
translation adjustments 4,729
Change in net unrealized
investment gains (losses) 1,260,392
Balance at December 31, 1995 2,206,933 27,587 333,578 2,171,412 (23,618) 938,932
Net income 337,280
Capital contributions from
parent 2,041
Dividends declared (41,286)
Change in foreign currency
translation adjustments (854)
Change in net unrealized
investment gains (389,160)
Balance at December 31, 1996 2,206,933 $ 27,587 $ 335,619 $ 2,467,406 $ (24,472) $ 549,772
============ ========== =========== ============= =========== ============
</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
1996 1995 1994
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 337,280 $ 311,296 $ 271,698
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (73,328) (466,669) (290,926)
Accounts receivable (159,309) (58,866) (31,934)
Policy liabilities 949,108 1,273,723 804,296
Other assets, accounts payable and other
liabilities, and income taxes (32,662) (252,362) 133,499
Policy acquisition costs deferred (388,003) (381,806) (394,858)
Amortization of deferred policy acquisition costs 268,770 191,313 182,312
Net realized gains on investment transactions (51,061) (37,302) (27,009)
Other (15,758) (22,862) (124,643)
--------------- ---------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 835,037 556,465 522,435
INVESTMENT ACTIVITIES
Purchases of securities (7,362,635) (5,667,539) (9,354,375)
Purchases of other investments (334,895) (330,503) (143,771)
Sales of securities 5,064,780 3,587,367 4,607,572
Sales of other investments 175,001 155,084 143,815
Maturities of securities 506,941 341,485 2,251,763
Net change in short-term investments 75,774 (67,337) 38,597
Other (21,358) (35,384) (25,354)
--------------- ---------------- ---------------
NET CASH USED BY
INVESTING ACTIVITIES (1,896,392) (2,016,827) (2,481,753)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,260,653 5,151,428 4,434,726
Withdrawals from policyholder contract deposits (5,173,419) (3,624,044) (2,419,915)
Dividends paid to parent (40,000) (60,000) (40,000)
--------------- ---------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,047,234 1,467,384 1,974,811
--------------- ---------------- ---------------
INCREASE (DECREASE) IN CASH (14,121) 7,022 15,493
Cash at beginning of year 49,938 42,916 27,423
--------------- ---------------- ---------------
CASH AT END OF YEAR $ 35,817 $ 49,938 $ 42,916
=============== ================ ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engage 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 consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1996, the Financial Accounting Standards
Board issued a new standard on accounting for transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. The Company
must adopt the standard in 1997. The standard requires that a transfer of
financial assets be accounted for as a sale only if certain specified conditions
for surrender of control over the transferred assets exist. When adopted, the
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans, which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
In 1994, the Company adopted the Financial Accounting Standards Board's standard
on accounting for certain investments in debt and equity securities which
requires the Company to report at fair value, with unrealized gains and losses
excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs, 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 consolidated financial statements of the
Company 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.
Investments: Investments are reported on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes, as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
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 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 non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 2.6% to 9.8% in 1996 and from 2.8% to 10% in 1995 and 1994.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 certain 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 2.5% in earlier years to 11.25%. Reserves for future policy benefits
are evaluated as if unrealized gains or losses on securities available for sale
were realized and adjusted for any resultant premium deficiencies. Changes in
such adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating the 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
1996, 1995, or 1994.
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.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
In 1996, the receivables and payables under certain modified coinsurance
arrangements are presented on a net basis to the extent that such receivables
and payables are with the same ceding company.
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
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturates consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
NOTE B--INVESTMENTS
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale and equity
securities are as follows (in thousands):
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 288,605 $ 25,118 $ 1,628 $ 312,095
Obligations of states and political
subdivisions 258,596 8,508 538 266,566
Foreign governments 110,283 4,479 520 114,242
Corporate securities 15,171,041 779,904 108,999 15,841,946
Public utilities 4,462,063 203,604 35,769 4,629,898
Mortgage-backed securities 5,548,067 252,094 56,293 5,743,868
Redeemable preferred stocks 66,856 10,281 5,076 72,061
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 25,905,511 $ 1,283,988 $ 208,823 $ 26,980,676
================ ================ ================ ================
Equity securities $ 199,494 $ 281,418 $ 9,178 $ 471,734
================ ================ ================ ================
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
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 30,581 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
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 24,015,234 $ 2,031,827 $ 49,658 $ 25,997,403
================ ================ ================ ================
Equity securities $ 150,968 $ 163,264 $ 6,351 $ 307,881
================ ================ ================ ================
</TABLE>
The cost and fair value of fixed maturities available for sale at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1997 $ 482,813 $ 511,576
Due in 1998-2001 3,688,424 3,761,584
Due in 2002-2006 4,725,231 4,839,666
Due after 2006 11,394,120 12,051,921
---------------- ----------------
20,290,588 21,164,747
Mortgage-backed securities 5,548,067 5,743,868
Redeemable preferred stock 66,856 72,061
---------------- ----------------
$ 25,905,511 $ 26,980,676
================ ================
The components of the carrying value of real estate are as follows (in
thousands):
1996 1995
--------------- ----------
Investment real estate $ 22,814 $ 27,095
Properties held for sale 2,062 11,281
---------------- ---------------
$ 24,876 $ 38,376
================ ===============
</TABLE>
As of December 31, 1996, the Company held a total investment in one issuer,
other than the United States Government or a Unites States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands) (See Note H.):
Name of Issuer Carrying Value
Transamerica Corporation $ 613,922
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $20.8 million at December 31, 1996.
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Net investment income (expense) by major investment category is summarized as follows (in thousands):
1996 1995 1994
<S> <C> <C> <C>
Fixed maturities $ 2,005,764 $ 1,904,519 $ 1,705,618
Equity securities 5,458 3,418 5,587
Mortgage loans on real estate 58,165 40,702 40,030
Real estate (7,435) 3,209 5,024
Policy loans 27,012 25,641 24,614
Other long-term investments 978 2,353 7,173
Short-term investments 10,616 13,286 9,689
---------------- ---------------- ----------------
2,100,558 1,993,128 1,797,735
Investment expenses (23,326) (20,369) (26,160)
---------------- ---------------- ----------------
$ 2,077,232 $ 1,972,759 $ 1,771,575
================ ================ ================
Significant components of net realized investment gains are as follows (in
thousands):
1996 1995 1994
---------------- ---------------- ----------
Net gains on disposition of investments in:
Fixed maturities $ 40,967 $ 52,889 $ 7,181
Equity securities 15,750 5,637 32,374
Other 3,424 2,327 2,546
---------------- ---------------- ----------------
60,141 60,853 42,101
Provision for impairment (9,080) (23,551) (15,092)
Accelerated amortization of DPAC (33,590) (9,190) (6,279)
---------------- ---------------- ----------------
$ 17,471 $ 28,112 $ 20,730
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1996 1995 1994
Gross gains $ 74,817 $ 61,504 $ 46,702
Gross losses (33,850) (8,615) (39,521)
---------------- ---------------- ----------------
$ 40,967 $ 52,889 $ 7,181
================ ================ ================
</TABLE>
Proceeds from disposition of investment in fixed maturities available for sale
were $5,476.1 million in 1996, $3,802.6 million in 1995 and $6,737.7 million in
1994.
<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
1996 1995
---------------- -----------
<S> <C> <C>
Fixed maturities $ 54,160 $ 71,429
Mortgage loans on real estate 22,654 21,516
Real estate 9,146 16,207
Other long-term investments 11,025 11,025
---------------- ----------------
$ 96,985 $ 120,177
================ ================
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1996 1995
---------------- ----------
Unrealized gains on investment in:
Fixed maturities $ 1,075,165 $ 1,982,169
Equity securities 272,240 156,913
---------------- ---------------
1,347,405 2,139,082
Fair value adjustments to:
DPAC (306,602) (355,571)
Reserves for future policy benefits (195,000) (339,000)
---------------- ---------------
(501,602) (694,571)
Related deferred taxes (296,031) (505,579)
---------------- ---------------
$ 549,772 $ 938,932
================ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 1,974,211 $ 2,480,474 $ 1,929,332
Cumulative effect of change in
accounting for investments - - (367,154)
Amounts deferred:
Commissions 290,512 298,698 305,858
Other 97,491 83,108 89,000
Amortization attributed to:
Net gain on disposition of investments (33,590) (9,190) (6,279)
Operating income (235,180) (182,123) (176,033)
Fair value adjustment 48,969 (706,915) 718,498
Foreign currency translation adjustment (4,210) 10,159 (12,748)
---------------- ---------------- ----------------
Balance at end of year $ 2,138,203 $ 1,974,211 $ 2,480,474
================ ================ ================
</TABLE>
NOTE D--POLICY LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1996 1995
---------------- -----------
<S> <C> <C>
Liabilities for investment-type products $ 18,126,119 $ 17,948,652
Liabilities for non-traditional life insurance
products 4,592,836 4,109,121
--------------- ---------------
$ 22,718,955 $ 22,057,773
=============== ===============
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $195 million as of December 31, 1996 and $339 million as
of December 31, 1995.
<PAGE>
NOTE E--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1996 1995
---------------- -----------
<S> <C> <C>
Current tax liabilities (receivables) $ (13,752) $ 35,689
Deferred tax liabilities 402,604 552,112
---------------- ----------------
$ 388,852 $ 587,801
================ ================
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1996 1995
---------------- -----------
Deferred policy acquisition costs $ 726,011 $ 696,728
Unrealized investment gains 296,031 505,579
Life insurance policy liabilities (578,823) (601,875)
Provision for impairment of investments (33,945) (42,062)
Other-net (6,670) (6,258)
---------------- ----------------
$ 402,604 $ 552,112
================ ================
</TABLE>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
<TABLE>
<CAPTION>
Components of provision for income taxes are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
<S> <C> <C> <C>
Current tax expense $ 99,692 $ 115,614 $ 204,087
Deferred tax expense (benefit):
Domestic 55,261 21,784 (69,490)
Foreign 9,732 12,249 8,894
---------------- --------------- ---------------
$ 164,685 $ 149,647 $ 143,491
================ =============== ===============
<PAGE>
NOTE E--INCOME TAXES (Continued)
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1996 1995 1994
---------------- ---------------- ----------
Income before income taxes:
Income from U.S. operations $ 474,160 $ 425,946 $ 389,778
Income from foreign operations 27,805 34,997 25,411
--------------- --------------- ---------------
501,965 460,943 415,189
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 175,688 161,330 145,316
Income not subject to tax (2,262) (685) (910)
Low income housing credits (8,175) (3,137) (902)
Other, net (566) (7,861) (13)
--------------- --------------- ---------------
$ 164,685 $ 149,647 $ 143,491
=============== =============== ===============
</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, 1996 was $138 million. At
December 31, 1996, $1,950 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 $149.1 million, $153.3 million and $195.4 million were paid
principally to the Company's parent in 1996, 1995 and 1994, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
NOTE F--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1996
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 220,162,932 $ 195,158,214 $ 201,560,322 $ 226,565,040
==================== =================== =================== ===================
Premiums and other
considerations $ 1,702,975 $ 1,033,201 $ 1,128,260 $ 1,798,034
==================== =================== =================== ===================
Benefits paid or
provided $ 2,922,967 $ 1,112,561 $ 904,435 $ 2,714,841
==================== =================== =================== ===================
1995
Life insurance in force,
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $ 264,153,296
==================== =================== =================== ===================
Premiums and other
considerations $ 1,857,439 $ 1,079,303 $ 1,033,752 $ 1,811,888
==================== =================== =================== ===================
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
==================== =================== =================== ===================
</TABLE>
<PAGE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly traded stocks and
bonds.
The Company's total pension costs (benefits) recognized for all plans were
$(3.1) million in 1996, $2.5 million in 1995 and $4.9 million in 1994, of which
$(3.7) million in 1996, $2.0 million in 1995 and $4.7 million in 1994,
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 1996, 1995 and 1994.
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 received for employee benefit services (none in 1996 and 1995,
and $5.5 million in 1994), loans and advances, investments in a money market
fund managed by an affiliated company, rental of space, and other specialized
services. At December 31, 1996, pension funds administered for these related
companies aggregated $1,067.9 million and the investment in an affiliated money
market fund, included in short-term investments, was $44.6 million.
During 1996, The Company transferred certain below investment grade bonds with
an aggregate book value of $424.9 million, including an aggregate interest
receivable of $9.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $438.9 million,
comprised of collateralized higher-rated bond obligations of $413.9 million
issued by the special purpose subsidiary and cash of $25 million. The excess of
fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies
<PAGE>
NOTE H--RELATED PARTY TRANSACTIONS (Continued)
in exchange for assets 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.
Included in the investment in fixed maturities available for sale is a note
receivable from Transamerica Corporation of $200 million. The note receivable
matures in 2013 and bears interest at 7%.
NOTE I--REGULATORY MATTERS
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of TOLIC and each subsidiary's state of
incorporation. Such regulations include the risk-based capital requirement and
the restriction on the payment of dividends. Generally, dividends during any
year may not be paid, without prior regulatory approval, in excess of the
greater of 10% of the Company's statutory capital and surplus as of the
preceding year end or the Company's statutory net income from operations for the
preceding year. The insurance department of the domiciliary 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):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 112,296 $ 131,607 $ 175,850
Statutory capital and surplus, at
end of year 1,249,045 1,115,691 947,164
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guaranty, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1996, commitments to maintain liquidity for
benefit payments on notional amounts of $1.9 billion were outstanding compared
to $620 million at December 31, 1995.
<PAGE>
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1996 and 1995, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $20.6
million in 1996, $25.3 million in 1995, and $16.3 million in 1994. The following
is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1996 (in thousands):
Year ending December 31:
1997 $ 15,633
1998 14,688
1999 13,593
2000 12,029
2001 11,865
Later years 58,997
$ 126,805
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel are working toward a settlement. Any such
proposed settlement is subject to significant contingencies, including approval
by the court. The lawsuit may proceed if such contingencies are not satisfied.
In the opinion of TOLIC, any ultimate liability which might result from such
litigation would not have a materially adverse effect on the consolidated
financial position of TOLIC or the results of its operations.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
-----------------------------------------
1996 1995
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 26,980,676 $ 26,980,676 $ 25,997,403 $ 25,997,403
Equity securities available for sale 471,734 471,734 307,881 307,881
Mortgage loans on real estate 716,669 770,122 565,086 671,835
Policy loans 442,607 416,396 426,377 408,088
Short-term investments 135,726 135,726 211,500 211,500
Cash 35,817 35,817 49,938 49,938
Accrued investment income 404,866 404,866 394,008 394,008
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,962,501 6,400,632 8,080,139 7,518,211
Single premium immediate annuities 4,115,047 4,476,968 4,123,954 4,677,652
Guaranteed investment contracts 3,153,769 3,207,342 2,958,850 2,998,047
Other deposit contracts 3,894,802 3,913,046 2,785,709 2,848,301
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 43,916 - 20,888
Payable position - (5,485) - (3,086)
</TABLE>
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 K--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.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 270,035 6.73% $ 1,511
Floating rate interest 250,905 6.77% 5,877
Floating rate interest based on one index and
receives floating rate interest based on
another index 326,644 - (9,359)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays
Fixed rate interest 60,000 4.39% 333
Floating rate interest 1,710,716 6.11% 37,655
Floating rate interest based on one index and
receives floating rate interest based on
another index 58,585 - 443
Interest rate floor agreements 560,500 6.46% 19,287
Swaptions 8,327,570 4.50% 54,198
Others 108,745 - 19,607
December 31, 1995
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
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)
Interest rate floor agreements 560,500 6.46% 35,820
Interest rate cap agreements 250,000 5.93% 792
Swaptions 1,267,140 5.52% 53,040
Others 100,000 - 2,500
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
<TABLE>
<CAPTION>
Activities with respect to the notional amounts are summarized as follows (in
thousands):
Beginning End
of Year Additions Maturities Terminations of Year
1996:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 440,173 $ 566,023 $ 143,554 $ 15,058 $ 847,584
Interest rate swap agreements
designated as hedges of
financial liabilities 1,146,678 1,887,348 1,103,525 101,200 1,829,301
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,267,140 7,170,000 109,570 - 8,327,570
Others 100,000 8,745 - - 108,745
-------------- -------------- -------------- ------------ ----------------
$ 3,764,491 $ 9,632,116 $ 1,606,649 $ 116,258 $11,673,700
============== ============== ============== ============ ===========
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 274,777 $ 246,790 $ 59,947 $ 21,447 $ 440,173
Interest rate swap agreements
designated as hedges of
financial liabilities 601,545 1,035,910 460,777 30,000 1,146,678
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 100,000 250,000 100,000 - 250,000
Swaptions 100,000 1,167,140 - - 1,267,140
Others 100,000 - - - 100,000
-------------- -------------- -------------- ------------ ----------------
$ 1,736,822 $ 2,699,840 $ 620,724 $ 51,447 $ 3,764,491
============== ============== ============== ============ ================
1994:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 153,000 $ 121,777 $ 274,777
Interest rate swap agreements
designated as hedges of
financial liabilities 210,000 391,545 601,545
Interest rate floor agreements 400,000 160,500 560,500
Interest rate cap agreements - 100,000 100,000
Swaptions - 100,000 100,000
Others 100,000 - 100,000
-------------- -------------- -------------- ------------ ----------------
$ 863,000 $ 873,822 $ - $ - $ 1,736,822
============== ============== ============== ============ ================
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1996, the Company had no significant concentration of credit risk.
NOTE L--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>
Audited Financial Statements
Separate Account VA-5 of
Transamerica Occidental
Life Insurance Company
Year ended December 31, 1996
with Report of Independent Auditors
<PAGE>
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 American Leaders Fund II, Federated Fund for U.S. Government
Securities II, 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, 1996, and the related
statement of operations for the year then ended, and the statements of changes
in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of 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, 1996, 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, 1996, and the results of their operations
for the year then ended, and the changes in their net assets for each of the two
years in the period then ended in conformity with generally accepted accounting
principles.
March 3, 1997
<PAGE>
1
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
----------------- ----------------- --------------- ----------------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Investments, at fair value (Notes 1 and 2) $ 14,918,004 $ 6,141,676 $ 14,208,949 $ 9,252,691
Receivable for net units sold - 10,899 - -
Due from Transamerica Life - - - 1
-------------- -------------- -------------- --------------
Total assets $ 14,918,004 6,152,575 $ 14,208,949 $ 9,252,692
Liabilities:
Payable for net units redeemed 131,244 - 114,204 40,281
Due to Transamerica Life 9 2 1,135 -
-------------- -------------- -------------- --------------
Total liabilities 131,253 2 115,339 40,281
-------------- -------------- -------------- --------------
Net assets $ 14,786,751 $ 6,152,573 $ 14,093,610 $ 9,212,411
============== ============== ============== ==============
Accumulation units outstanding 918,872.236 543,849.780 901,758.145 672,805.354
============== ============== ============== ==============
Net asset value and redemption price per unit $ 16.092282 $ 11.313001 $ 15.629036 $ 13.692536
============== ============== ============== ==============
Other sub-account information:
Number of shares 977,588.716 608,689.354 991,552.645 700,430.837
Net asset value per share $ 15.26 $ 10.09 $ 14.33 $ 13.21
Investment cost $ 13,639,684 $ 6,075,731 $ 13,478,453 $ 8,539,200
.
</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-accounSub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
- ------- ---------------- --------------- ---------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,$29,518,317,674 $ 5,807,717 $ 22,696,270 $ 10,025,724 $ 8,832,766 $ 281,052 $ 5,336,820
9,716 - - 529,847 - - - -
2 - 5 - 6 - - -
- ------ --------------- -------------- --------------- --------------- -------------- --------------- --------------
$ 7,$39,218,317,674 $ 5,807,722 $ 23,226,117 $ 10,025,730 $ 8,832,766 $ 281,052 $ 5,336,820
- 79,491 7,131 - 51,422 87,096 70,651 252,010
- 2 - 2,657 - 3 - 11
- ------ --------------- -------------- --------------- --------------- -------------- --------------- --------------
- 79,493 7,131 2,657 51,422 87,099 70,651 252,021
- ------ --------------- -------------- --------------- --------------- -------------- --------------- --------------
$ 7,$39,218,238,181 $ 5,800,591 $ 23,223,460 $ 9,974,308 $ 8,745,667 $ 210,401 $ 5,084,799
======================= ============== =============== =============== ============== =============== ==============
549,411,209,092.299 570,871.216 20,961,560.414 700,859.132 601,379.985 16,117.850 425,786.350
======================= ============== =============== =============== ============== =============== ==============
$ 13$7223015.084193 $ 10.160945 $ 1.107907 $ 14.231545 $ 14.542662 $ 13.053944 $ 11.942138
======================= ============== =============== =============== ============== =============== ==============
639,171,181,023.469 576,162.388 22,696,270.060 483,633.581 817,848.669 37,274.809 521,173.816
$11.78 $ 15.51 $ 10.08 $ 1.00 $ 20.73 $ 10.80 $ 7.54 $ 10.24
$ 7,$52,517,063,962 $ 5,951,931 $ 22,696,270 $ 9,415,285 $ 9,190,082 $ 242,916 $ 5,525,396
</TABLE>
See accompanying notes
<PAGE>
- -----------------------------------------------------------------------------
Separate Account VA-5 of
- -----------------------------------------------------------------------------
Transamerica Occidental Life Insurance Company
Statement of Operations
Year ended December 31, 1996
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
----------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investment Income (Note 2) $ 187,435 $ 307,760 $ 972,131 $ 277,966
Expenses (Note 3)
Mortality and expense risk charge 84,801 45,000 86,550 67,696
-------------- -------------- -------------- --------------
Net investment income (loss) 102,634 262,760 885,581 210,270
Net realized and unrealized (loss) gain on investments:
Realized (loss) gain on investment transactions 712,852 7,008 682,677 204,309
Unrealized (depreciation) appreciation of 940,433 (3,626) 391,388 429,998
-------------- -------------- -------------- --------------
investments
Net (loss) gain on investments 1,653,285 3,382 1,074,065 634,307
-------------- -------------- -------------- --------------
Increase (decrease) in net assets resulting from oper$tion1,755,919 $ 266,142 $ 1,959,646 $ 844,577
= ========= ============== ============== ==============
Increase (decrease) in net assets resulting from operatios
operations ffrom
</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-accoSub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
- ------ --------------- ---------------- ---------------- ---------------- --------------- ---------------- ---------------
<C> <C> <C> <C> <C> <C> <C>
$ $38,782390,140 $ - $ 1,019,324 $ - $ 1,634,186 $ 13,302 $ 744,559
45,968115,574 48,966 180,477 59,104 73,471 2,855 54,850
- --------------------- -------------- --------------- -------------- -------------- -------------- --------------
592,814274,566 (48,966) 838,847 (59,104) 1,560,715 10,447 689,709
160,11,023,948 299,992 - 892,513 (793,599) 14,001 (853,977)
96,264641,212 (80,603) - 439,679 (862,211) 6,493 (193,107)
- --------------------- -------------- --------------- -------------- -------------- -------------- --------------
256,41,665,160 219,389 - 1,332,192 (1,655,810) 20,494 (1,047,084)
- --------------------- -------------- --------------- -------------- -------------- -------------- --------------
$ $49,21,939,726 $ 170,423 $ 838,847 $ 1,273,088 $ (95,095) $ 30,941 $ (357,375)
===================== ============== =============== ============== ============== ============== ==============-
</TABLE>
See accompanying notes.
<PAGE>
- ------------------------------------------------------------------------------
Separate Account VA-5 of
- ----------------------------------------------------------------------------
Transamerica Occidental Life Insurance Company
Statement of Changes in Net Assets
Year ended December 31, 1996
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
--------------- ----------------- ---------------- -----------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 102,634 $ 262,760 $ 885,581 $ 210,270
Realized gain (loss) on investment transactions 712,852 7,008 682,677 204,309
Unrealized appreciation (depreciation) of investments 940,433 (3,626) 391,388 429,998
-------------- -------------- -------------- --------------
Increase (decrease) in net assets resulting from 1,755,919 266,142 1,959,646 844,577
operations
Increase (decrease) in net assets resulting from
operations
Changes from accumulation unit transactions (Note 5) 8,093,973 2,943,241 5,380,435 2,514,334
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets 9,849,892 3,209,383 7,340,081 3,358,911
Net assets at beginning of year 4,936,859 2,943,190 6,753,529 5,853,500
-------------- -------------- -------------- --------------
Net assets at end of year $ 14,786,751 $ 6,152,573 $ 14,093,610 $ 9,212,411
============== ============== ============== ==============
</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-acSub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
- ---- --------------- ---------------- --------------- ----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ $ 592,8274,566 $ (48,966) $ 838,847 $ (59,104) $ 1,560,715 $ 10,447 $ 689,709
1601,023,948 299,992 - 892,513 (793,599) 14,001 (853,977)
96,2641,212 (80,603) - 439,679 (862,211) 6,493 (193,107)
- ------------------- -------------- -------------- -------------- -------------- -------------- -------------
8491,939,726 170,423 838,847 1,273,088 (95,095) 30,941 (357,375)
2,8259,011,169 2,452,183 6,656,349 6,051,159 1,548,802 (120,559) (255,063)
- ------------------- -------------- -------------- -------------- -------------- -------------- -------------
3,6710,950,895 2,622,606 7,495,196 7,324,247 1,453,707 (89,618) (612,438)
3,8647,287,286 3,177,985 15,728,264 2,650,061 7,291,960 300,019 5,697,237
- ------------------- -------------- -------------- -------------- -------------- -------------- -------------
$ $,5318,238,181 $ 5,800,591 $ 23,223,460 $ 9,974,308 $ 8,745,667 $ 210,401 $ 5,084,799
=================== ============== ============== ============== ============== ============== =============
</TABLE>
See accompanying notes
<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
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
--------------- ----------------- ---------------- ---------------
Increase (decrease) 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 566,414 157,848 834,907 588,543
operations
Increase (decrease) in net assets resulting from
operations
Changes from accumulation unit transactions (Note 5) 3,830,020 2,312,317 5,419,280 4,253,491
------------- --------------- -------------- --------------
Total increase (decrease) in net assets 4,396,434 2,470,165 6,254,187 4,842,034
Net assets at beginning of year 540,425 473,025 499,342 1,011,466
------------- --------------- -------------- --------------
Net assets at end of year $ 4,936,859 $ 2,943,190 $ 6,753,529 $ 5,853,500
============= =============== ============== ==============
</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-AccouSub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- ------ ---------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ $54,328114,756 $ 11,995 $ 476,129 $ 8,783 $ 60,352 $ 5,241 $ (19,359)
338,745208,076 (174,655) - (25,752) 427,454 14,694 352,787
614,394 89,593 - 228,293 571,949 31,672 4,056
- ------ -------------- -------------- --------------- -------------- -------------- -------------- --------------
(120,441)
372,632937,226 (73,067) 476,129 211,324 1,059,755 51,607 337,484
2,883,65,563,251 2,019,120 7,933,102 1,565,145 4,770,444 163,151 4,951,299
- --------------------- -------------- --------------- -------------- -------------- -------------- --------------
3,256,36,500,477 1,946,053 8,409,231 1,776,469 5,830,199 214,758 5,288,783
608,144786,809 1,231,932 7,319,033 873,592 1,461,761 85,261 408,454
- --------------------- -------------- --------------- -------------- -------------- -------------- --------------
$ 3,$64,47,287,286 $ 3,177,985 $ 15,728,264 $ 2,650,061 $ 7,291,960 $ 300,019 $ 5,697,237
===================== ============== =============== ============== ============== ============== ==============
</TABLE>
See accompanying notes
<PAGE>
- ------------------------------------------------------------------------------
Separate Account VA-5 of
- ----------------------------------------------------------------------------
Transamerica Occidental Life Insurance Company
Notes to Financial Statements
December 31, 1996
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 American Leaders Fund II, Federated Fund for U.S.
Government Securities II, 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 (together "the Funds"). The Funds are
open-end, diversified investment companies registered under the Investment
Company Act of 1940.
2. Significant Accounting Policies
The accompanying financial statements of the Separate Account have been prepared
in accordance with 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:
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
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).
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. Under current federal income tax law,
income from assets maintained in the Fund for the exclusive benefit of
participants is generally not subject to federal income tax.
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.
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
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.
5. Accumulation Units
<TABLE>
<CAPTION>
The changes in accumulation units and amounts are as follows:
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Year ended December 31, 1996
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 80,053.623 17,617.696 66,427.051 49,171.527
Units redeemed (104,816.781) (53,222.028) (99,467.295) (26,819.466)
Units transferred 573,824.700 310,658.757 410,910.540 174,945.245
---------------- --------------- --------------- ----------------
Net increase 549,061.542 275,054.425 377,870.296 197,297.306
================ =============== =============== ================
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 41,140.407 97,054.601 41,292.050 51,790,752.590
Units redeemed (67,009.677) (145,939.773) (73,158.129) (4,276,053.163)
Units transferred 249,721.016 690,578.532 269,488.705 (41,331,633.705)
---------------- -------------- --------------- ---------------
Net increase 223,851.746 641,693.360 237,622.626 6,183,065.722
================ ============== =============== ================
</TABLE>
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 68,091.717 51,941.430 667.888 39,107.373
Units redeemed (117,551.276) (79,349.337) (8,570.299) (84,409.989)
Units transferred 515,942.943 127,614.932 (1,544.651 19,033.395
---------------- --------------- --------------- ----------------
)
Net increase (decrease) 466,483.384 100,207.024 (9,447.062) (26,269.221)
================ =============== =============== ================
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Year ended December 31, 1996
Amounts:
Sales $ 1,169,260 $ 212,447 $ 937,245 $ 622,758
Redemptions (1,633,248) (584,019) (1,516,451) (358,043)
Transfers 8,557,961 3,314,813 5,959,641 2,249,619
----------------- ---------------- ---------------- ----------------
Net increase $ 8,093,973 $ 2,943,241 $ 5,380,435 $ 2,514,334
================= ================ ================ ================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Amounts:
Sales $ 541,188 $ 1,362,459 $ 431,545 $ 56,093,326
Redemptions (889,257) (2,138,312) (747,548) (4,661,898)
Transfers 3,173,598 9,787,022 2,768,186 (44,775,079)
----------------- ---------------- ---------------- ----------------
Net increase $ 2,825,529 $ 9,011,169 $ 2,452,183 $ 6,656,349
================= ================ ================ ================
</TABLE>
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Amounts:
<S> <C> <C> <C> <C>
Sales $ 896,802 $ 746,690 $ 8,661 $ 493,685
Redemptions (1,607,164) (1,131,996) (110,284) (1,036,294)
Transfers 6,761,521 1,934,108 (18,936) 287,546
----------------- ---------------- ---------------- ----------------
Net increase (decrease) $ 6,051,159 $ 1,548,802 $ (120,559) $ (255,063)
================= ================ ================= =================
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Year ended December 31, 1995
Accumulation Units:
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
================ ================= ================ =================
</TABLE>
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Accumulation Units:
<S> <C> <C> <C> <C>
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
================ ================= ================ =================
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Year ended December 31, 1995
Amounts:
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
================= ================= ================ ================
</TABLE>
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
------------------- ------------------ ------------------- ------------------
Amounts:
<S> <C> <C> <C> <C>
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
================= ================ ================ ================
6. Investment Transactions
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1996 were as follows:
Federated Federated INVESCO INVESCO
American Fund for U.S. VIF VIF
Leaders Government Industrial Total
Fund II Securities II Income Return
Sub-account Sub-account Sub-account Sub-account
Aggregate purchases $ 12,852,758 $ 6,657,321 $ 9,918,938 $ 4,941,393
================= ================= ================= ==================
Aggregate proceeds from sales $ 4,411,726 $ 3,412,509 $ 3,570,908 $ 1,583,265
================= ================= ================= ==================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Markets Market
Sub-account Sub-account Sub-account Sub-account
------------------ ------------------- ------------------ ----------------------
Aggregate purchases $ 7,579,864 $ 14,416,999 $ 7,935,552 $ 74,835,826
================= ================= ================= ==================
Aggregate proceeds from sales $ 4,083,011 $ 5,000,022 $ 5,571,226 $ 68,615,985
================= ================= ================= ==================
</TABLE>
<PAGE>
Separate Account VA-5 of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
6. Investment Transactions (continued)
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
------------------ ------------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Aggregate purchases $ 12,076,496 $ 11,461,386 $ 30,601 $ 12,062,333
================= ================= ================= ==================
Aggregate proceeds from sales $ 6,038,658 $ 8,087,703 $ 93,893 $ 11,242,961
================= ================= ================= ==================
</TABLE>
<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) (A) Principal Underwriting Agreement between Transamerica Occidental Life
Insurance Company and Charles Schwab & Co., Inc. (12)
(B) Distribution Agreement between Transamerica Occidental Life Insurance
Company and Transamerica Securities Sales Corporation 13/
(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
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
C-1
<PAGE>
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. (13)
(b) Consent of Independent Auditors. (13)
(11) No financial statements are omitted from item 23.
(12) Not applicable.
(13) Performance Data Calculations. (11)
(14) Not applicable.
(15) Powers of Attorney.
Robert Abeles (13) Richard N. Latzer (3)
Thomas J. Cusack (8)
James W. Dederer (3) 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) T. Desmond Sugrue (13)
Frank C. Herringer (3) Nooruddin S. Veerjee (2)
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).
(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
<PAGE>
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) Incorporated by reference to the like-numbered exhibit
to Post-Effective
Amendment No. 4 to this Form N-4 Registration Statement File No. 33-71746
(April 26, 1996).
(13) Filed herewith.
Item 25. List of Directors of Transamerica Occidental Life Insurance Company
Robert Abeles Frank C. Herringer
Richard N. Latzer
Thomas J. Cusack
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 T. Desmond Sugrue
Nooruddin S. Veerjee
Robert A. Watson
List of Officers for Transamerica Occidental Life Insurance Company
Thomas J. Cusack President and Chief Executive Officer
John A. Fibiger, FSA Chairman
James B. Roszak President, Life Insurance Division and Chief
Marketing Officer
William E. Simms President - Reinsurance Division
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer, CLU Executive Vice President, General
Counsel and Corporate Secretary
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
David E. Gooding Executive Vice President and Chief Information Officer
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 Executive 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
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Lyman Lokken Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Dale S. Rathe-Aazam Investment Officer
Susan A. Silbert 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 Senior Vice President and Actuary
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
C-4
<PAGE>
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
Ken Kilbane Vice President
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
Mark Madden 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
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Olisa Abaelu Second Vice President
Flora Bahaudin Second Vice President
David Barcellos Vice President
Michael C. Barnhart Regional 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
Rose Corlew Second Vice President
Dave Costanza Second Vice President
Gloria Durosko Second Vice President
C-5
<PAGE>
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
Brian Hoyt Second Vice President
Zahid Hussain 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
Joan Klubnik Second Vice President
Lynette Lawson Second Vice President
Dean LeCesne Second Vice President
Marilyn McCullough Vice President and Chief Reinsurance Underwriter
Richard MacKenzie Second Vice President
Carl Marcero Second Vice President
Lisa Moriyama Second Vice President
Joseph K. Nelson Second Vice President
John Oliver Second Vice President
Susan O'Brien 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 Vice President
David Stone Second Vice President
Suzette Stover-Hoyt Second Vice President
John Tillotson Second Vice President
Janet Unruh Second Vice President and Assistant General Counsel
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
</TABLE>
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
<PAGE>
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
Inter-America Corporation - California
Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. - Delaware
River Thames Insurance Company Limited - England
RTI Holdings, Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
Transamerica CBO I, Inc. - Delaware
Transamerica Corporation (Oregon) - Oregon
Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Company (Europe) - Maryland
Transamerica Insurance Finance Corporation, California - California
Transamerica Insurance Finance Corporation, Canada - Ontario
Transamerica Finance Corporation - Delaware
TA Leasing Holding Co., Inc. - Delaware
Trans Ocean Ltd. - Delaware
Trans Ocean Container Corp. - Delaware
Cool Solutions, Inc. - Delaware
TOD Liquidating Corp. - California
TOL S.R.L. - Italy
Trans Ocean Leasing Deutschland GMBH - Germany
Trans Ocean Leasing PTY Limited - Australia
Trans Ocean Management Corporation -
Trans Ocean Regional Corporate Holdings - California
Trans Ocean SARL - France
Trans Ocean Tank Services Corporation - Delaware
Trans Ocean Container Finance Corp. - Delaware
Transamerica Leasing Inc. - Delaware
Better Asset Management Company LLC - Delaware
Greybox L.L.C. - Delaware
Transamerica Leasing Holdings Inc. - Delaware
Greybox Services Limited - United Kingdom
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing SRL - Italy
Transamerica Distribution Services Inc. - Delaware
<PAGE>
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil Ltda. - Brazil
Transamerica Leasing GmbH - West Germany
Transamerica Leasing Limited - United Kingdom
ICS Terminals (UK) Limited - United Kingdom
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing (Proprietary) Limited - South Africa
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III Inc. - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing A/S - Denmark.
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - Fra.
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
TELColorado Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
The Plain Company - Delaware
Transamerica Global Distribution Finance Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
BWAC Seventeen, Inc. - Delaware
Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada - Canada
TCF Commercial Leasing Corporation, Canada - Ontario
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited - United Kingdom
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
Transamerica Commercial Finance France S.A. - France
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmaatschappij B.V. - Netherlands
Transamerica GmbH - Germany - Germany
Transamerica Finance Loan Company - Delaware
Transamerica Financial Services Holding Company - Delaware
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
Pacific Agency, Inc. - Indiana
Pacific Agency, Inc. - Nevada
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
<PAGE>
Transamerica Financial Services Limited, United Kingdom -
United Kingdom Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation (Washington) - Washington
Transamerica Financial Consumer Discount Company (Pennsylvania) -
Pennsylvania Transamerica Financial Corporation - Nevada
Transamerica Financial Services Mortgage Company - Delaware
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services Company - Ohio
Transamerica Financial Services Inc. - Hawaii
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services, Inc. - West Virginia
Transamerica Insurance Administrators, Inc. - Delaware
Transamerica Mortgage Company - Delaware
Transamerica Financial Services Finance Co. - Delaware
Transamerica HomeFirst, Inc. - California
Transamerica Foundation - California
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas - Texas
TBK Insurance Agency of Ohio, Inc. - Ohio
Transamerica Financial Resources Insurance Agency of Alabama Inc. - Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - Massachusetts
Transamerica International Insurance Services, Inc. - Delaware
Home Loans and Finance Ltd. - United Kingdom
Transamerica Occidental Life Insurance Company - California Bulkrich
Trading Limited - Hong Kong First Transamerica Life Insurance
Company - New York NEF Investment Company - California Transamerica
Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Colorado
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Securities Sales Corporation - Maryland
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
Transamerica Investment Services, Inc. - Delaware
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- Maryland
<PAGE>
Transamerica LP Holdings Corp. - Delaware
Transamerica Properties, Inc. - Delaware
Transamerica Retirement Management Corporation - Delaware
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - Delaware
Bankers Mortgage Company of California - California
Pyramid Investment Corporation - Delaware
The Gilwell Company - California
Transamerica Affordable Housing, Inc. - California
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Ventana Inn, Inc. - California
Transamerica Telecommunications Corporation - Delaware
<PAGE>
<PAGE>
<PAGE>
*Designates INACTIVE COMPANIES
oA Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
C-13
<PAGE>
Item 27. Number of Contract/Certificate Owners
As of April 1, 1997, there were 1,586 Owners of Non-Qualified
Individual Contracts and
36 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 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
<PAGE>
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.
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,
<PAGE>
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).
<PAGE>
Item 29. Principal Underwriter
Transamerica Securities Sales Corporation ("TSSC") is the underwriter
of the Certificates and the Individual Contracts as defined in the Investment
Company Act of 1940. TSSC will become Principal Underwriter effective May 1,
1997.
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS* TRANSAMERICA SECURITIES SALES CORPORATION
Barbara A. Kelley President and Director
Regina M. Fink Secretary and Director
Benjamin Tang Treasurer
James B. Roszak Director
Nooruddin Veerjee Director
Dan S. Trivers Senior Vice President
Nicki A. Bair Vice President
Chris Shaw Second Vice President
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
<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
(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.
(d) Transamerica hereby represents that the fees and charges
deducted under the Contracts are reasonable in the aggregate
in relation to services rendered, expenses expected to be
incurred and risks assumed by Transamerica.
<PAGE>
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 28th day of April, 1997.
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. 5 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, Executive Vice President April 28, 1997
Robert Abeles and Chief Financial Officer
______________________* Director, President April 28, 1997
Thomas J. Cusack and Chief Executive Officer
______________________* Director and Chairman April 28, 1997
John A. Fibiger
<PAGE>
______________________* Director April 28, 1997
Richard I. Finn
______________________* Director April 28, 1997
David E. Gooding
______________________* Director April 28, 1997
Edgar H. Grubb
______________________* Director April 28, 1997
Frank C. Herringer
______________________* Director April 28, 1997
Richard N. Latzer
______________________* Director April 28, 1997
Karen MacDonald
______________________* Director April 28, 1997
Gary U. Rolle'
______________________* Director April 28, 1997
James B. Roszak
______________________* Director April 28, 1997
William E. Simms
______________________* Director April 28, 1997
T. Desmond Sugrue
______________________* Director April 28, 1997
Nooruddin S. Veerjee
______________________* Director April 28, 1997
Robert A. Watson
</TABLE>
______________________ On April 28, 1997 as Attorney-in-Fact pursuant to
*By: Aldo Davanzo powers of attorney previously filed and filed
herewith, and in his own capacity as Vice President
and Assistant Sectretary.
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit
(3) (b) Distribution Agreement between Transamerica Occidental
Life Insurance Company and Transamerica Securities
Sales Corporation 13/
(10) (a) Consent of Counsel
(b) Consent of Independent Auditors
(15) Power of Attorney
<PAGE>
EXHIBIT (3) (B)
Distribution Agreement between Transamerica Occidental Life I
nsurance Company
and Transamerica Securities Sales Corporation
<PAGE>
DISTRIBUTION AGREEMENT BETWEEN
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND TRANSAMERICA INSURANCE SECURITIES SALES CORPORATION
This Agreement (the "Agreement") made as of this 24th day of August, 1994,
by and between TRANSAMERICA INSURANCE SECURITIES SALES CORPORATION (the
"Distributor"), a corporation organized and existing under the laws of the State
of Maryland with its principal place of business in Los Angeles, California, and
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (the "Company"), an insurance
company organized and existing under the laws of the State of California with
its principal place of business in Los Angeles, California, for itself and on
behalf of certain of its separate accounts.
W I T N E S S E T H
WHEREAS, the Company has established and maintains the class or classes of
variable annuity contracts set forth on Schedule 1 to this Agreement as in
effect at the time this Agreement is executed, and such other classes of
variable annuity contracts and variable life insurance contracts (collectively,
"variable insurance products") that may be added to Schedule 1 from time to time
in accordance with Section 18 of this Agreement, and including any riders to
such contracts and any other contract offered in connection therewith
(collectively the "Contracts") (A "class of Contracts" shall mean those
Contracts issued by the Company on the same policy form or forms and covered by
the same Registration Statement.); and
WHEREAS, the Distributor, a wholly-owned subsidiary of Transamerica
Insurance Corporation of California, 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 parties desire to have the Distributor act as the principal
underwriter for and in connection with the sale of the Contracts to the public
and assume full responsibility for the securities activities of each "associated
person" (as that term is defined in Section 3(a)(18) of the 1934 Act) of the
Distributor, including each associated person of the Distributor engaged in the
offer and sale of the Contracts (a "Representative"); and
WHEREAS, the Distributor and the Company acknowledge that the Company is
best suited to provide certain administrative functions in connection with the
Contracts, subject at all times to the control and direction of the Distributor
with respect to the broker-dealer operations;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the Distributor and the Company agree as follows:
1. Definitions
<PAGE>
a. Fund -- An investment company serving as the funding medium for any
Contracts, specified in Schedule 2 to this Agreement as in effect at the
time this Agreement is executed, and such other investment companies that
may be added to Schedule 2 from time to time in accordance with Section 18
of this Agreement.
b. Intermediary Distributors -- A person registered as a broker-dealer
and licensed as a life insurance agent or affiliated with a person so
licensed, and authorized to distribute the Contracts pursuant to a sales
agreement as provided for in Section 2 of this Agreement (the "Sales
Agreement").
c. Separate Account -- Each separate account of the Company specified
on Schedule 3 to this Agreement as in effect at the time this Agreement is
executed, and such other separate accounts of the Company that may be added
to Schedule 3 from time to time in accordance with Section 18 of this
Agreement, each of which will be approved by the Commissioner of Insurance
of the State of California under Section 10506 of the California Insurance
Code.
2. Distribution Duties and Responsibilities. The Distributor shall act as
principal underwriter for the Contracts in connection with their sale during the
term of this Agreement in each state or other jurisdiction where they may
legally be sold (the "Territory"). The Distributor is authorized to solicit
applications for the Contracts ("Applications") directly from customers and
prospective customers in the Territory and to select all persons who will be
authorized to engage in solicitation activities with respect to the Contracts.
Such selection activity shall include the recruitment and appointment of third
parties to act as distributors. In turn such third parties may be authorized as
Intermediary Distributors to engage in solicitation activities, including the
solicitation of Applications directly from customers and prospective customers
in the Territory and/or as Intermediary Distributors to recruit other third
parties to act as Intermediary Distributors, in each case as the Company and the
Distributor shall agree to. The Distributor shall enter into separate written
Sales Agreements with each such Intermediary Distributor. Such Sales Agreements
will be substantially in the form attached to this Agreement as Exhibit A, but
may include such additional or alternative terms and conditions that are not
otherwise inconsistent with this Agreement, subject to the Company's review and
prior written consent (which may be given by facsimile), which consent will not
be unreasonably withheld, and which will be deemed to have been given if the
Company has not responded in writing (by facsimile or otherwise) within 10
calendar days. The Distributor will provide the Company with a profile on each
Intermediary Distributor. The Distributor shall use its best efforts to market
the Contracts actively, both directly and through Intermediary Distributors.
The Distributor shall have the power and authority to select and recommend
Representatives of the Distributor, and to authorize an Intermediary Distributor
to select and recommend representatives of such Intermediary Distributor (the
"Intermediary's Representatives"), for appointment as agents of the Company, and
only such Representatives and Intermediary's Representatives shall become agents
of the Company with authority to engage in solicitation activities with respect
to the Contracts. The Distributor shall be solely responsible for background
<PAGE>
investigations of its Representatives to determine their qualifications, good
character and moral fitness to sell the Contracts, and pursuant to the Sales
Agreement, each Intermediary Distributor shall be solely responsible for
background investigations of its Intermediary's Representatives to determine
their qualifications, good character and moral fitness to sell the Contracts.
The Company shall appoint in the appropriate states or jurisdictions such
selected and recommended agents, provided that the Company reserves the right,
which right shall not be exercised unreasonably, to refuse to appoint as agent
any Representative or Intermediary's Representative, or, once appointed, to
terminate the same at any time with or without cause. No other individuals,
persons or entities, other than affiliates of the Company, shall have authority
to engage in solicitation activities with respect to the Contracts, without the
express prior written consent of the Distributor.
The Distributor shall at all times be an independent contractor, and shall
be under no obligation to produce any particular amount of sales of the
Contracts. Anything in this Agreement to the contrary notwithstanding, the
Company retains ultimate responsibility for the direction and control of the
services provided under this Agreement, and the ultimate right to control the
sale of the Contracts, including the right to suspend sales in any jurisdiction
or jurisdictions, to appoint and discharge agents of the Company, or to refuse
to sell a Contract to any applicant for purchase of a Contract (an "Applicant")
for any reason whatsoever. The Distributor and the Distributor's Representatives
shall not have the authority, and shall not grant the authority to Intermediary
Distributors or the Intermediary's Representatives, on behalf of the Company: to
make, alter or discharge any Contract or other contract entered into pursuant to
a Contract; to waive any Contract forfeiture provision; to extend the time of
paying any premium on the Contracts; or to receive any monies or premiums
(except for the sole purpose of forwarding such monies or premiums to the
Company). The Distributor shall not possess or exercise any authority on behalf
of the Company other than that expressly conferred upon the Distributor by this
Agreement.
3. Filings, Marketing Materials and Representatives. The Distributor will
assume full responsibility for the securities activities of its Representatives,
and, similarly, each Intermediary Distributor shall assume, pursuant to the
Sales Agreement, full responsibility for the Intermediary's Representatives'
securities activities, including compliance with the NASD Rules of Fair Practice
and any applicable state securities laws and regulations. The Distributor,
either directly or indirectly through the Company as its agent, shall: (a) make
timely filings with the SEC, the NASD, and any other appropriate securities
regulatory authorities of any advertisements, sales literature, or other
materials relating to the Contracts, as required by law or regulation to be
filed; (b) make available to the Company for approval copies of all agreements
and other written plans and documents relating to the sale of the Contracts, and
shall, if necessary, submit such agreements and other plans and documents to the
appropriate securities regulatory authorities for approval prior to their use;
(c) assist its Representatives in their efforts to prepare themselves to pass
any and all applicable NASD and state insurance qualification examinations; (d)
<PAGE>
register its Representatives with the NASD and any other appropriate securities
regulatory authorities; and (e) supervise and control their Representatives in
the performance of their selling activities. The Intermediary Distributors,
pursuant to each Sales Agreement, shall have similar responsibilities with
regard to the assistance, registration, supervision and control of the
Intermediary's Representatives. In connection with obtaining the clearances of
the appropriate regulatory authorities, the parties agree to use their best
efforts to obtain such clearances as expeditiously as possible, and shall not
use any sales material, plan, or other agreement in any jurisdiction unless the
appropriate filings have been made and approvals obtained that are necessary to
make their use proper and legal therein.
The Distributor will take reasonable steps to ensure that the
Representatives do not make any recommendations to Applicants for the purchase
of a Contract(s) in the absence of reasonable grounds to believe that the
purchase of such Contracts is suitable for the Applicants. Determinations of
suitability will be based on various types of information including, but not
limited to, information furnished to a Representative by an Applicant after
reasonable inquiry by the Representative concerning the Applicant's insurance
and investment objectives, financial situation, and needs, including the
likelihood that the Applicant will be financially able to make sufficient
premium payments to derive the benefits from the Contracts. Likewise, pursuant
to each Sales Agreement, each Intermediary Distributor shall take reasonable
steps to ensure that the Intermediary's Representatives do not make any
recommendations to any Applicant in the absence of reasonable grounds to believe
that the purchase of such Contracts is suitable for the Applicant, with
determinations of suitability based upon the factors set forth immediately
above.
The Distributor will not encourage a prospective Applicant to surrender or
exchange an insurance contract in order to purchase a Contract, nor will the
Distributor encourage any existing holder of a Contract (a "Contractholder") to
surrender or exchange a Contract in order to purchase another insurance
contract. Likewise, each Intermediary Distributor, pursuant to each Sales
Agreement with the Distributor, shall not encourage a prospective Applicant to
surrender or exchange an insurance contract in order to purchase a Contract, nor
encourage any Contractholder to surrender or exchange a Contract in order to
purchase another insurance contract. The obligations under this paragraph are
subject to applicable NASD Rules of Fair Practice and any other applicable laws,
regulations and regulatory guidelines.
The Distributor and each Intermediary Distributor, pursuant to each Sales
Agreement, each shall take reasonable steps to ensure that their respective
Representatives or Intermediary's Representatives do not use any advertisement,
sales literature, or other promotional material which has not been specifically
approved in advance by the Company; and the Company, as agent for the
Distributor, shall be responsible for filing such items, as necessary, with the
SEC, the NASD, and any other appropriate securities regulatory authorities, and,
where necessary, shall obtain the approvals of such authorities. No associated
person, either of the Distributor or of any Intermediary Distributor, shall, in
connection with the offer and sale of the Contracts, make any representation or
communicate any information regarding the Contracts or the Company, which is not
<PAGE>
inconsistent with (i) materials approved by the Company for distribution to the
public, or (ii) a current prospectus relating to the Contracts, or (iii) the
then effective registration statements under the Securities Act of 1933 (the
"1933 Act") for the Contracts.
4. Offer, Sale and Acceptance of Applications. The Company will undertake
to appoint the Representatives and Intermediary's Representatives as life
insurance agents of the Company, and will be responsible for ensuring that only
agents properly qualified under the insurance laws of all relevant jurisdictions
will engage in the offer and sale of the Contracts. Completed Applications shall
be transmitted directly to the Company for acceptance or rejection by the
Company in its sole discretion, in accordance with its insurance underwriting
and selection rules. Initial and subsequent premium payments under the Contracts
shall be made payable to the Company, and when such payments are received by a
Representative or Intermediary's Representative they shall be held in a
fiduciary capacity and forwarded promptly, and in any event not later than two
business days, in full to the Company. All such premium payments, whether by
check, money order or wire, shall be the property of the Company.
5. Undertakings. The Distributor, in order to discharge its duties under
this Agreement, may designate certain employees of the Company to become limited
or general securities principals of the Distributor, and the Company will use
its best efforts to ensure the cooperation of such employees. These individuals
will perform various functions on behalf of the Distributor, including, but not
limited to, supervision of the securities sales activities of the
Representatives and enforcement of the compliance rules and procedures of the
Distributor. All books and records relating to the Distributor's operations
shall: (a) be maintained and preserved by the Company as agent for the
Distributor, in conformity with the requirements of SEC Rules 17a-3 and 17a-4
under the 1934 Act; (b) be and remain the property of the Distributor; and (c)
be at all times subject to inspection by the SEC and the NASD in accordance with
Section 17(a) of the 1934 Act.
The Distributor will fully cooperate with the Company in executing such
papers and performing such acts as may be reasonably requested by the Company
from time to time for the purpose of: (a) maintaining the registration of the
Contracts under the 1933 Act, and of the Separate Account(s) under the
Investment Company Act of 1940 (the "1940 Act"); and (b) maintaining the
qualification of the Contracts for sale under applicable state laws.
Upon the completion of each transaction relating to the Contracts for which
a confirmation is legally required, the Company shall, acting as agent of the
Distributor, send a written confirmation of such transaction to the customer.
6. Servicing of the Contracts. The Company shall provide all necessary
insurance operations, including such actuarial, financial, statistical, premium
billing and collection, accounting, data processing, and investment services as
may be required with respect to the Contracts. In addition to these services, or
other services provided hereunder, the Company shall provide such executive,
legal, clerical, and other personnel related services as may be required to
carry out the Company's obligations under this Agreement, including its
<PAGE>
obligation to perform certain functions on behalf of the Distributor.
7. Recordkeeping. The Company shall provide recordkeeping and general
office administration services incidental to or necessary for the proper
performance of the services to be performed by the Company and, to the extent
the Distributor does not elect to perform said recordkeeping and administration
functions, the Distributor in accordance with this Agreement. In addition, the
Company shall maintain all book and records relating to the Contracts, which
materials will be available to the Distributor (to the extent that they relate
to the broker-dealer operations) and to the appropriate regulatory authorities
upon request.
All books, accounts, and records of the Company and the Distributor as may
pertain to the Contracts and this Agreement shall be maintained so as to clearly
and accurately disclose the nature and details of all Contract transactions and
all other transactions relating to this Agreement. The Company shall own and
control all records pertinent to its variable insurance products operations that
are maintained by the Distributor under this Agreement, and in the event this
Agreement is terminated for any reason, all such records shall promptly be
returned to the Company without charge, free from any claim or retention of
rights of the Distributor.
8. Confidentiality. The Distributor shall keep confidential any information
obtained pursuant to this Agreement, and shall disclose such information only if
the Company has authorized such disclosure, or if such disclosure is expressly
required by the appropriate federal or state regulatory authorities.
9. Expenses and Fees. The Company shall pay commissions to the Distributor
on premiums paid under all Contracts sold pursuant to this Agreement and any
Sales Agreements entered into pursuant to Section 2 of this Agreement. The
Company shall, in connection with the sale of the Contracts, pay all amounts,
including sales commissions, owed by the Distributor to the Representatives or
Intermediary Distributors. The Distributor shall be responsible for all tax
reporting information which the Distributor is required to provide under
applicable tax law to its agents, Representatives or employees with respect to
the Contracts.
The Company shall pay, or cause another person to pay, all expenses related
to: (a) registering the Distributor's associated persons with the NASD and all
other appropriate securities regulatory authorities; (b) preparing the
Distributor's associated persons to pass the applicable NASD and state
qualification examinations; (c) preparing and distributing all prospectuses
(including all amendments and supplements thereto), Contracts, notices,
confirmations, periodic reports, proxy solicitation materials, sales literature
and advertising relating to the sale of the Contracts; and (d) ensuring
compliance with all applicable insurance and securities laws and regulations
relating to the registration of the Contracts and the activities of the
Representatives in connection with the offer and sale of the Contracts. Except
as otherwise indicated herein, or by written agreement of the parties, the
Company shall pay, or cause another person to pay, all expenses resulting from
this Agreement.
<PAGE>
10. Dual Interests. It is understood that any shareholder, director,
officer, employee, or agent of the Distributor, or of any organization
affiliated with the Distributor, or of any organization which the Distributor
may have an interest, or of any organization which may have an interest in the
Distributor may be a Contractholder; and that the existence of any such dual
interest shall not affect the validity thereof or the validity of any
transaction hereunder except as may be otherwise provided in the articles of
incorporation or by-laws of the Distributor, or by the specific provisions of
applicable law. For the purpose of this Section 10, the term "affiliated person"
shall have the same definition as set forth in the 1940 Act subject, however, to
such exemptions as may be granted pursuant to the 1940 Act.
11. Customer Claims. The Company shall provide all services relating to
claims made under the Contracts, including investigation, adjustment, and
defense of claims, and shall make all payments relating to the Contracts,
including payments representing claims, Contract loans, full and partial
surrenders, and amounts paid under Contract settlement options. The Company
shall retain ultimate authority for adjustments and claim payments, which
payments shall be final and conclusive.
12. Cooperation Regarding Investigations and Proceedings. The Distributor
and the Company agree to fully cooperate with each other in any insurance
regulatory examination, investigation, or proceeding, or in any judicial
proceeding arising in connection with the Contracts distributed under this
Agreement. The Distributor and the Company further agree to fully cooperate with
each other in any securities regulatory examination, investigation, or
proceeding, or in any judicial proceeding with respect to the Company, the
Distributor, their affiliates and agents, or representatives, to the extent that
such examination, investigation, or proceeding is in connection with Contracts
distributed under this Agreement. The Distributor shall, upon request by the
appropriate federal and state regulatory authorities, furnish such authorities
with any information or reports in connection with the Distributor's services
under this Agreement.
13. Sharing of Information. Each party hereto will promptly advise the
other of: (a) any action taken by the SEC, the NASD, or other regulatory
authorities, of which it has knowledge, affecting the registration or
qualification of the Contracts, or the right to offer the Contracts for sale;
and (b) the happening of any event which makes untrue any statement contained in
the registration statements or prospectus, or which requires the making of any
change in the registration statements or prospectus in order to make the
statements therein not misleading.
14. Indemnification.
a. The Company. The Company shall indemnify and hold harmless the
Distributor and each person who controls or is associated with the
Distributor within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or
<PAGE>
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 the Distributor
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
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission to state a materials fact required to be stated therein or
necessary to make the statements therein not misleading, in light of
the circumstances in which they were made, contained in any (A)
registration statement or in any prospectus; or (B) a blue-sky
application or other document executed by the Company specifically for
the purpose of qualifying any or all of the Contracts for sale under
the securities laws of any jurisdiction; provided that the Company
shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission:
(A) made in reliance upon information furnished in writing to the
Company by the Distributor specifically for use in the preparation of
any registration statement or any such blue-sky application or any
amendment thereof or supplement thereto; or (B) contained in any
registration statement, or any post-effective amendment thereto which
becomes effective, filed by a Fund with the SEC relating to shares of
such Fund (the "Shares"), including any financial statements included
in, or any exhibit to, such registration statement or post-effective
amendment, any prospectus of a Fund relating to the Shares either
contained in any such registration statement or post-effective
amendment or filed pursuant to Rule 497(c) or Rule 497(e) under the
1933 Act, any blue-sky application or other document executed by a
Fund specifically for the purpose of qualifying any or all of the
shares of such Fund for sale under the securities laws of any
jurisdiction or any promotional, sales or advertising material or
written information relating to the Shares authorized by a Fund; or
(ii) result because of the terms of any Contract or because of
any breach by the Company of any provision of this Agreement or of any
Contract or which proximately result from any activities of the
Company's officers, directors, employees or agents or their failure to
take any action in connection with the sale, processing or
administration of the Contracts. This indemnification agreement shall
be in addition to any liability that the Company 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. The Distributor. The Distributor shall indemnify and hold harmless
the Company and each person who controls or is associated with the Company
within the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against any and all
<PAGE>
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 the Company 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:
(i) violations(s) by the Distributor or a Representative of
federal or state securities law(s) or regulation(s), applicable
banking law(s) or regulation(s), insurance law(s) or regulation(s) or
any rule or requirement of the NASD; or
(ii) any unauthorized use of sales or advertising material, any
oral or written misrepresentations, or any unlawful sales practices
concerning the Contracts, by the Distributor or a Representative; or
(iii) claims by the Representatives or other agents or
representatives of the Distributor
for commissions or other compensation or remuneration of any type; or
(iv) any action or inaction by a clearing broker through whom
the Distributor
purchases any transaction pursuant to this Agreement; or
(v) any failure on the part of the Distributor or a
Representative to submit premiums or Applications to the Company, or
to submit the correct amount of a premium, on a timely basis and in
accordance with Section 4 of this Agreement, subject to applicable
law; or
(vi) any failure on the part of the Distributor or a
Representative to deliver the
Contracts to purchasers thereof on a timely basis; or
(vii) a breach by the Distributor of any provisions of this
Agreement.
This indemnification agreement shall be in addition to any liability
that the Distributor 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.
c. In General. After receipt by a party entitled to indemnification
(the "indemnified party") under this Section 14 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
14 (the "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 from any
liability under this Section 14, 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
<PAGE>
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 shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
The indemnification provisions contained in this Section 14 shall
remain operative in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or by or on behalf of any
controlling person thereof, (ii) delivery of any Contracts and premiums
therefor, and (iii) any termination of this Agreement. A successor by law
of the Distributor or the Company, as the case may be, shall be entitled to
the benefits of the indemnification provisions contained in this Section
14.
15. Standard of Care. Neither the Company nor the Distributor shall be
liable to the other for any action taken or omitted by any of their officers,
directors, employees, or agents, in connection with the good faith performance
of their responsibilities under this Agreement, except for willful misconduct,
bad faith, negligence, or reckless disregard of the duties of the parties under
this Agreement.
16. Assignment. The Distributor may not assign or delegate its
responsibilities under this
Agreement without the prior written consent of the Company.
17. Termination. This Agreement shall become effective as of the date of
its execution, shall continue in full force and effect until terminated, and may
be terminated by either party at any time without penalty upon sixty (60) days
written notice to the other party. This Agreement may be terminated upon ten
days notice upon the other party's material breach of any provision of this
Agreement, unless such breach has been cured to the satisfaction of the
non-breaching party within ten days of receipt by the breaching party of notice
of such breach from the non-breaching party. This Agreement may also be
terminated at any time without penalty if, in the sole discretion of the
Company, the Distributor is not performing its duties in a satisfactory manner.
Upon termination of this Agreement all authorizations, rights and
obligations shall cease except for the obligation to settle accounts hereunder,
including commissions on premiums subsequently received for Contracts in effect
<PAGE>
at the time of termination or issued pursuant to Applications received by the
Company prior to termination, and the obligations contained in Sections 7, 10,
11, 12, 13, and 14.
18. Amendment. This Agreement and the Schedules hereto may be amended at
any time by a
writing executed by both of the parties hereto.
19. Governing Law. This Agreement, and the rights and liabilities of the
parties hereunder, shall
be construed in accordance with the internal laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
TRANSAMERICA INSURANCE SECURITIES
SALES CORPORATION
By: ____________________________
----------------------------
Name
----------------------------
Title
TRANSAMERICA OCCIDENTAL LIFE
INSURANCE COMPANY
By: _____________________________
-----------------------------
Name
-----------------------------
Title
<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 28, 1997
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Re: Separate Account VA-5
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. 5 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
<PAGE>
EXHIBIT (10) (b)
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Accountants" in the Prospectus dated May 1, 1997, and to the
use of our reports dated March 3, 19976 and February 12, 1996 with respect to
the financial statements of Separate Account VA-5 of Transamerica Occidental
Life Insurance Company and Transamerica Occidental Life Insurance Company and
Subsidiaries, respectively, contained in the Statement of Additional
Information.
Ernst & Young LLP
Charlotte, North Carolina
April 28, 1997
<PAGE>
EXHIBIT (15)
POWER OF ATTORNEY
<PAGE>
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, David E. Gooding and Charles E. LeDoyen
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
him 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 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 him 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 February, 1997.
-------------------------------
Robert Abeles
<PAGE>
Exhibit 15
Power of Attorney
<PAGE>
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, David E. Gooding and James B. Roszak 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 him and
on his behalf and in his name, place and stead, to execute
<PAGE>
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 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 him 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 March, 1997.
- ---------------------------
Desmond Sugrue
<PAGE>
