April 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: First Transamerica Life Insurance Company Separate Account VA-5NLNY,
Post-Effective Amendment No. 3 To Form N-4, (File Nos. 33-71748,
811-8160)
Dear Commissioners:
Transmitted herewith for filing via EDGAR, please find Post-Effective Amendment
No. 3 to the Registration Statement on Form N-4 for Separate Account VA-5NLNY of
First Transamerica Life Insurance Company.
This Amendment is being filed pursuant to Paragraph (b) of Rule 485 under the
Securities Act of 1933.
Please call Regina M. Fink, Esq. of Transamerica's Law Department at (213)
742-3131 with any questions.
Very truly yours,
Susan Vivino
Paralegal
cc: F. Bellamy, Esq.
R. Fink, Esq.
Enclosures
<PAGE>
As filed with the Securities and Exchange Commission on __________, 1996
Registration No. 33-71748
811-8160
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. 3 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 4 |X|
-----
SEPARATE ACCOUNT VA-5NLNY
(Exact Name of Registrant)
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
(Name of Depositor)
575 Fifth Avenue, New York, NY 10017
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (212) 682-8740
Name and Address of Agent for Service: Copy to:
James W. Dederer, Esquire Frederick R. Bellamy, Esquire
Chairman of the Board, General Counsel and Sutherland, Asbill & Brennan
Corporate Secretary 1275 Pennsylvania Avenue, N.W.
First Transamerica Life Insurance Co. Washington, D.C. 20004-2404
575 Fifth Avenue
New York, NY 10017
Approximate date of proposed sale to the
public: As soon as practicable after effectiveness of the
Registration Statement.
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the year ended December 31, 1995 was filed on February 28,
1996.
It is proposed that this filing will become effective: |_|
immediately upon filing pursuant to paragraph (b) |X| on May
1, 1996 pursuant to paragraph (b) |_| 60 days after filing
pursuant to paragraph (a)(i) |_| on ________________ pursuant
to paragraph (a)(i) |_| 75 days after filing pursuant to
paragraph (a)(ii) |_| on ________________ pursuant to
paragraph (a)(ii) of Rule 485
If appropropriate, check the following box:
|_| this Post-Effective Amendment designates
a new effective date for a previously
filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page........................... Cover Page
2. Definitions.......................... Definitions
3. Synopsis............................. Key Features of the Contracts
4. Condensed Financial Information...... Condensed Financial Information
5. General
(a) Depositor...................... Transamerica Occidental Life
Insurance Company;
Available Information
(b) Registrant..................... The Variable Account
(c) Portfolio Company.............. The Portfolios
(d) Portfolio Prospectus....... The Portfolios
(e) Voting Rights.................. Voting Rights
6. Deductions and Expenses..................................
(a) General..................... Charges and Deductions
(b) Sales Load %................ Not Applicable
(c) Special Purchase Plan....... Not Applicable
(d) Commissions................. Distribution of the Contracts
(e) Fund Expenses............... The Funds
(f) Operating Expenses.......... Variable Account Fee Table
7. Contracts
(a) Persons with Rights.......... The Contract; Application and
Purchase Payments;
Cash Withdrawals; Account Value;
Death Benefit;
Voting Rights
(b) (i) Allocation of Purchase Payments
Payments................. Allocation of Purchase Payments
(ii) Transfers................ Transfers
(iii) Exchanges................ Federal Tax Matters
(c) Changes....................... Addition, Deletion, or Substitution
(d) Inquiries............. Key Features of the Contracts; Available
Information
8. Annuity Period....................................... Annuity Payments
9. Death Benefit........................................ Death Benefit
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<PAGE>
10. Purchase and Contract Balances...........................
(a) Purchases.............Application and Purchase Payments
(b) Valuation.............Account Value; Appendix A
(c) Daily Calculation.....Account Value
(d) Underwriter...........Distribution of the Contracts
11. Redemptions
(a) By Contract Owners....Cash Withdrawals; Automatic Payout Option
By Annuitant..........Not Applicable
(b) Texas ORP.............Not Applicable
(c) Check Delay...........Cash Withdrawals
(d) Lapse.................Not Applicable
(e) Free Look.............Key Features of the Contracts; Application and
Purchase Payments
12. Taxes.......................Federal Tax Matters
13. Legal Proceedings...........Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information......Statement of Additional Information Table of
Contents
PART B
Item of Form N-4 Statement of Additional
Information Caption
15. Cover Page................. Cover Page
16. Table of Contents.......... Table of Contents
17. General Information
and History................ (Prospectus) Transamerica Occidental Life
Insurance Company; (Prospectus) Available
Information; Transamerica
18. Services...................
(a) Fees and Expenses
of Registrant........ (Prospectus) Variable Account Fee Table;
(Prospectus) The Portfolios
(b) Management Contracts. (Prospectus) Third Party Administrator
(c) Custodian............ Safekeeping of Account Assets; Records and
Reports
Independent Auditors Experts
(d) Assets of Registrant. Not Applicable
(e) Affiliated Person.... Not Applicable
(f) Principal Underwriter Not Applicable
- 3 -
<PAGE>
19. Purchase of Securities
Being Offered................. (Prospectus) The Contract
Offering Sales Load........... Not Applicable
20. Underwriters.................. (Prospectus) Distribution of the Contracts
21. Calculation of Performance
Data..................... (Prospectus) Performance Data; Performance Data
22. Annuity Payments......... (Prospectus) Annuity Payments; Annuity Period
23. Financial Statements.......... Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits........................ Financial Statements and Exhibits
(a) Financial Statements...................... Financial Statements
(b) Exhibits........................................... Exhibits
25. Directors and Officers of
the Depositor.................. Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant ... Persons Controlled By or Under
Common Control
with the Depositor or Registrant
27. Number of Contract Owners................... Number of Contract Owners
28. Indemnification................................... Indemnification
29. Principal Underwriters......................... Principal Underwriter
30. Location of Accounts
and Records.......................... Location of Accounts and Records
31. Management Services.............................. Management Services
32. Undertakings............................................. Undertakings
Signature Page.................................. Signature Page
- 4 -
<PAGE>
SCHWAB INVESTMENT ADVANTAGETM
A VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
Issued by
First Transamerica Life
Insurance Company
The Schwab Investment Advantage ("Contract") is a variable annuity issued by
First Transamerica 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. You may withdraw funds in the Contract as a
lump sum, through a systematic withdrawal program, or from a choice of Annuity
Payment Options.
The minimum initial investment is $5,000. There are no sales charges,
redemption, surrender or withdrawal charges. The Contract provides a Free Look
Period of 30 days from your receipt of the Contract, during which you may cancel
your investment in the Contract.
Your investment in the Contract may be allocated among eleven Sub-Accounts of
Transamerica Separate Account VA-5NLNY ("Variable Account"). Based on your
instructions, your investment in the Contract is invested in Portfolios of
various mutual funds (open-end investment companies) offered by fund families
such as Federated, INVESCO, Janus, Lexington, Schwab Funds(R), SteinRoe,
Strongand Twentieth Century. Your initial investment is automatically allocated
to the Schwab Money Market Portfolio until after the end of the Free Look
Period, and is then allocated according to your instructions.
The wide array of mutual fund choices 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. This ability to transfer
assets among the various Portfolios allows you to change your investment mix in
response to changes in your personal objectives or investment outlook.
Your Account Value 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. While there is a guaranteed death benefit,
there is no guaranteed or minimum Account Value. Therefore, the Account Value
you receive could be less than the total amount you have invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Dated May 1, 1996
The Contracts are not deposits of, or guaranteed or endorsed by, any bank,
nor is the Contract federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency. The
Contracts involve certain investment risks, including possible loss of
principal.
- 5 -
<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 Contract may be made at any time before the
Annuity Date. Generally, withdrawals made prior to age 591/2 are subject to
ordinary income taxes and a 10% federal income penalty tax.
To Place Orders and for Account Information: Contact the Annuity Service Center
(the "Service Center"), Charles Schwab
& Co., Inc. ("Schwab") at 800-838-0649 or P.O. Box 7806, San Francisco,
California 94120-9327.
About This Prospectus: This Prospectus concisely presents important information
you should have before investing in the Contract. Please read it carefully and
retain it for future reference. You can find more detailed information
pertaining to the Contract in the Statement of Additional Information dated May
1, 1996 (as may be amended from time to time), and filed with the Securities and
Exchange Commission. The Statement of Additional Information is incorporated by
reference into this Prospectus, and may be obtained without charge by contacting
the Service Center at 800-838-0649 or P.O. Box 7806, San Francisco, California
94120-9327.
- ii -
ii
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS................................................... iv
KEY FEATURES OF THE CONTRACT.................................. 1
CONDENSED FINANCIAL INFORMATION............................... 8
FIRST TRANSAMERICA LIFE INSURANCE COMPANY AND THE VARIABLE
ACCOUNT.................................................... 9
THE PORTFOLIOS................................................ 11
THE CONTRACT.................................................. 16
APPLICATION AND PURCHASE PAYMENTS............................. 18
ACCOUNT VALUE................................................. 20
TRANSFERS..................................................... 21
CASH WITHDRAWALS.............................................. 23
DEATH BENEFIT................................................. 26
CHARGES AND DEDUCTIONS........................................ 28
ANNUITY PAYMENTS.............................................. 31
FEDERAL TAX MATTERS........................................... 35
PERFORMANCE DATA.............................................. 40
DISTRIBUTION OF THE CONTRACTS................................. 42
VOTING RIGHTS................................................. 42
LEGAL PROCEEDINGS............................................. 43
LEGAL MATTERS................................................. 44
ACCOUNTANTS................................................... 44
AVAILABLE INFORMATION......................................... 44
STATEMENT OF ADDITIONAL INFORMATION--TABLE OF CONTENTS........ 45
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 available only in New
York.
- iii -
iii
<PAGE>
DEFINITIONS
Account Value: The Account Value of a particular Contract is the total dollar
amount of all Variable Accumulation Units under each Sub-Account held for you
prior to the Annuity Date.
Annuitant: The person or persons named on the application and whose life is used
to determine the
amount of monthly annuity payments on the Annuity Date.
Annuity Date: The date on which the Account Value, less any applicable premium
taxes, will be applied to provide an Annuity for you, under the annuity form you
selected. Unless a different Annuity Date is elected under the annuity payment
provisions, the Annuity Date will be as described in the Contract. The date
annuity payments start is the Commencement of Annuity Payment Date shown in the
Contract.
Contract: A certificate issued to an individual which evidences his or her
coverage under a group annuity
contract.
Joint Owners: Must be husband and wife as of the Annuity Issue Date.
Net Purchase Payment: A Purchase Payment reduced by any applicable premium tax
charge (including any charge for retaliatory premium taxes) (see "Premium
Taxes," page 28).
Owner or You: The person or persons who, while living, controls all rights and
benefits under a certificate issued under a group annuity contract.
Payee: The person who receives the annuity payments after the Annuity Date.
The Payee will be the
Annuitant, unless you designate that some other person shall be the Payee.
Portfolio: (1) A separate "series" or portfolio of investments within a mutual
fund or (2) a mutual fund
available for investment under the Contract.
Receipt: Receipt and acceptance by us at our Service Center.
Service Center: The Annuity Service Center, P.O. Box 7806, San Francisco,
California 94120-9327,
telephone 800-838-0649.
Sub-Account: A subdivision of the Variable Account investing solely in shares
of one of the Portfolios.
- iv -
iv
<PAGE>
We, our, us, or Transamerica: First Transamerica Life Insurance Company.
KEY FEATURES OF THE CONTRACT
The Schwab Investment Advantage ("Contract") allows you to invest currently in
your choice of eleven different mutual fund Portfolios offered by eight
different mutual fund investment advisers. You may withdraw funds in the
Contract as a lump sum, through a systematic withdrawal program, or from a
choice of annuity payment options. Your Account Value will vary with the
investment performance of the Portfolios you select. You bear the entire
investment risk for all amounts invested in the Contract. The Account Value
could be less than the total amount you have invested.
Who should invest. The Contract is designed for investors who are seeking
long-term tax-deferred asset accumulation with a wide range of investment
options. The Contract can be used for retirement or other long-term investment
purposes. The deferral of income taxes is particularly attractive to investors
in high federal and state tax brackets who have already taken full advantage of
their ability to make IRA contributions or "pre-tax" contributions to their
employer- sponsored retirement or savings plans.
A Wide Range of Investment Choices. The Contract gives you an opportunity to
select among eleven different Portfolios offered by eight different mutual fund
investment advisers. The investment options cover a wide range of investment
objectives as follows:
Aggressive Growth
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
Growth Janus Aspen Growth Portfolio
TCI Growth Portfolio
Growth & Income Federated American Leaders
Fund II
INVESCO VIF-Industrial Income Portfolio
Balanced/Asset Allocation INVESCO VIF-Total Return Portfolio
International Lexington Emerging Markets Fund
- 1 -
1
<PAGE>
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 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 7806, San Francisco, California 94120-9327, 800-838-0649. (See "The
Portfolios," page 9.)
How to Invest. You must complete an application form in order to invest in a
Contract and you must either have sufficient funds available in your Schwab
account to purchase a Contract or pay by check. The minimum initial investment
is $5,000. Subsequent investments must be at least $1,000. (See "Application and
Purchase Payments," page 16.)
Free Look Period. The Contract provides for a Free Look Period which allows you
to cancel your investment within 30 days of your receipt of the Contract. You
can cancel the Contract during the Free Look Period by delivering or mailing
written notice or sending a telegram to the Service Center. The cancellation is
not effective unless the notice is delivered or postmarked before the end of the
Free Look Period. We will reimburse you for all payments and any appreciation in
your Contract.
Allocation of the Initial Investment. Your initial investment will be allocated
to the Schwab Money Market Portfolio until the estimated end of the Free Look
Period (allowing 5 days for mail delivery of the Contract), at which time the
then current value of your Contract will be allocated to the Portfolios in
accordance with your instructions. (See "Account Value," page 18.)
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% if imposed.
New York currently has no premium tax or retaliatory premium tax. If New York
imposes these taxes in the future, or if you become a resident of a state other
than New York where such taxes apply, we may deduct a charge for these premium
taxes from purchase payments, from amounts withdrawn, or at the Annuity Date.
(See "Charges and Deductions," page 26.)
Switching Investments. You may switch investments among the Portfolios as often
as you like by making a written request to our Service Center. The minimum
amount which may be transferred is $1,000 (or the entire value of the Portfolio
being transferred, if less). You may make as many transfers as you like. Ten
free transfers will be allowed per Contract year and a charge of $10 (or 2% of
the amount of the transfer, whichever is less) will be imposed for each
subsequent transfer during that Contract Year.
- 2 -
2
<PAGE>
Full and Partial Withdrawals. You may withdraw all or part of your Account Value
before the earlier of the Annuity Date you selected or the Annuitant's or
Owner's death. Withdrawals may be taxable and if made prior to age 591/2 of the
Owner may be subject to a 10% penalty tax.
Annuity Forms. Beginning on the first day of the month immediately following the
Annuity Date you select (which generally may not be later than Annuitant's age
85), you may receive annuity payments on a fixed basis. A wide range of annuity
forms are available to provide flexibility in choosing an annuity payment
schedule that meets your particular needs. These annuity forms include
alternatives designed to provide payments for life (for either a single or joint
life) with or without a guaranteed minimum number of payments.
Death Benefit. If the death of the Owner or the Annuitant specified in your
Contract occurs prior to the Annuity Date, a Death Benefit will be payable to
the appropriate Beneficiary. The Death Benefit will be the greater of the sum of
your Investments, less withdrawals and any applicable premium taxes, or the then
current Account Value. The beneficiary may elect to receive the Death Benefit
proceeds as a lump sum or as Annuity Payments.
Customer Service. Charles Schwab's professional representatives are available
toll-free to assist you. If you have any questions about your Contract, please
telephone the Service Center at 800-838-0649 or write to the Service Center at
P.O. Box 7806, San Francisco, California 94120-9327. All inquiries should
include the Contract Number, your name and the Annuitant's name. As a Contract
Owner you will receive periodic statements confirming any transactions relating
to your Contract, as well as a quarterly statement and an Annual Report.
- 3 -
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 information
set forth should be considered together with the narrative provided under the
heading "Charges and Deductions" on page 26 of this Prospectus, and with the
Funds' prospectuses. In addition to the expenses listed below, premium taxes may
be applicable.
Contract Owner Transaction Expenses
Sales Load................................................. None
Surrender Fee.............................................. None
Transfer Fee (First 10 Per Year)(1)........................ None
Annual Contract Charge(2)................................. $25.00
Variable Account Annual Expenses
(as a percentage of average Variable
Account assets)
Mortality and Expense Risk Charge........................ 0.85%
Administrative Expense Charge(3)......................... 0.00%
Other Fees and Expenses of the Variable Account.......... 0.00%
------
Total Variable Account Annual Expenses.................. 0.85%
(1) There is a fee of $10 (or 2% of the amount of the transfer, whichever is
less) for each transfer in excess of 10 in any Contract Year. (2) This is a
maximum annual charge. The Annual Contract Charge is the lesser of $25 or 2% of
Account Value. (3) 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.
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4
<PAGE>
Portfolio Annual Expenses(1)
(as a percentage of Portfolio net assets, after expenses reimbursements)
<TABLE>
<CAPTION>
Total
Management Other Portfolio
Fees Expenses Expenses
Portfolio
<S> <C> <C> <C>
Federated American Leaders Fund II............................ 0.00% 0.85% 0.85%
Federated Fund for U.S. Government Securities II.............. 0.00% 0.80% 0.80%
INVESCO VIF-High Yield Portfolio.............................. 0.60% 0.37% 0.97%
INVESCO VIF-Industrial Income Portfolio....................... 0.75% 0.28% 1.03%
INVESCO VIF-Total Return Portfolio............................ 0.75% 0.26% 1.01%
Janus Aspen Growth Portfolio.................................. 0.65% 0.13% 0.78%
Lexington Emerging Markets Fund............................... 0.85% 0.47% 1.32%
Schwab Money Market Portfolio................................. 0.44% 0.06% 0.50%
SteinRoe Capital Appreciation Fund............................ 0.50% 0.27% 0.77%
Strong Discovery Fund II...................................... 1.00% 0.31% 1.31%
TCI Growth Portfolio.......................................... 1.00% 0.00% 1.00%
</TABLE>
(1) The figures given above are based on expenses that would have been incurred
but for expense offset arrangements, if any, for 1995.
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<PAGE>
From time to time, a Portfolio's investment adviser, in its sole discretion, may
waive all or part of its fees and/or voluntarily assume certain Portfolio
expenses. For a more complete description of the Portfolios' fees and expenses,
see the Portfolio's prospectuses. As of the date of this Prospectus, certain
fees are being waived or expenses are being assumed, in each case on a voluntary
basis. Without such waivers or reimbursements, the Total Portfolio Annual
Expenses that would have been incurred for the last completed fiscal year would
be: 2.21% for Federated American Leaders Fund II 5.61% for Federated Fund for
U.S. Government Securities II; 2.71% for INVESCO VIF-High Yield Portfolio; 2.31%
for INVESCO VIF-Industrial Income Portfolio; 2.51% for INVESCO VIF-Total Return
Portfolio; 0.98% for Janus Aspen Growth Portfolio; 4.09% for Lexington Emerging
Markets Fund; and 1.02% for Schwab Money Market Portfolio. See the Portfolios'
prospectuses for a discussion of fee waiver and expense reimbursements.
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<PAGE>
EXAMPLES(1)
The following chart reflects the $25 Annual Contract Charge as an
annual charge of 0.048% of assets based on an approximate average Account Value
of $52,000, assuming a 5% annual return before expenses. The tabular information
also assumes that the entire Account Value is allocated to the particular
Sub-Account. These examples assume that no premium taxes have been assessed
(although premium taxes may be applicable - see "Premium Taxes," page 34).
If you retain, annuitize, or surrender the Contract at the end of the
applicable time period, assuming a $1,000 Purchase Payment, you would pay the
following fees and expenses
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years 5 Years 10 Years
- -------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Federated American Leaders Fund II............. 17.76 55.05 94.79 206.03
Federated Fund for U.S. Government Securities II 17.26 53.51 92.20 200.65
INVESCO VIF-High Yield Portfolio............... 18.97 58.72 101.00 218.83
INVESCO VIF-Industrial Income Portfolio........ 19.58 60.55 104.09 225.17
INVESCO VIF-Total Return Portfolio............. 19.38 59.94 103.06 223.06
Janus Aspen Growth Portfolio................... 17.06 52.90 91.16 198.49
Lexington Emerging Markets Fund................ 22.49 69.36 118.88 255.24
Schwab Money Market Portfolio.................. 14.23 44.25 76.48 167.76
SteinRoe Capital Appreciation Fund............. 16.96 52.59 110.61 197.41
Strong Discovery Fund II....................... 22.39 69.06 118.37 254.22
TCI Growth Portfolio........................... 19.28 59.64 102.54 222.01
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES.
ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO THE
GUARANTEES IN THE CONTRACT.
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7
<PAGE>
(1) The Portfolio Annual Expenses and these examples are based on data provided
by the Portfolios. Transamerica has no reason to doubt the accuracy or
completeness of that data, but Transamerica has not verified the Funds' figures.
In preparing the Portfolio Expense table and the Examples above, Transamerica
has relied on the figures provided by the Portfolios.
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 33.)
NOTES:
The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the prospectuses for the
Portfolios which should be referred to for more detailed information.
With respect to Qualified Contracts, it should be noted that the
requirements of a particular retirement plan, an endorsement to the Contract, or
limitations or penalties imposed by the Code or the Employee Retirement Income
Security Act of 1974, as amended, may impose additional limits or restrictions
on Purchase Payments, withdrawals, surrenders, distributions, or benefits, or on
other provisions of the Contract. This Prospectus does not describe any such
limitations or restrictions. (See "Federal Tax Matters," page 33.)
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 operation of the
Sub-Accounts on January 1, 1995, through December 31, 1995.
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<PAGE>
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 1/1/95 12/31/95 12/31/95
------ -------- --------
<S> <C> <C> <C>
Federated American Leaders Fund II 10.024 13.350 10,878.374
Federated Fund for U.S. Government Securities II 10.114 10.950 3,759.299
INVESCO VIF-High Yield Portfolio 9.996 11.870 11,645.434
INVESCO VIF-Industrial Income Portfolio 10.058 12.891 20,026.115
INVESCO VIF-Total Return Portfolio 10.110 12.310 5,210.993
Janus Aspen Growth Portfolio 9.950 12.843 17,259.094
Lexington Emerging Markets Fund 10.011 9.536 29,955.147
Schwab Money Market Portfolio 1.019 1.064 1,085,225.895
SteinRoe Capital Appreciation Fund 10.204 11.307 8,002.306
Strong Discovery Fund II 10.848 14.550 25,802.320
TCI Balanced Portfolio 9.773 11.736 176.896
TCI Growth Portfolio 9.695 12.603 34,669.264
</TABLE>
The TCI Balanced Portfolio 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 TCI Balanced
Portfolio Sub-Account is no longer available for investment.
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
First Transamerica Life Insurance Company
First Transamerica Life Insurance Company ("Transamerica"), is a stock
life insurance company incorporated under the laws of the state of New York on
February 5, 1986. It is principally engaged in the sale of life insurance and
annuity policies. Transamerica is a wholly-owned subsidiary of
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Transamerica Occidental Life Insurance Company which, in turn, is an indirect
subsidiary of Transamerica Corporation. The address of Transamerica is 575 Fifth
Avenue, New York, New York 10017, and the telephone number for Transamerica is
212-682-8740.
Published Ratings
We may from time to time publish in advertisements, sales literature and
reports, the ratings and other information assigned to Transamerica by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's, Moody's and Duff & Phelps. The purpose of the ratings is to reflect our
financial strength and/or claims-paying ability and should not be considered as
bearing on the investment performance of assets held in the Variable Account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, our claims-paying ability as
measured by Standard & Poor's Insurance Ratings Services or Duff & Phelps may be
referred to in advertisements or sales literature or in reports. These ratings
are opinions of an operating insurance company's financial capacity to meet the
obligations of its insurance and annuity policies in accordance with their
terms. 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-5NLNY of Transamerica ("Variable Account") was
established by us as a separate account under the laws of the State of New York
on November 10, 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 4240 of the New York 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) if and to the extent provided in
the applicable agreements, and the Contracts contain such a provision. 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.
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The Variable Account currently has eleven Sub-Accounts, each of which
invests solely in a specific corresponding mutual fund Portfolio. (See "The
Portfolios," page 9.) Changes to the Sub- Accounts may be made at our
discretion. (See "Addition, Deletion, or Substitution," page 13.)
THE PORTFOLIOS
The Portfolios described below are exclusively for use as funding vehicles
for insurance products and qualified plans in certain circumstances and,
consequently, are not publicly available mutual funds. Each Portfolio has
separate investment objectives and policies. As a result, each Portfolio
operates as a separate investment portfolio and the investment performance of
one Portfolio has no effect on the investment performance of any other
Portfolio. See the Portfolios' prospectuses for more information.
Federated Investors Insurance Management 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. 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, but secondary, consideration in the selection
of portfolio securities. The Industrial Income Portfolio seeks to achieve
its investment objective by investing in securities which will provide a
relatively high yield and stable return and which, over a period of years,
also may provide capital appreciation.
INVESCO VIF-Total Return Portfolio: Seeks a high total return on
investment through capital appreciation and current income. The Total
Return Portfolio seeks to achieve its investment objective by investing in
a combination of equity securities (consisting of common stocks and, to a
lesser degree, securities convertible into common stock) and fixed income
securities.
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INVESCO VIF-High Yield Portfolio: Seeks a high level of current income by
investing substantially all of its assets in lower rated bonds and other
debt securities and in preferred stock. These bonds and other securities
are sometimes referred to as "junk bonds." The High Yield Portfolio
pursues its investment objective through investment in a variety of
long-term, intermediate-term, and short-term bonds. Potential capital
appreciation is a factor in the selection of investments, but is secondary
to the Portfolio's primary objective.
Janus Aspen Series
Janus Aspen Growth Portfolio: Seeks long-term growth of capital in a
manner consistent with the preservation of capital. Realization of income
is not a significant investment consideration and any income realized on
the Growth Portfolio's investments will be incidental to its primary
objective. The Growth Portfolio seeks to achieve its investment objective
by investing substantially all of its assets in common stock when its
portfolio manager believes that the relevant market environment favors
profitable investing in those securities. Generally, the Portfolio
emphasizes issuers with larger market capitalizations.
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
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invest in equity securities and equivalents traded in any market, of
companies that derive 50% or more of their total revenue from either goods
or services produced in such emerging countries or markets or sales made
in such countries.
Schwab Annuity Portfolios
Schwab Money Market Portfolio: Seeks maximum current income consistent
with liquidity and stability of capital. It seeks to achieve its objective
by investing in short-term money market instruments. This Portfolio is
neither insured nor guaranteed by the United States Government and there
can be no assurance that it will be able to maintain a stable net asset
value of $1.00 per share.
SteinRoe Variable Investment Trust
SteinRoe Capital Appreciation Fund: Seeks capital growth by investing
primarily in common stocks, convertible securities, and other securities
selected for prospective capital growth.
Strong Discovery Fund II, Inc.
Strong Discovery Fund II: Seeks capital growth by investing in a
diversified portfolio of securities that the Fund's investment adviser
believes represent attractive growth opportunities.
TCI Portfolios, Inc.
TCI Growth Portfolio: Seeks capital growth by investing in common stocks
(including securities convertible into common stocks and other equity
equivalents) and other securities that meet certain fundamental and
technical standards of selection and have, in the opinion of the
investment manager, better-than-average potential for appreciation. The
Portfolio's investment manager intends to stay fully invested in such
securities, regardless of the movement of stock prices generally.
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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. TheTCI
Growth Portfolio is advised by Investors Research Corporation of Kansas City,
Missouri, advisers to the Twentieth Century family of mutual funds.
* * *
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.
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<PAGE>
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 adviser services and administrative
services and charges can be found in the current prospectuses for the Funds,
which can be obtained by calling the Service Center at 800-838-0649 or by
writing to P.O. Box 7806, San Francisco, California 94120-9327. The Portfolios'
prospectuses should be read carefully before any decision is made concerning the
allocation of Purchase Payments to, or transfers among, the Sub-Accounts.
Addition, Deletion, or Substitution
Transamerica does not control the Portfolios and cannot guarantee that any
of the Portfolios will always be available for allocation of Purchase Payments
or transfers, so Transamerica retains the right to make changes in the Variable
Account and in its investments. Currently, Charles Schwab & Co., Inc., must
approve certain fundamental changes.
Transamerica and Schwab reserve the right to eliminate the shares of any
Portfolio held by a Sub- Account and to substitute shares of another Portfolio
or of another investment company, for the shares of any Portfolio, if the shares
of the Portfolio are no longer available for investment or if, in our judgment,
investment in any Portfolio would be inappropriate in view of the purposes of
the Variable Account. To the extent required by the 1940 Act, a substitution of
shares attributable to the Owner's interest in a Sub-Account will not be made
without prior notice to the Owners and the prior approval of the Commission.
Nothing contained herein shall prevent the Variable Account from purchasing
other 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
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<PAGE>
eliminated, we will notify the Owners and request a re-allocation of the amounts
invested in the eliminated Sub-Account. We also reserve the right to restrict
the transfer privilege.
In the event of any such substitution or change, we may make such changes
to your Contract as may be necessary or appropriate to reflect such substitution
or change. Furthermore, if deemed to be in the best interests of persons having
voting rights under the Contracts, the Variable Account may be operated as a
management company under the 1940 Act or any other form permitted by law, may be
de- registered under such Act in the event such registration is no longer
required, or may be combined with one or more other separate accounts.
THE CONTRACT
The Contract is a deferred variable annuity contract. Your rights and
benefits are described below and in the certificate and group contract; however,
we reserve the right to make any modification to conform the group contract and
certificates thereunder to, or give you the benefit of, any federal or state
statute or rule or regulation. The obligations under the Contract are our
obligations.
You as Owner will designate the Annuitant. You can be the Annuitant and
must be the Annuitant in the case of a Qualified Contract issued to fund an IRA.
(See "Qualified Contracts" on page 15.)
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 a certificate issued under a
group annuity contract. For each Contract, a different Account will be
established and values and benefits will be calculated separately. The various
administrative rules described below will apply separately to each Contract,
unless otherwise noted.
Qualified Contracts
The Contracts may be used to fund IRA rollovers for use in connection with
Section 408(b) of the Code. If a Contract is purchased to fund an IRA, the
Annuitant must also be the Owner. In addition, if a Contract is purchased to
fund an IRA or other Qualified Plan, minimum distributions must commence not
later than April 1st of the calendar year following the calendar year in which
you attain age 701/2.
You should consult your tax adviser concerning these matters.
The Contract and prototype IRA endorsement have received IRS approval that
they are acceptable under Section 408 of the Code, and that each individual who
purchases a Contract with an IRA
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<PAGE>
endorsement will be considered to have adopted a retirement savings program that
satisfies the requirements of Section 408 of the Code. The IRS approval is a
determination only as to the form of the Contract and does not represent a
determination of the merits of the Contract.
An IRA rollover is a rollover of certain kinds of distributions from
qualified plans, Section 403(b) tax sheltered annuities, and individual
retirement plans, following the rules set out in the Code to maintain favorable
tax treatment, to an Individual Retirement Annuity.
The Contracts may also be used to accumulate retirement savings under
various types of qualified pension and profit sharing plans under Section 401 of
the Code, which permits corporate employers to establish various types of
retirement plans for themselves and for employees.
Purchasers of the Contract for use in Qualified Plans should seek
competent advice regarding the suitability of the proposed plan documents and
the Contract to their specific needs. Transamerica reserves the right to decline
to sell the Contract to certain Qualified Plans or terminate the Contract if in
Transamerica's judgment the Contract is not appropriate for the Plan.
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<PAGE>
APPLICATION AND PURCHASE PAYMENTS
Purchase Payments
All Purchase Payments can be paid to the Service Center by a check payable
to Transamerica or by transfer of available funds from your Schwab account.
The Initial Purchase Payment for the Contract must be at least $5,000. A
confirmation will be issued to you upon the acceptance of each Purchase Payment.
Your Contract will be issued and your Net Purchase Payment derived from
the Initial Purchase Payment generally will be accepted and credited within two
business days after receipt of an acceptable application and receipt of the
Initial Purchase Payment at the Service Center. (A Net Purchase Payment is the
Purchase Payment less any applicable premium taxes, including any retaliatory
premium taxes should such taxes be levied in the future in New York or should
you live in a state with such taxes in the future.) The Purchase Payment can be
paid by check (payable to Transamerica) or by transfer of available cash from
your account with Schwab. Acceptance is subject to the there being sufficient
information in a form acceptable to us, and we reserve the right to reject any
application or Purchase Payment.
The Service Center will process your application and Purchase Payments. If
your application is complete and your initial Purchase Payment is being
transferred from funds available in your Schwab account, then the Purchase
Payment will generally be credited on the business day following receipt of the
application. If your application is incomplete, the Service Center will either
complete the application from information Schwab has on file, or contact you for
the additional information. No transfer of funds will be made from your Schwab
Account until your application is complete. The funds will be credited to the
Contract when they are transferred.
If your Purchase Payment is by check, and the application is complete,
Schwab will use its best efforts to credit the Purchase Payment on the day of
receipt, but in all such cases it will be credited to your Contract within two
business days of receipt. If your application is incomplete, the Service Center
will complete the application from information Schwab has on file or contact you
by telephone to obtain the required information. If your application remains
incomplete for five business days, we will return to you both the check and the
application unless you consent to our retaining the Initial Purchase Payment and
crediting it as soon as the requirements are fulfilled.
Each Contract provides for a Free Look Period of 30 days after you receive
the Contract. You may cancel the Contract by notifying us within the Free Look
Period. Then you will be refunded the greater
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<PAGE>
of the Purchase Payments paid under your Contract or your Account Value as of
the date the notice is postmarked.
Additional Purchase Payments may be made at any time prior to the Annuity
Date, as long as the Annuitant or Contingent Annuitant is living. Additional
Purchase Payments must be at least $1,000. In addition, minimum allocation
amounts apply (see "Allocation of Purchase Payments" below). Additional Purchase
Payments made by check are credited to your Contract as of the date of receipt
of the payment at the Service Center. If made by transfer of funds from your
Schwab account, the funds for the additional Purchase Payment will be
transferred and credited to your Contract the business day of receipt of your
instructions in good order.
Total Purchase Payments may not exceed $1,000,000 without our prior
approval.
In no event may the sum of all Purchase Payments for a Contract during any
taxable year exceed the limits imposed by any applicable federal or state law,
rules, or regulations.
Allocation of Purchase Payments
You specify either in your application or by subsequent written notice how
Purchase Payments will be allocated. You may allocate each Net Purchase Payment
to one or more of the Sub-Accounts as long as the portions are whole number
percentages and any allocation percentage for a Sub-Account is at least 10%. In
addition, the Initial Purchase Payment allocation is subject to a minimum
allocation of $1,000 to each Sub-Account you select.
On the Annuity Issue Date, the Net Purchase Payment derived from your
Initial Purchase Payment will first be allocated to the Money Market Sub-Account
and will remain in that Sub-Account until the estimated end of the Free Look
Period (plus five days for delivery of the Contract by mail). At that time the
dollar value of the Accumulation Units held in the Money Market Sub-Account
attributable to such Net Purchase Payment will be allocated among the
Sub-Accounts in accordance with the allocation percentages selected by you.
Each Net Purchase Payment will be subject to the allocation percentages in
effect at the time of receipt of such Purchase Payment. The allocation
percentages for new Purchase Payments among the Sub-Accounts 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 is $1,000.
ACCOUNT VALUE
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Before the Annuity Date, your Account Value is the total dollar amount of
each Sub-Account credited to your Contract. The Account Value is equal to: (a)
Net Purchase Payments; plus or minus (b) any increase or decrease in the value
of the Sub-Accounts due to investment results; less (c) the Mortality and
Expense Risk Charge; less (d) the Administrative Expense Charge (if one is
imposed); less (e) Annual Contract Charge; less (f) any Transfer Fees; and less
(g) withdrawals from the Sub-Accounts.
A Valuation Period is the period between successive Valuation Days. It
begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on
each Valuation Day and ends at the close of the New York Stock Exchange on the
next succeeding Valuation Day. A Valuation Day is each day that the New York
Stock Exchange is open for regular business. The value of the Variable Account
assets is determined at the end of each Valuation Day. To determine the value of
an asset on a day that is not a Valuation Day, the value of that asset as of the
end of the next Valuation Day will be used.
The Account 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 are used to purchase Variable Accumulation Units in
the Sub-Account or Sub-Accounts you select. The number of Variable Accumulation
Units to be credited for each Sub- Account will be determined by dividing the
portion of each Net Purchase Payment allocated to the Sub- Account by the
Variable Accumulation Unit Value determined at the end of the Valuation Period
during which the Net Purchase Payment was received. In the case of the Initial
Net Purchase Payment, Variable Accumulation Units for that payment will be
credited to the Account Value (and held in the Money Market Sub-Account until
the estimated end of the Free Look Period) as soon as possible, but no later
than two Valuation Days after the later of: (a) the date sufficient information
in a form acceptable to us is received by us at the Service Center; or (b) the
date the Service Center receives the Initial Purchase Payment. In the case of
any subsequent Purchase Payment, Variable Accumulation Units for that payment
will be credited at the end of the Valuation Period during which we receive the
payment. The value of a Variable Accumulation Unit for each Sub-Account for a
Valuation Period is established at the end of each Valuation Period and is
calculated by multiplying the value of that unit at the end of the prior
Valuation Period by the Sub-Account's Net Investment Factor for the Valuation
Period.
The Net Investment Factor is a formula that reflects the changes in the
value of a share of the applicable Portfolio (and any dividends declared by the
Portfolio); it is used to determine the value of Accumulation Units. The
applicable formula can be found in the Statement of Additional Information.
The value of a Variable Accumulation Unit may go up or down.
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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 the Sub- Accounts 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 from which the transfer is being made. The
request must specify the amounts being transferred from each Sub-Account, and
the amounts being transferred to each Sub-Account that will receive the
transfer.
Currently, there is no limit on the number of transfers you can make and
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.
A transfer generally will be effective on the date the request for
transfer is received by our Service Center if received before 4:00 p.m. Eastern
Time. Under current law, there will not be any tax liability to you if you make
a transfer.
Transfers may also be subject to such terms and conditions as may be
imposed by the Portfolios.
Transfers among 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 in which the transfer is effective.
Possible Restrictions
We reserve the right, without prior notice, to modify, restrict, suspend
or eliminate the transfer privileges 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
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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 Contract Owner and not by a third party holding a power
of attorney and to require that each transfer request be made by a separate
communication to us. We also reserve the right to request that each transfer
request be submitted in writing and be manually signed by the Contract Owner;
facsimile transfer requests may not be allowed.
Dollar Cost Averaging (Automatic Transfers)
Prior to the Annuity Date, you may automatically transfer without charge
amounts from one Sub- Account selected from among those being allowed under this
option to any of the other Sub-Accounts on a monthly basis. The transfers will
begin on the tenth day of the next month following receipt of the request,
provided that automatic transfers will not commence until the later of (a) 30
days after the Annuity Issue Date, or (b) the estimated end of the Free Look
Period. Transfers will continue unless terminated by you or automatically
terminated by us because there are insufficient funds in the applicable
Sub-Account, or for other reasons as set forth in the Contract.
Automatic transfers must meet the following conditions: (1) the minimum
amount that can be transferred out of the selected Sub-Account is $250 per
month; and (2) the minimum amount transferred into any other Sub-Account is the
greater of $250 or 10% of the amount being transferred that month. At the time
of your election and of the first automatic transfer made under this option, the
amount in the selected Sub-Account from which the transfers are to be made must
be at least $5,000.
Automatic transfers will not count toward the limitation of 10 free
transfers per Contract Year.
CASH WITHDRAWALS
Withdrawals
You (the Owner) may withdraw all or part of your Account Value at any time
during the life of the Annuitant and prior to the Annuity Date by request in a
manner and form acceptable to us at our Service Center, subject to the rules
below. Federal or state laws, rules or regulations may apply. The amount payable
to you if you surrender your Contract on or before the Annuity Date is your
Account Value less any applicable premium taxes. No withdrawals may be made
after the Annuity Date.
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A full surrender will result in a cash withdrawal payment equal to the
Account Value (less 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.
Partial withdrawals must be at least $1,000. You may instruct our Service
Center as to the amounts to be withdrawn from each Sub-Account. If not so
instructed, our Service Center will effect such withdrawal pro rata from all
Sub-Accounts in which your Account Value is invested.
A partial withdrawal will not be processed if it would reduce the Account
Value to less than $2,000. In that case, you will be contacted to decide either
to: (a) withdraw a lesser amount (subject to the $1,000 minimum) leaving an
Account Value of at least $2,000; or (b) completely surrender the Contract. You
will have ten days to notify us of your decision. Amounts payable will be
determined as of the end of the Valuation Period during which the subsequent
instructions are received. If, after the expiration of the 10-day period, no
election is received from you, the withdrawal request will be considered null
and void, and no withdrawal will be processed.
Withdrawals are generally taxable transactions (this includes APO
withdrawals and Systematic Withdrawals discussed below). Moreover, the Internal
Revenue Code provides that a 10% penalty tax may be imposed on the taxable
portions of certain early withdrawals. The Code generally requires us to
withhold federal income tax from withdrawals. However, generally you will be
entitled to elect, in writing, not to have tax withholding apply although
withholding is mandatory for certain types of Qualified Contracts. Withholding
applies to the portion of the withdrawal which is included in your income and
subject to federal income tax. The current tax withholding rate is 10% of the
taxable amount of the withdrawal. Withholding applies only if the taxable amount
of the withdrawal is at least $200. Some states also require withholding for
state income taxes. (See "Federal Tax Matters," page 33.)
Withdrawal requests must be made in writing to ensure that your
instructions regarding withholding are followed.
Since you assume the investment risk under the Contract, 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
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a delay for the protection of Owners. The withdrawal request will be effective
when any necessary withdrawal request forms are received. Payments of any
amounts derived from Purchase Payment paid by check may be delayed until the
check has cleared the Owner's bank.
After a surrender of your total Account Value, or at any time that your
Account Value is zero, all your rights under the Contract will terminate.
Since the Qualified Contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of the Code,
reference should be made to the Code and the terms of the particular retirement
plans for any additional limitations or restrictions on cash withdrawals.
Systematic Withdrawal Option
Under the Systematic Withdrawal Option, you can instruct Transamerica to
make automatic payments of a predetermined dollar amount or fixed percentage of
the Account Value to you monthly. To be eligible for systematic withdrawal, the
Account Value must be at least $15,000 at the time you elect the Systematic
Withdrawal Option and at the time of the first withdrawal. The minimum
systematic withdrawal payment is $150. Systematic withdrawals will commence on
the fourth day of the month following receipt of the election at our Service
center. Such date may not be earlier than: (a) 30 days after the Annuity Issue
Date shown on the Certificate Data page; or (b) the end of the Free Look Period,
whichever is later. If the fourth day is not a Valuation Day, systematic
withdrawals will start on the next following Valuation Day. Subsequent
withdrawals will be made on the fourth day of each month thereafter. To ensure
that your instructions regarding tax withholding are followed, requests for
systematic withdrawal must be in a manner and form acceptable to the Service
Center. You may specify the Sub-Accounts from which systematic withdrawals will
be made, but if you do not specify the Sub- Accounts from which systematic
withdrawals are to be taken, systematic withdrawals will be taken from each
Sub-Account in the proportion that the Account Value in each Sub-Account bears
to the total Account Value of the Contract.
When using systematic withdrawals, an Owner may not simultaneously
participate in the Automatic Payout Option.
Systematic withdrawals may be taxable, subject to withholding, and subject
to the 10% penalty tax. (See "Federal Tax Matters," page 33.)
Qualified Policies are subject to complex rules with respect to
restrictions on and taxation of distributions, including the applicability of
penalty taxes. A qualified tax adviser should be consulted before a Systematic
Withdrawal Option is requested. (See "Federal Tax Matters," page 33.)
Automatic Payout Option ("APO") For Qualified Plans
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Prior to the Annuity Date, for Qualified Contracts, subject to the minimum
distribution requirements under Sections 401 and 408(b)(3) of the Code, you may
elect the Automatic Payout Option ("APO"). 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.
Payments will be made on the seventh day of the month, and will continue
unless terminated by you or automatically terminated by us as stated in the
Contract.
APO may be elected in any calendar month, but no later than the month
immediately preceding the month in which you attain age 84.
To be eligible for this option, the following conditions must be met: (1)
your Account Value must be at least $15,000 at the time of election and at the
time of the first APO withdrawal; and (2) the annual withdrawal amount is the
larger of the required minimum distribution under Code Sections 401 or 408(b)(3)
or $1,000. APO withdrawals are available on a monthly, quarterly, semi-annual or
annual basis. If you elect other than an annual distribution mode, the minimum
modal APO withdrawal amount is $150.
APO allows the required minimum distribution to be paid periodically from
any of the Sub- Accounts. If there are insufficient funds in the Variable
Account to make a withdrawal, or for other reasons as set forth in the Contract,
this option will terminate. If you have more than one qualified plan, you must
consider all such plans in the calculation of your minimum annual distribution
requirement. Termination of distributions from this Contract will not relieve
you from your distribution requirements if you own multiple contracts.
You may also make partial withdrawals in addition to APO withdrawals,
subject to the withdrawal provisions of the Contract.
APO withdrawals may be taxable and subject to withholding.
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
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settlement elected by the Beneficiary is received at our Service Center. (See
"Designation of Beneficiaries," page 21.) 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 remains in the
Variable Account, and fluctuates with the investment performance of the
applicable Portfolio(s). Accordingly, the amount of the death benefit depends on
the Account Value at the time the death benefit is paid (not on the date of
death).
Due Proof of Death may be: (a) a certified copy of a death certificate;
(b) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death; or (c) a written statement by a medical doctor who attended
the deceased; and any other proof and documents 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 33.)
Designation of Beneficiaries
You may select one or more Beneficiaries and name them in the application
or a Beneficiary designation form. If you select more than one Beneficiary,
unless you otherwise indicate, they will share equally in any death benefits
payable in the event of the Annuitant's death before the Annuity Date if there
is no Contingent Annuitant or upon your death if there is no Joint Owner.
Different Beneficiaries may be named with respect to the Annuitant's death
("Annuitant's Beneficiary") and your death ("Owner's Beneficiary"). Before the
Annuitant's death, you may change any Beneficiary by written notice to the
Service Center. You may also make the designation of a Beneficiary irrevocable
by sending written notice to and obtaining approval from our Service Center.
Irrevocable Beneficiaries may be changed only with the written consent of the
designated Irrevocable Beneficiaries, except to the extent required by law.
The interest of any Beneficiary who dies before you or the Annuitant will
terminate at the death of the Beneficiary. The interest of any Beneficiary who
dies at the time of, or within 30 days after your or the Annuitant's death, will
also terminate if no benefits have been paid, unless the Contract has been
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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 shall 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 charges) is invested in the Variable Account.
The variable account expenses for the Contract are substantially below the
costs of most other variable annuity contracts. The average variable account
expense charge of other variable annuity contracts was 1.30% as reported by
Morningstar Annuity/Life Sourcebook, 1995, and 1.25% as reported
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by Barron's-Lipper Mutual Fund Quarterly, January 1995. The variable account
expense charge for
this Contract is 0.85%.
As more fully described below, charges under the Contract are assessed
only as deductions for premium taxes, if applicable, as charges against the
assets of the Variable Account for our assumption of mortality and expense risks
and administrative expenses (if charged), for certain transfers, and as an
Annual Contract Charge.
In addition, 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. The approximate portion of this charge attributable to mortality risks
is 0.30%; the approximate portion of this charge estimated to be attributable to
expense risk is 0.55% of the value of the net assets in the Variable Account. We
guarantee that this charge will never increase beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the Variable
Accumulation Unit Values for each Sub-Account.
Account Values and annuity payments are not affected by changes in actual
mortality experience incurred by us. The mortality risks assumed by us arise
from our contractual obligations to make annuity payments determined in
accordance with the annuity tables and other provisions contained in the
Contract. Thus you are assured that neither the Annuitant's longevity nor an
unanticipated improvement in general life expectancy will adversely affect the
annuity payments under the Contract.
We also bear substantial risk in connection with the death benefit before
the Annuity Date, since we will pay a death benefit equal to the greater of your
Account Value or your Purchase Payments less withdrawals and premium taxes (so
we bear the risk of unfavorable experience in the Sub-Accounts).
The expense risk assumed by us is the risk that our actual expenses in
administering the Contracts and the Variable Account will be greater than
anticipated, or exceed the amount recovered through the Annual Contract Charge
plus the amount, if any, recovered through Transfer Fees and the Administrative
Expense Charge (currently not being charged).
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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 pro rata from
the other Sub- Accounts in the proportion that the Account Value in a
Sub-Account bears to the total Account Value in all Sub-Accounts. We do not
expect a profit from the Annual Contract Charge.
We currently do not deduct any other administrative expense charge.
However, we reserve the right to deduct such a Charge from the Variable Account
at the end of each Valuation Period at an effective annual rate that is
guaranteed not to exceed 0.15% of the assets held in the Variable Account to
reimburse us for those administrative expenses attributable to the Contracts and
the Variable Account. We will provide you at least 30 days written notice before
any such charge is imposed.
If we impose an Administrative Expense Charge, it will be at a level that
will be designed to recover no more than the anticipated and estimated costs
associated with administering the Contract and the Variable Account that are not
recovered through the Annual Contract Charge. We do not expect to make a profit
from any Administrative Expense Charge.
Premium Taxes
Currently, New York has no premium tax or retaliatory premium tax. If New
York imposes these taxes in the future or if you become a resident of a state
where these taxes apply, 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.
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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 9.) Current
prospectuses for the Portfolios can be obtained by calling the Service Center at
800-838-0649, or by writing P.O. Box 7806, San Francisco, California 94120-9327.
Transfer Fee
There will be a $10 (or 2% of the amount of the transfer, if less) charge
for each transfer in excess of ten transfers in any Contract Year.
ANNUITY PAYMENTS
Election of Annuity Date and Annuity Form
The Annuity Date is the date that your Account Value (less any applicable
premium taxes) is applied to provide the annuity payments under your selected
annuity form (unless your entire Account Value has been withdrawn or the death
benefit has been paid to the Beneficiary prior to that date). When the contract
is issued, the designated annuity form is a Life Annuity with period certain of
120 months (10 years). Before the Annuity Date, and while the Annuitant is
living, you may change the Annuity Date or annuity form by 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.
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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 will
be transferred to our general account assets. The amount of annuity payments
will be established by the fixed annuity forms 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
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
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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; you may elect to
have the commuted value of these payments paid 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 for as long as the Annuitant and the Joint Annuitant are living. After
the Annuitant or the Joint Annuitant dies, payments will continue for as long as
the survivor lives. Payments will be made to the survivor for his or her life.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that only one
payment or very few payments will be made under this form if the Annuitant and
the Joint Annuitant both die shortly after payments begin.
The request for this form must: (a) name the Joint Annuitant; and (b)
state the percentage of continued payments for the survivor. Once payments start
under this annuity form, the person named as Joint Annuitant, for the purpose of
being the measuring life, may not be changed. We will need proof of age for the
Joint Annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
annuity form not described in this section subject to our agreement and any
applicable state or federal law or regulation. Requests for any other annuity
form must be made in writing to our Service Center at least 30 days before the
Annuity Date.
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* * *
For annuity forms involving life income, the actual age and/or sex of the
Annuitant, or a Joint or Contingent Annuitant will affect the amount of each
payment. We reserve the right to ask for satisfactory proof of the Annuitant's
(or Joint or Contingent Annuitant's) age. We may delay annuity payments until
satisfactory proof is received. Since payments to older Annuitants are expected
to be fewer in number, the amount of each annuity payment under a selected
annuity form will be greater for older Annuitants than for younger Annuitants.
In the event that an annuity form is not selected at least 30 days before the
Annuity Date, we will make annuity payments in accordance with the "Life Annuity
With Period Certain" of 120 months, and the applicable provisions of the
Contract.
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 $20 or if
your Account Value (less any applicable premium taxes) is less than $2,000, we
reserve the right to offer a less frequent mode of payment or to pay that amount
in a lump sum cash payment to you.
Once payments start under the annuity form selected by the Owner: (a) no
changes can be made in the annuity form; (b) no additional Purchase Payments
will be accepted under the Contract; and (c) no further withdrawals other than
withdrawals made to provide annuity benefits, will be allowed.
You may, at any time after the Annuity Date, request, in a manner and form
acceptable to us, the Service Center to change the Payee of annuity benefits
being provided under the Contract. The effective date of change in Payee will be
the later of: (a) the date we receive the notice for such change; or (b) the
date specified by you. If the Contract is issued as an IRA, you may not change
the Payee on or after the Annuity Date.
* * *
A portion or the entire amount of the annuity payments may be taxable as
ordinary income. If, at the time the annuity payments begin, we have not
received a proper written election not to have federal income taxes withheld, we
must by law withhold such taxes from the taxable portion of such annuity
payments and remit that amount to the federal government (an election not to
have taxes withheld is not permitted for certain Qualified Contracts). State
income tax withholding may also apply. (See "Federal Tax Matters," page 33.)
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
favorable tax treatment ("Qualified Contract"). Qualified Contracts are designed
for use in connection with plans entitled to special income tax treatment under
sections 401 or 408 of the Internal Revenue Code of 1986, as amended ("Code").
The ultimate effect of federal income taxes on the amounts held under a
Contract, on annuity payments, and on the economic benefit to you, the
Annuitant, or the Beneficiary may depend on the type of retirement plan, and on
the tax status of the individual concerned. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of the Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of the Contract. The following discussion assumes that a Qualified
Contract is purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
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Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general. We
believe that an Owner who is a natural person generally is not taxed on
increases (if any) in the value of an Account Value until distribution occurs by
withdrawing all or part of the Account Value (e.g., withdrawals or annuity
payments under the annuity form elected). For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Account Value (and
in the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Account Value over the
"investment in the contract" (discussed below) during each taxable year. There
are some exceptions to this rule and a prospective Owner that is not a natural
person may wish to discuss these with a competent tax adviser.
The following discussion generally applies to a Contract owned by a
natural person.
Withdrawals
In the case of a withdrawal under a Qualified Contract, including
withdrawals under the Automatic Payout Option, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the individual's total accrued benefit under the retirement plan.
The "investment in the contract" generally equals the amount of any
non-deductible Purchase Payments paid by or on behalf of any individual. For a
Contract issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from a Qualified Contract.
With respect to Non-Qualified Contracts, partial withdrawals, including
systematic withdrawals, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. 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
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"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 59
1/2; (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 includible in the income of
the recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender, as described above, or (2) if distributed
under an annuity form, they are taxed in the same manner as annuity payments, as
described above. For these purposes, the investment in the Contract is not
affected by the Owner's or Annuitant's death. That is, the investment in the
Contract remains the amount of any Purchase Payments paid which were not
excluded from gross income.
Transfers, Assignments, or Exchanges
A transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, or the exchange of a
Contract may result in certain tax consequences to the Owner that are not
discussed herein. An Owner contemplating any such designation, transfer,
assignment, or exchange of a Contract should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.
Multiple Contracts
All deferred, non-qualified annuity contracts that are issued by us (or
our affiliates) to the same Owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in gross
income under section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of section
72(e) through the serial
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purchase of annuity contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and separate deferred annuity contracts as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws.
Withholding
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Certain distributions from Qualified Contracts are subject to
mandatory federal income tax withholding. (See discussion of this election under
"Withdrawals" on page 21.)
Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law and the law may change. Federal estate tax consequences and state and local
estate, inheritance, and other tax consequences of ownership or receipt of
distributions under a Contract depend on the individual circumstances of each
Owner or recipient of the distribution. A competent tax adviser should be
consulted for further information.
Qualified Plans
The Contract is designed for use with several types of qualified plans.
The tax rules applicable to qualified plans, including restrictions on
contributions and benefits, taxation of distributions, and any tax penalties,
vary according to the type of plan and the terms and conditions of the plan
itself. Various tax penalties may apply to contributions in excess of specified
limits, aggregate distributions in excess of $150,000 annually, distributions
that do not satisfy specified requirements, and certain other transactions
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with respect to qualified plans. Therefore, no attempt is made to provide more
than general information about the use of the Contract with the various types of
qualified plans. Owners, Annuitants and Beneficiaries are cautioned that the
rights of any person to any benefits under qualified plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the Contract. Qualified plans are also subject to distribution and
other requirements that are not incorporated in the administration of the
Contracts. Owners, participants, and Beneficiaries are responsible for
determining that contributions, distributions, and other transactions with
respect to the Contracts comply with applicable law. Following are brief
descriptions of the various types of qualified plans in connection with which
Transamerica may issue the Contract. Contracts for all types of qualified plans
may not be available. When issued in connection with a qualified plan, the
Contract will be amended as necessary to conform to the requirements of the
Code.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits corporate employers to establish
various types of retirement plans for employees. Such retirement plans may
permit the purchase of the Contract in order to provide retirement savings under
the plans. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10," also permits self-employed
individuals to establish qualified plans for themselves and their employees.
Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
to their specific needs. The Contract is designed to invest retirement savings
and not to distribute retirement benefits. Adverse tax consequences to the plan,
to the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.
Individual Retirement Annuities
The Contract is designed for use with IRA rollovers. Section 408 of the
Code permits eligible individuals to contribute to an individual retirement
program known as an Individual Retirement Annuity (each referred to as an
"IRA"). Also, distributions from certain other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. The sale of a Contract for
use with an IRA may be subject to special disclosure requirements of the
Internal Revenue Service. Purchasers of the Contract for use with IRAs will be
provided with supplemental information required by the Internal Revenue Service
or other appropriate agency. Such purchasers will have the right to revoke their
purchase within seven days of the earlier of the establishment of the IRA or
their purchase. Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000 annually,
distributions that do not satisfy specified requirements, and certain other
transactions. If a Qualified Contract is issued in connection with an employer's
Simplified Employee Pension ("SEP") plan, Owners, Annuitants and Beneficiaries
are cautioned that the rights of any person to any of the benefits under the
Qualified Contract may be subject to the terms and conditions of the plan
itself, regardless of
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the terms and conditions of the Contract. A Qualified Contract will be amended
as necessary to conform to the requirements of the Code. Purchasers should seek
competent advice as to the suitability of the Contract for use with IRAs.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
General
At the time the Initial Purchase Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Non-Qualified Contract or a
Qualified Contract. If the Initial Purchase Payment is derived from an exchange
or surrender of another annuity contract, we may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity contract. We will require that persons purchase separate
Contracts if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate Contract would require the minimum
Initial Purchase Payment stated above. Additional Purchase Payments under a
Contract must qualify for the same federal income tax treatment as the Initial
Purchase Payment under the Contract; we will not accept an additional Purchase
Payment under a Contract if the federal income tax treatment of such Purchase
Payment would be different from that of the Initial Purchase Payment.
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.
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The yield of a Sub-Account (other than the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Sub-Account
over a specified thirty-day period. The yield is calculated by assuming that the
income generated by the investment during that thirty-day period is generated
each thirty-day period over a twelve-month period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any premium taxes that
may be applicable to a particular Contract. To the extent that premium taxes are
applicable to a particular Contract, the yield of that Contract will be reduced.
For a description of the methods used to determine yield and total returns, see
the Statement of Additional Information.
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for various
periods of time including, but not limited to, a period measured from the date
the Sub-Account commenced operations. When a Sub-Account has been in operation
for 1, 5, and 10 years, respectively, the average annual total return for these
periods will be provided. The average annual total return quotations will
represent the average annual compounded rates of return that would equate an
initial investment of $1,000 to the redemption value of that investment
(excluding premium taxes) as of the last day of each of the periods for which
total return quotations are provided. For additional information regarding
yields and total returns calculated using the standard formats briefly described
herein, please refer to the Statement of Additional Information.
Performance information for any Sub-Account reflects only the performance
of a hypothetical Contract under which Account Value is allocated to a
Sub-Account during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies and characteristics of the Portfolios in which the
Sub-Account invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and promotional literature may also contain other information
including (1) the ranking of any Sub-Account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, Morningstar, Value Line, IBC/Donoghue's Money
Fund Report, Financial Planning Magazine, Money Magazine, Bank Rate Monitor,
Standard & Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate accounts
or other investment products on overall performance or other criteria, and (2)
the effect of tax deferred compounding on Sub-Account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
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We may from time to time also disclose cumulative (non-annualized) total
returns for the Sub- Accounts. We may from time to time also disclose yield and
standard total returns for any or all Sub- Accounts.
We may also advertise performance figures for the Sub-Accounts based on
the performance of a Portfolio prior to the time the Variable Account commenced
operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
DISTRIBUTION OF THE CONTRACTS
Charles Schwab & Co., Inc. ("Schwab") is the principal underwriter and
distributor of the Contracts.
Schwab is registered with the Commission as a broker/dealer and is a member of
the National
Association of Securities Dealers, Inc. ("NASD"). Its principal offices are
located at P.O. Box 7806, San
Francisco, California 94120-9327, telephone 800-838-0649.
Certain administrative services are provided by Schwab to assist
Transamerica in the processing of the Contracts, which services are described in
written agreements between Schwab and Transamerica.
VOTING RIGHTS
To the extent required by applicable law, all Portfolio shares held in the
Variable Account will be voted by us at regular and special shareholder meetings
of the respective Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or if we determine that we are allowed to
vote all Portfolio shares in our own right, we may elect to do so.
Before the Annuity Date, you, the Owner, have the voting interest. The
number of votes which are available to you will be calculated separately for
each Sub-Account. That number will be determined by applying your percentage
interest, if any, in a particular Sub-Account to the total number of votes
attributable to that Sub-Account. You hold a voting interest in each Sub-Account
to which your Contract Value is allocated. You have no voting interest after the
Annuity Date.
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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 applied on a pro rata basis to reduce the votes eligible
to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the appropriate
Portfolio.
It should be noted that generally the Funds are not required to, and do
not intend to, hold annual or other regular meetings of shareholders.
LEGAL PROCEEDINGS
There is at present no pending material legal proceeding to which the
Variable Account is a party or to which the assets of the Variable Account are
subject. We are involved in various kinds of litigation which, in management's
judgment, is not of material importance in relation to our total assets or to
the assets of the Variable Account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal securities
laws applicable to the issue and sale of the Contract has been provided by
Sutherland, Asbill & Brennan. The organization of Transamerica, Transamerica's
authority to issue the Contract, and the validity of the form of the Contract
have been passed upon by James W. Dederer, Secretary and General Counsel of
Transamerica.
ACCOUNTANTS
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The financial statements of First Transamerica Life Insurance Company at
December 31, 1995, and for each of the three years in the period then ended,
have been audited by Ernst & Young LLP, Independent Auditors, as set forth in
their report appearing in the Statement of Additional Information, and have been
included in reliance upon their reports given on their authority as experts in
accounting and auditing.
AVAILABLE INFORMATION
We have filed a registration statement ("Registration Statement") with the
Commission under the Securities Act of 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...................................... 3
ADDITIONAL DEFINITIONS............................ 3
NET INVESTMENT FACTOR............................. 4
GENERAL PROVISIONS................................ 5
CALCULATION OF PERFORMANCE DATA................... 7
HISTORIC PERFORMANCE DATA......................... 10
TERMINATION OF DOLLAR COST AVERAGING.............. 14
FEDERAL TAX MATTERS............................... 15
DISTRIBUTION OF THE CONTRACTS..................... 17
SAFEKEEPING OF ACCOUNT ASSETS..................... 17
TRANSAMERICA...................................... 17
STATE REGULATION.................................. 18
RECORDS AND REPORTS............................... 18
FINANCIAL STATEMENTS.............................. 18
Schwab Investment Advantage(TM) Variable Annuity issued by First Transamerica
Life Insurance Company, Policy form FTCG- 101-193.
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va5nlnys.3 April 20, 1996
STATEMENT OF ADDITIONAL INFORMATION
for the
SCHWAB INVESTMENT ADVANTAGE
A VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
Issued by
First Transamerica Life
Insurance Company
575 Fifth Avenue
New York, New York 10017
(212) 682-8740
This Statement of Additional Information expands upon subjects
discussed in the current Prospectus for the deferred variable annuity contract
("Contract") offered by First Transamerica Life Insurance Company
("Transamerica") and its Separate Account VA-5NLNY ("Variable Account"). You may
obtain a copy of the Prospectus dated May 1, 1996, as supplemented from time to
time, by writing to the Service Center, Charles Schwab and Company, Inc., P.O.
Box 7806, San Francisco, California 94120-9327, or calling 800-838-0649. Terms
used in the current Prospectus for the Contract are incorporated in this
Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD
BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
Dated May 1, 1996
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<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT (page 16)...................... 3
ADDITIONAL DEFINITIONS........................ 3
NET INVESTMENT FACTOR (page 19)............... 4
GENERAL PROVISIONS............................ 5
CALCULATION OF PERFORMANCE DATA............... 7
HISTORIC PERFORMANCE DATA (page 40)......... 10
TERMINATION OF DOLLAR COST AVERAGING.......... 14
FEDERAL TAX MATTERS (page 35).............. 15
DISTRIBUTION OF THE CONTRACTS (page 42)..... 17
SAFEKEEPING OF ACCOUNT ASSETS................. 17
TRANSAMERICA (page 9)........................ 17
STATE REGULATION.............................. 18
RECORDS AND REPORTS........................... 18
FINANCIAL STATEMENTS (page 8)................ 18
(Additional page references refer to the current
Prospectus.)
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<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. The term "Contract: as used herein refers to a 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: (a) Net Purchase Payments; plus
or minus (b)
any increase or decrease in the value of the Sub-Accounts due to investments
results; less (c)
charges; and less (d) withdrawals from the Sub-Accounts.
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.
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Owner's Beneficiary: The person who becomes the Owner of the Contract is the
Owner dies.
If the Contract has Joint Owners, the surviving Joint Owner will be the Owner's
Beneficiary.
Valuation Day: Any day the New York Stock Exchange is open for trading.
Valuation occurs
currently as of 4:00 p.m. ET each Valuation Day.
Valuation Period: The time interval between the closing of the New York Stock
Exchange on
consecutive Valuation Days.
Withdrawals: Refers to partial withdrawals, full surrenders, and withdrawals
under the Automatic
Payout Option that are paid in cash to you.
NET INVESTMENT FACTOR
For any Sub-Account of the Variable Account, the Net Investment Factor
for a Valuation Period, before the Annuity Date, is (a) divided by (b), minus
(c),
Where (a) is
The net asset value per share held in the Sub-Account, as of the end
of the Valuation
Period,
plus or minus
The per-share amount of any dividend or capital gain distribution
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).
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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 he 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 distribution 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 15.500000, 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 13.)
Non-Participating
The Contract is non-Participating. No dividends are payable and the
Contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of any measuring life has been misstated, the Annuity
Payments under the Contract will be whatever the Annuity Purchase Amount applied
on the Annuity Date would purchase on the basis of the correct age or sex of you
and/or the other measuring life. Any overpayments or underpayments by
Transamerica as a result of any such misstatement bay 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.
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<PAGE>
Transamerica will not be liable for obligations which depend on
receiving information from or about a Payee or measuring life until such
information is received in a satisfactory form.
Assignment
No assignment of a Contract will be binding on Transamerica unless made
in writing and given to Transamerica at its Service Center. Transamerica is not
responsible for the adequacy of any assignment. Your rights and the interest of
any Annuitant or Beneficiary will be subject to the rights of any assignee of
record.
Annual Report
At least once each Contract Year prior to the Annuity Date, you will be
given a report of the current Account Value allocated to each Sub-Account. This
report will also include any other information required by law or regulation.
Incontestability
Each Contract is incontestable from the Annuity Issue Date.
Ownership
Only you will be entitled to the rights granted by the Contract or
allowed by Transamerica under the Contract. If you die, your rights belong to
your estate unless you have previously named an Owner's Beneficiary.
Entire Contract
Transamerica issues a Contract in consideration and acceptance of the
application and making of the Initial Purchase Payment. All statements made by
or for you and the Annuitant in the application are considered representations
and not warranties. Transamerica will not use any statement in defense of a
claim unless it is made in the application and a copy of the application is
attached to the Contract when issued.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any changes in the Contract and then
only in writing. Transamerica will not be bound by any promise or 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.
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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 Office.
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.
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.
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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 tot he 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 rated 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 period by the price per unit on the last day of the period, according to the
following formula:
YIELD - 2 [ {a-b +1}6 - 1]
---
cd
Where:
a = net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period (net of
reimbursements).
c = the average daily number of Variable Accumulation Units outstanding
during the period.
d = the maximum offering price per Variable Accumulation Unit on the last
day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all Contracts.
- 52 -
52
<PAGE>
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 type 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 of more of the Sub-Accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five, and ten year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number or 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.
- 53 -
53
<PAGE>
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one, five, or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
P = a hypothetical initial payment of $1,000.
Hypothetical Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations. Such
performance information for the Sub-Account will be calculated based on the
performance of the corresponding Portfolio and the assumption that the
Sub-Account was in existence for the same periods as the Portfolio, with a level
of Contract charges currently n effect. The Portfolio used for these
calculations will be the actual Portfolio that the Sub-Account will invest in.
This type of hypothetical performance data may be disclosed on both an average
annual total return and a cumulative total return basis.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent the past performance of the Sub-Accounts
and are not indicative of future performance. The figures may reflect the waiver
of advisory fees and reimbursement of other expenses.
The performance data for the Portfolios was provided by or on behalf of
the Portfolios. The Sub-Account performance data is derived from the data
provided for the Portfolios. None of the Portfolios are affiliated with
Transamerica. None of the Portfolios is affiliated with Transamerica. In
preparing the tables below, Transamerica has relied on the data provided by the
Funds. While Transamerica has no reason to doubt the accuracy of the figures
provided by the Funds, Transamerica has not verified those figures.
Sub-Account Performance Figures
The charts below show the historical performance data for the
Sub-Accounts. Calculation of the Sub-Account unit values and performance data
began before amounts were allocated to the Sub-Accounts at the time the
identical Sub-Accounts of the Schwab Investment Advantage Variable Annuity
issued by Transamerica Occidental Life Insurance Company commenced operations.
- 54 -
54
<PAGE>
The average annual total returns for each Sub-Account is as follows:
<TABLE>
<CAPTION>
For the period from
SUB-ACCOUNT For the 1-year commencement of
(date of commencement of period ending Sub-Account operations
operation of each Sub-Account is 4/25/94) 12/31/95 to 12/31/95
<S> <C> <C>
Federated American Leaders Fund II 22.08% 20.97%
Federated Fund for U.S. Government Securities II 5.1% 5.57%
INVESCO VIF-High Yield 13.20% 10.87%
INVESCO VIF-Industrial Income 18.39% 16.63%
INVESCO VIF-Total Return 15.09% 13.48%
Janus Aspen Growth 19.03% 16.50%
Lexington Emerging Markets -7.15% -0.47%
Schwab Money Market 3.99% 3.82%
SteinRoe Capital Appreciation 6.54% 11.88%
Strong Discover Fund II 23.79% 19.32%
TCI Growth 26.30% 17.16%
</TABLE>
The cumulative total return for each Sub-Account is as follows:
<TABLE>
<CAPTION>
SUB-ACCOUNT For the period from
(date of commencement of commencement of Sub-Account
operation of each Sub-Account is 4/25/94) operations to 12/31/95
<S> <C>
Federated Equity Growth and Income 37.82%
Federated U.S. Government Bond 9.56%
INVESCO VIF-High Yield 18.98%
INVESCO VIF-Industrial Income 29.60%
INVESCO VIF-Total Return 23.75%
Janus Aspen Growth 29.35%
Lexington Emerging Markets -0.79%
Schwab Money Market 6.52%
SteinRoe Capital Appreciation 20.82%
Strong Discovery Fund II 34.66%
TCI Growth 30.58%
</TABLE>
Money Market Sub-Account Yields
The annualized yield for the Schwab Money Market Sub-Account for the
seven-day period ending December 31, 1995 was 4.21%.. The effective yield for
the Schwab Money Market Sub-Account for the seven-day period ending December 31,
1995, was 4.30%.
- 55 -
55
<PAGE>
Hypothetical Sub-Account Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations. Such
performance information for the Sub-Account will be calculated based on the
performance of the corresponding Portfolio and the assumption that the
Sub-Account was in existence for the same periods as the Portfolio, with a level
of Contract charges currently in effect. The Portfolio used for these
calculations will be the actual Portfolio that the Sub-Account will invest in.
This type of hypothetical performance data may be disclosed on both an average
annual total return and a cumulative total return basis.
These figures are not an indication of the future performance of the
Sub-Accounts. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses.
The hypothetical average annual total return for each Sub-Account is as
follows:
<TABLE>
<CAPTION>
For the
period from
For the For the commencement
1-year 5-year of Portfolio
SUB-ACCOUNT period period operations
(date of commencement of ending ending to
operation of Corresponding Portfolio) 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
SteinRoe Capital Appreciation(12/30/88 ) 11.76% 18.10% 15.18%
Strong Discovery Fund II(5/4/92) 35.05% N/A 14.15%
TCI Growth(11/20/87 ) 31.70% 14.18% 12.33%
</TABLE>
The hypothetical cumulative total return for each Sub-Account is as
follows:
<TABLE>
<CAPTION>
For the period
For the For the from
1-year 5-year commencement
SUB-ACCOUNT period period of Portfolio
(date of commencement of operations ending ending operations to
of Corresponding Portfolio) 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
SteinRoe Capital Appreciation(12/30/88 ) 11.76% 129.73% 169.00%
Strong Discovery Fund II(05/04/92) 35.05% N/A 62.30%
TCI Growth(11/20/87) 31.70% 94.10% 144.50%
</TABLE>
- 56 -
56
<PAGE>
- 57 -
57
<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
- 58 -
58
<PAGE>
(c) submit an additional Purchase Payment (subject to the
$1,000 minimum)
to make the value of the Sub-Account equal to
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 allowable
transfers per Contract Year limitation.
FEDERAL TAX MATTERS
The Contract is designed for use by individuals in retirement
plans which may or may not be plans qualifies for special tax treatment under
sections 401 or 408 of the Internal Revenue Code of 1986, as amended (the
"Code"). the ultimate effect of federal income taxes on the Account Value, on
Annuity Payments, and on the economic benefit to you, the Annuitant or the
Beneficiary may depend on the type of retirement plan for which the Contract is
purchases, 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 of other tax laws.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part
I of Subchapter L of the Code. Since he 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 any 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 tot he
- 59 -
59
<PAGE>
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-Qualifies Contracts, the investment of the Portfolio be "adequately
diversified" in accordance with Treasury regulations in order for the Contract
to qualify as annuity contracts under federal tax law. The Variable Account,
through the Portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
Portfolios' assets may be invested.
In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible 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 areas. More recently, the Treasury Department
announced, in connection with the issuance of regulations concerning investment
diversification, that those regulation "do not provide guidance concerning the
circumstances in which 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 s 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 investment to
particular subaccounts without being treated as owners of the underlying
assets."
The ownership rights under the Contract are similar to, but
different in certain respects from, those described by the IRS in rulings in
which it was determined that 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 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
- 60 -
60
<PAGE>
the Annuity Date, the entire interest in the Contract will be distributed within
five years after the date of the Owner's death.
These requirements will be considered satisfied as to any
portion of your interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
Beneficiary, provided that such distributions begin within one year of your
death. Your "designated beneficiary" is a natural person designated by you as a
Beneficiary and to whom ownership of the Contract passes by reason of death.
However, if your "designated beneficiary" is your surviving spouse, the Contract
may be continued with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are
intended to comply with the requirements of section 72(s) of the Code, although
no regulations interpreting these requirements have yet been issued.
Transamerica intends to review such provisions and modify them if necessary to
assure that they comply with the requirements of Code section 72(s) when
clarified by regulation or otherwise. Other ruled may apply to the Qualified
Contracts.
DISTRIBUTION OF THE CONTRACTS
Charles Schwab & Co., Inc. ("Schwab"), located at 101
Montgomery Street, San
Francisco, California 94104, is the principal underwriter and distributor
of the Contracts. Schwab
is registered with the Commission as a broker/dealer and is a member of the
National Association
of Securities Dealers, Inc. ("NASD"). The offering of the Contracts is
expected to be continuous.
No underwriting commissions have been paid to Schwab since commencement
of the Policies.
SAFEKEEPING OF ACCOUNT ASSETS
Title to the assets of the Variable Account is held by
Transamerica. The assets are kept separate and apart from Transamerica's general
account assets. Records are maintained of all purchases and redemptions of
Portfolio shares by each of the Sub-Accounts.
TRANSAMERICA
General Information and History
Transamerica is wholly-owned by Transamerica Occidental Life
Insurance Company, which is in turn an indirect subsidiary off 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. In addition, Transamerica Corporation has retained a
minority ownership interest in its former property and casualty insurance
subsidiary.
- 61 -
61
<PAGE>
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/r 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 financial statements of Transamerica should be considered
only as bearing on the ability of Transamerica to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
This Statement of Additional Information contains the
financial statement for the Variable Account as of December 31, 1995.
Schwab Investment Advantage(TM) Variable Annuity issued by First Transamerica
Life Insurance Company, Policy form FTCG-101-193.
- 62 -
62
<PAGE>
Audited Financial Statements
Separate Account VA-5NLNY
of First Transamerica Life Insurance Company
December 31, 1995
<PAGE>
- 2 -
REPORT OF INDEPENDENT AUDITORS
Unitholders of Separate Account VA-5NLNY of First Transamerica Life Insurance
Company Board of Directors, First Transamerica Life Insurance Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VA-5NLNY of First Transamerica Life Insurance Company (comprised of the
Federated Equity Growth and Income Fund, Federated U.S. Government Bond Fund,
INVESCO VIF-Industrial Income Portfolio, INVESCO VIF-Total Return Portfolio,
INVESCO VIF-High Yield Portfolio, Janus Aspen Growth Portfolio, Lexington
Emerging Markets Fund, Schwab Money Market Portfolio, SteinRoe Capital
Appreciation Fund, Strong Discovery Fund II, TCI Balanced Portfolio and TCI
Growth Portfolio Sub-Accounts) as of December 31, 1995, and the related
statement of operations for the year then ended, and the statements of changes
in net assets for the year then ended and the period from December 19, 1994
(commencement of operations) to December 31, 1994. These financial statements
are the responsibility of Separate Account VA-5NLNY's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the fund managers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts comprising Separate Account VA-5NLNY of First Transamerica Life
Insurance Company as of December 31, 1995, and the results of their operations
for the year then ended, and the changes in their net assets for the year ended
December 31, 1995 and the period from December 19, 1994 (commencement of
operations) to December 31, 1994 in conformity with generally accepted
accounting principles.
April 15, 1996
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
ASSETS:
<S> <C> <C> <C> <C>
Investments, at fair value--Notes 1 and 2 Federated Investors Insurance
Management Series:
Equity Growth and Income-11,352.194 shares at
$12.80 per share (cost $140,568) $ 145,308
U.S. Government Bond-3,976.051 shares at
$10.29 per share (cost $39,905) $ 40,914
INVESCO Variable Investment Funds, Inc.:
INVESCO VIF-Industrial Income-20,533.039 shares at
$12.58 per share (cost $253,092) $ 258,306
INVESCO VIF-Total Return-5,287.152 shares at
$12.14 per share (cost $61,206) $ 64,186
INVESCO VIF-High Yield-16,998.213 shares at
$11.04 per share (cost $188,615)
Janus Aspen Growth-16,490.201 shares at
$13.45 per share (cost $212,826)
Lexington Emerging Market-30,472.134 shares at
$9.38 per share (cost $293,495)
Schwab Money Market-1,154,891.370 shares at
$1.00 per share (cost $1,154,891)
SteinRoe Capital Appreciation-5,584.007 shares at
$16.33 per share (cost $83,772)
Strong Discovery Fund II-30,507.475 shares at
$13.44 per share (cost $395,029)
TCI Portfolios, Inc.:
TCI Balanced-295.083 shares at
$7.04 per share (cost $1,836)
TCI Growth-36,250.327 shares at
$12.06 per share (cost $430,643)
Due from Transamerica Life - 272 - -
Dividend accrued - - - -
------------- ------------- ------------- -------------
TOTAL ASSETS 145,308 41,186 258,306 64,186
LIABILITIES:
Due to Transamerica Life 85 23 146 39
------------- ------------- ------------- -------------
TOTAL LIABILITIES 85 23 146 39
------------- ------------- ------------- -------------
NET ASSETS $ 145,223 $ 41,163 $ 258,160 $ 64,147
============= ============= ============= =============
Accumulation units outstanding 10,878.374 3,759.299 20,026.115 5,210.993
============ ============ ============ =============
Net asset value and redemption price per unit $ 13.349691 $ 10.949555 $ 12.891173 $ 12.309991
============ ============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Market Market Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C> <C> <C> <C>
$ 187,660
$ 221,793
$ 285,829
$ 1,154,891
$ 91,187
$ 410,020
$ 2,077
$ 437,179
- - - - - - - -
- - - 707 - - - -
- ------------- ------------- ------------- --------------- ------------ ------------- ------------- -------------
187,660 221,793 285,829 1,155,598 91,187 410,020 2,077 437,179
49,428 129 165 628 27 34,602 1 244
- ------------- ------------- ------------- --------------- ------------ ------------- ------------- -------------
49,428 129 165 628 27 34,602 1 244
- ------------- ------------- ------------- --------------- ------------ ------------- ------------- -------------
$ 138,232 $ 221,664 $ 285,664 $ 1,154,970 $ 91,160 $ 375,418 $ 2,076 $ 436,935
============= ============= ============= =============== ============ ============= ============= =============
11,645.434 17,259.094 29,955.147 1,085,225.895 8,062.306 25,802.320 176.896 34,669.264
============= ============= ============= =============== ============ ============= ============= =============
$ 11.870090 $ 12.843319 $ 9.536380 $ 1.064267 $ 11.306890 $ 14.549788 $ 11.735577 $ 12.602957
============= ============= ============= =============== ============ ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C> <C>
Investment Income--Note 2 $ 800 $ 1,156 $ 3,932 $ 1,264
Expenses--Note 3:
Mortality and expense risk charge 249 148 549 163
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) 551 1,008 3,383 1,101
Net realized and unrealized gain (loss) on investments:
Realized gain on investment transactions 1,678 4 8,725 276
Unrealized appreciation (depreciation) of investments 4,740 1,009 5,214 2,980
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS 6,418 1,013 13,939 3,256
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $ 6,969 $ 2,021 $ 17,322 $ 4,357
============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Market Market Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
<C> <C> <C> <C> <C> <C> <C> <C>
$ 8,641 $ 4,314 $ 2,788 $ 31,054 $ 779 $ 5,237 $ 39 $ -
598 713 750 4,892 325 843 12 926
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,043 3,601 2,038 26,162 454 4,394 27 (926)
9,559 8,359 984 - 751 10,964 1 10,086
(955) 8,967 (7,666) - 7,415 14,991 241 6,536
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,604 17,326 (6,682) - 8,166 25,955 242 16,622
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 16,647 $ 20,927 $ (4,644) $ 26,162 $ 8,620 $ 30,349 $ 269 $ 15,696
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Increase in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 551 $ 1,008 $ 3,383 $ 1,101
Realized gain on investment transactions 1,678 4 8,725 276
Unrealized appreciation (depreciation) of investments 4,740 1,009 5,214 2,980
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS 6,969 2,021 17,322 4,357
Change from accumulation unit transactions--Note 5 138,254 39,142 240,838 59,790
------------ ------------ ------------ ------------
TOTAL INCREASE
IN NET ASSETS 145,223 41,163 258,160 64,147
Net assets at beginning of year - - - -
------------ ------------ ------------ ------------
NET ASSETS AT
END OF YEAR $ 145,223 $ 41,163 $ 258,160 $ 64,147
============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Market Market Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
<C> <C> <C> <C> <C> <C> <C> <C>
$ 8,043 $ 3,601 $ 2,038 $ 26,162 $ 454 $ 4,394 $ 27 $ (926)
9,559 8,359 984 - 751 10,964 1 10,086
(955) 8,967 (7,666) - 7,415 14,991 241 6,536
- ------------- ------------- ------------- -------------- ------------- ------------- ------------ -------------
16,647 20,927 (4,644) 26,162 8,620 30,349 269 15,696
121,585 200,737 290,308 1,078,808 82,540 345,069 1,807 421,239
- ------------- ------------- ------------- -------------- ------------- ------------- ------------ -------------
138,232 221,664 285,664 1,104,970 91,160 375,418 2,076 436,935
- - - 50,000 - - - -
- ------------- ------------- ------------- -------------- ------------- ------------- ------------ -------------
$ 138,232 $ 221,664 $ 285,664 $ 1,154,970 $ 91,160 $ 375,418 $ 2,076 $ 436,935
============= ============= ============= ============== ============= ============= ============ =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from December 19, 1994 (commencement of operations) to December 31, 1994
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C> <C>
Unsettled deposits
TOTAL INCREASE
IN NET ASSETS
Net assets at beginning of period
NET ASSETS AT
END OF PERIOD $ - $ - $ - $ -
============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INVESCO
VIF Janus Lexington Schwab SteinRoe Strong
High Aspen Emerging Money Capital Discovery TCI TCI
Yield Growth Market Market Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000
50,000
-
$ - $ - $ - $ 50,000 $ - $ - $ - $ -
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1--ORGANIZATION
Separate Account VA-5NLNY of First Transamerica Life Insurance Company
("Separate Account") was established by First Transamerica Life Insurance
Company ("Transamerica Life") as a separate account under the laws of the State
of New York 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 December 19, 1994.
In accordance with the terms of the Contract, all payments allocated to the
Separate Account by contract owners must be allocated to purchase units of any
or all of the Separate Account's twelve sub-accounts, each of which invests
exclusively in a specific corresponding mutual fund portfolio. The mutual fund
portfolios are: Federated Equity Growth and Income Fund, Federated U.S.
Government Bond Fund, INVESCO VIF-High Yield Portfolio, INVESCO VIF-Industrial
Income Portfolio, INVESCO VIF-Total Return 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 (together "the Funds"). The
Funds are open-end, diversified investment companies registered under the
Investment Company Act of 1940.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Separate Account have been prepared
on the basis of generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein. The
accounting principles followed and the methods of applying those principles are
presented below:
Investment Valuation--Investments in the Funds' shares are carried at fair (net
asset) value. Realized investment gains or losses on investments are determined
on a specific identification basis which approximates average cost. Investment
transactions are accounted for on the date the order to buy or sell is executed
(trade date). Investments have a cost basis for federal income tax purposes of
$3,255,878.
Investment Income--Investment income consists of dividend income (both ordinary
and capital gains) and is recognized as declared payable by the Funds. All
distributions received are reinvested in the respective sub-accounts.
Federal Income Taxes--Operations of the Separate Account are part of, and will
be taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. No income taxes are payable by the
Separate Account.
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
NOTE 3--EXPENSES AND CHARGES
Mortality and expense risk charges are deducted by Transamerica Life from each
sub-account of the Separate Account on a daily basis which is equal, on an
annual basis, to 0.85% of the daily net asset value of the sub-account. This
amount can never increase and is paid to Transamerica Life. No administrative
expense charge is currently deducted from each sub-account but Transamerica Life
may deduct such a charge not to exceed a maximum effective annual rate of .15%
of the daily net asset value of the sub-account.
The following charges are deducted from a contract holder's account by
Transamerica Life and not directly from the Separate Account. An annual contract
charge of $25 (or 2% of the account value, if less) is deducted at the end of
each contract year. Additionally, there is a $10 (or 2% of the transfer amount,
if less) fee for each transfer in excess of 10 in any contract year.
NOTE 4--REMUNERATION
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
NOTE 5--ACCUMULATION UNITS
The change in accumulation units and amounts is as follows:
<TABLE>
<CAPTION>
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Year Ended December 31, 1995
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 5,112.972 361.570 7,444.353 -
Units redeemed - - - -
Units transferred 5,765.402 3,397.729 12,581.762 5,210.993
------------------ ------------------ ------------------ -------------------
NET INCREASE 10,878.374 3,759.299 20,026.115 5,210.993
================== ================== ================== ===================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Market Market
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 799.529 2,648.407 4,810.144 2,734,101.749
Units redeemed - - - (285,697.353)
Units transferred 10,845.905 14,610.687 25,145.003 (1,363,178.501)
------------------- ------------------- ------------------ ------------------
NET INCREASE 11,645.434 17,259.094 29,955.147 1,085,225.895
=================== =================== ================== ===================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Accumulation Units:
Units sold 2,643.631 6,366.662 - 12,143.219
Units redeemed - - - -
Units transferred 5,418.675 19,435.658 176.896 22,526.045
------------------- ------------------- ------------------- ----------------
NET INCREASE 8,062.306 25,802.320 176.896 34,669.264
=================== =================== =================== ================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
<TABLE>
<CAPTION>
NOTE 5--ACCUMULATION UNITS (continued)
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
Year Ended December 31, 1995
Amounts:
<S> <C> <C> <C> <C>
Sales $ 67,154 $ 3,923 $ 93,148 $ 135
Redemptions - - - -
Transfers 71,100 35,219 147,690 59,655
------------------- ------------------- ------------------- -------------------
NET INCREASE $ 138,254 $ 39,142 $ 240,838 $ 59,790
=================== =================== =================== ===================
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Market Market
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 4,181 $ 32,806 $ 45,014 $ 2,803,883
Redemptions - - - (298,649)
Transfers 117,404 167,931 245,294 (1,426,426)
------------------ ------------------- ------------------- ------------------
NET INCREASE $ 121,585 $ 200,737 $ 290,308 $ 1,078,808
================== =================== =================== ===================
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Amounts:
Sales $ 28,732 $ 87,586 $ - $ 152,204
Redemptions - - - -
Transfers 53,808 257,483 1,807 269,035
------------------- ------------------- ------------------- -------------------
NET INCREASE $ 82,540 $ 345,069 $ 1,807 $ 421,239
=================== =================== =================== ===================
</TABLE>
<PAGE>
SEPARATE ACCOUNT VA-5NLNY OF FIRST TRANSAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1995
NOTE 6--INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1995 were:
Federated Federated INVESCO INVESCO
Equity U.S. VIF VIF
Growth and Government Industrial Total
Income Bond Income Return
Sub-account Sub-account Sub-account Sub-account
<S> <C> <C> <C> <C>
Aggregate purchases $ 167,375 $ 63,754 $ 325,920 $ 75,242
=============== =============== =============== ===============
Aggregate proceeds from sales $ 28,485 $ 23,854 $ 76,346 $ 14,281
=============== =============== =============== ===============
INVESCO
VIF Janus Lexington Schwab
High Aspen Emerging Money
Yield Growth Market Market
Sub-account Sub-account Sub-account Sub-account
Aggregate purchases $ 292,954 $ 309,216 $ 312,013 $ 3,982,592
=============== =============== =============== ===============
Aggregate proceeds from sales $ 107,700 $ 104,749 $ 19,501 $ 2,827,700
=============== =============== =============== ===============
SteinRoe Strong
Capital Discovery TCI TCI
Appreciation Fund II Balanced Growth
Sub-account Sub-account Sub-account Sub-account
Aggregate purchases $ 136,470 $ 450,614 $ 1,846 $ 595,911
=============== =============== =============== ===============
Aggregate proceeds from sales $ 53,449 $ 66,549 $ 11 $ 175,354
=============== =============== =============== ===============
</TABLE>
<PAGE>
Audited Financial Statements
First Transamerica Life
Insurance Company
December 31, 1995
<PAGE>
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
Audited Financial Statements
December 31, 1995
Report of Independent Auditors............................ 1
Balance Sheet............................................. 2
Statement of Income....................................... 3
Statement of Shareholder's Equity......................... 4
Statement of Cash Flows................................... 5
Notes to Financial Statements............................. 6
<PAGE>
1
REPORT OF INDEPENDENT AUDITORS
Transamerica Corporation
and
Board of Directors
First Transamerica Life Insurance Company
We have audited the accompanying balance sheet of First Transamerica Life
Insurance Company as of December 31, 1995 and 1994, and the related statements
of income, shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Transamerica Life
Insurance Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note A, in 1994, the Company changed its method of accounting
for certain debt securities effective January 1, 1994.
February 14, 1996
<PAGE>
<TABLE>
<CAPTION>
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
BALANCE SHEET
December 31
1995 1994
--------------------- --------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 433,428 $ 329,118
Investment real estate 363 376
Policy loans 10,764 9,341
--------------------- ---------------------
444,555 338,835
Cash 16,257 15,777
Accrued investment income 7,511 6,160
Accounts receivable 4,542 3,750
Reinsurance recoverable on paid and unpaid losses 11,136 14,426
Deferred policy acquisitions costs 35,588 61,435
Deferred tax assets - 3,867
Other assets 5,993 7,062
Separate account assets 109,222 55,538
--------------------- ---------------------
$ 634,804 $ 506,850
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 420,826 $ 370,483
Reserves for future policy benefits 10,075 9,419
Policy claims and other 6,707 7,072
--------------------- ---------------------
437,608 386,974
Income tax liabilities 4,533 1,034
Accounts payable and other liabilities 17,172 14,986
Separate account liabilities 109,222 55,538
--------------------- ---------------------
568,535 458,532
Shareholder's equity:
Common Stock ($1,000 par value):
Authorized--2,000 shares
Issued and outstanding--2,000 shares 2,000 2,000
Additional paid-in capital 52,320 47,320
Retained earnings 5,068 2,910
Net unrealized investment gains (losses) 6,881 (3,912)
--------------------- ---------------------
66,269 48,318
--------------------- ---------------------
$ 634,804 $ 506,850
===================== =====================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
Year Ended December 31
1995 1994 1993
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 13,495 $ 10,836 $ 7,908
Net investment income 30,897 26,468 23,065
Net realized investment gains (losses) 19 (36) 809
--------------- --------------- ---------------
TOTAL REVENUES 44,411 37,268 31,782
Benefits:
Benefits paid or provided 31,984 26,628 22,948
Increase (decrease) in policy reserves and liabilities 316 381 (535)
--------------- --------------- ---------------
32,300 27,009 22,413
Expenses:
Amortization of deferred policy acquisition costs 2,197 1,536 1,767
Salaries and salary related expenses 3,206 2,726 2,361
Other expenses 3,219 3,499 3,057
--------------- --------------- ---------------
8,622 7,761 7,185
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 40,922 34,770 29,598
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 3,489 2,498 2,184
Provision for income taxes 1,331 986 864
--------------- --------------- ---------------
NET INCOME $ 2,158 $ 1,512 $ 1,320
=============== =============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF SHAREHOLDER'S EQUITY
Net
Unrealized
Additional Investment
Common Stock Paid-in Retained Gains
Shares Amount Capital Earnings (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 2,000 $ 2,000 $ 36,520 $ 78
Net income 1,320
Capital contributions from parent 3,400
------------ ------------ ------------
Balance at December 31, 1993 2,000 2,000 39,920 1,398
Cumulative effect of change in
accounting for investments $ 12,075
Net income 1,512
Capital contributions from parent 7,400
Change in net unrealized
investment gains (losses) (15,987)
Balance at December 31, 1994 2,000 2,000 47,320 2,910 (3,912)
Net income 2,158
Capital contributions from parent 5,000
Change in net unrealized
investment gains (losses) 10,793
Balance at December 31, 1995 2,000 $ 2,000 $ 52,320 $ 5,068 $ 6,881
============ ============ ============ =========== ==============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Year Ended December 31
1995 1994 1993
--------------- --------------- ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 2,158 $ 1,512 $ 1,320
Adjustments to reconcile net income to net cash
used by operating activities:
Changes in:
Reinsurance recoverable and accounts
receivable 2,498 (8,129) (7,922)
Accrued investment income (1,351) (1,099) (777)
Policy liabilities 11,693 9,489 17,174
Other assets, accounts payable and other
liabilities, and income taxes 786 10,791 (530)
Policy acquisition costs deferred (12,126) (14,387) (12,953)
Amortization of deferred policy acquisition costs 2,197 1,536 1,767
Net realized losses (gains) on investment transactions (19) 36 (809)
Other (698) 92 (257)
--------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 5,138 (159) (2,987)
INVESTMENT ACTIVITIES
Purchases of securities and other investments (79,260) (66,255) (77,673)
Sales of investments 28,738 20,742 26,886
Maturities of securities 2,000 - 800
Other (77) 3,852 (3,358)
--------------- --------------- ---------------
NET CASH USED
BY INVESTING ACTIVITIES (48,599) (41,661) (53,345)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 65,019 67,951 75,097
Withdrawals from policyholder contract deposits (26,078) (22,729) (17,747)
Capital contributions from parent 5,000 7,400 3,400
--------------- --------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 43,941 52,622 60,750
--------------- --------------- ---------------
INCREASE IN CASH 480 10,802 4,418
Cash at beginning of year 15,777 4,975 557
--------------- --------------- ---------------
CASH AT END OF YEAR $ 16,257 $ 15,777 $ 4,975
=============== =============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: First Transamerica Life Insurance Company (the "Company") is
domiciled in New York. The Company is a
wholly owned subsidiary of Transamerica Occidental Life Insurance Company
("TOLIC"), which is an indirect
subsidiary of Transamerica Corporation.
The Company engages in providing life insurance, annuity products, reinsurance,
and structured settlements. The Company's customers are primarily in the state
of New York.
Basis of Presentation: The accompanying 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 financial
statements are based on the management's best estimates and judgment. Actual
results could differ from those estimates.
New Accounting Standards: In March 1995, the Financial Accounting Standards
Board issued a new standard on accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The Company will adopt the
standard in 1996. The standard 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. When adopted, this
standard is not expected to have a material effect on the financial position or
results of operations of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for certain investments in debt and equity securities
which requires the Company to report at fair value, with unrealized gains and
losses excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs with any resultant adjustment also excluded
from earnings and reported on an after tax basis in shareholder's equity. As of
January 1, 1994, the impact of adopting the standard was to increase
shareholder's equity by $12.1 million (net of deferred taxes of $6.5 million)
with no effect on net income.
Investments: Investments are reported on the following bases:
Fixed maturities --All debt securities are classified as available for
sale and carried at fair value effective as of January 1, 1994. The
Company does not carry any debt securities principally for the purpose of
trading. Prepayments are considered in establishing amortization periods
for premiums and discounts and amortized cost is further adjusted for
other-than-temporary fair value declines.
Investment real estate--at cost, less allowance for depreciation and
possible impairment.
Policy loans--at unpaid balances.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Realized gains and losses on disposal of investments are determined on a
specific identification basis. Changes in fair values of fixed maturities
available for sale are included in net unrealized investment gains or losses
after adjustment of deferred policy acquisition costs and deferred income taxes
as a separate component of shareholder's equity and, accordingly, have no effect
on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting and issue 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 generally 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
variable annuity contracts. The assets held in these Separate Accounts are
invested in various mutual fund portfolios managed by third party companies. 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
and single premium immediate annuities. Policyholder contract deposits on
universal life and investment products represent premiums received plus
accumulated interest, less mortality charges on universal life products and
other administration charges as applicable under the contract. Interest credited
to these policies ranged from 5.5% to 7.8% in 1995 and 1994 and from 5.5% to
8.5% in 1993.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and 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. The initial interest
assumptions range from 4.0% to 5.5%.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: The Company is included in the consolidated federal income tax
return of TOLIC which, with its domestic subsidiaries and affiliates, is
included in the consolidated federal income tax returns filed by Transamerica
Corporation, which by the terms of a tax sharing agreement generally requires
the Company 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.
Fair values for policy loans are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar loans
to borrowers.
The carrying amounts of cash and accrued investment income approximate their
fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying balance sheet.
Reclassifications: Certain reclassifications of prior year amounts have been
made to conform with the 1995 presentation.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE B--INVESTMENTS
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale are as follows
(in thousands):
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C>
corporations and agencies $ 1,356 $ 117 $ 1,473
Obligations of states and political
subdivisions 14,381 522 14,903
Corporate securities 210,276 20,010 $ 63 230,223
Public utilities 104,238 9,190 52 113,376
Mortgage-backed securities 71,513 1,942 2 73,453
------ ----- - --------
$ 401,764 $ 31,781 $ 117 $ 433,428
================ ================ ================ ================
December 31, 1994
U.S. Treasury securities and
obligations of U.S. government
corporate agencies $ 10,868 $ 237 $ 10,631
Corporate securities 170,261 $ 1,101 9,221 162,141
Public utilities 81,489 43 7,287 74,245
Mortgage-backed securities 87,219 125 5,243 82,101
------ --- ----- --------
$ 349,837 $ 1,269 $ 21,988 $ 329,118
================ ================ ================ ================
</TABLE>
The cost and fair value of fixed maturities available for sale at December 31,
1995, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Due in 1996 $ 2,504 $ 2,536
Due in 1997-2000 31,519 33,796
Due in 2001-2005 71,233 76,551
Due after 2005 224,995 247,092
---------------- ----------------
330,251 359,975
Mortgage-backed securities 71,513 73,453
---------------- ----------------
$ 401,764 $ 433,428
================ ================
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE B--INVESTMENTS (Continued)
As of December 31, 1995, the Company held investments in three issuers, other
than the United States Government or a United States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands):
Carrying Value Name of Issuer
$ 11,047 General Public Utilities
8,305 Cinergy
7,958 Chemical Banking Corp.
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $1.4 million at December 31, 1995.
<TABLE>
<CAPTION>
Net investment income by major investment category is summarized as follows (in
thousands):
1995 1994 1993
-------------- -------------- ---------
<S> <C> <C> <C>
Fixed maturities $ 30,329 $ 26,085 $ 22,487
Short-term investments 524 133 469
Other investments 58 443 238
-------------- -------------- --------------
30,911 26,661 23,194
Investment expenses (14) (193) (129)
-------------- -------------- --------------
Net investment income $ 30,897 $ 26,468 $ 23,065
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
The following summarizes realized investment gains and losses and other
information related to investments (in thousands):
1995 1994 1993
-------------- -------------- ---------
Net gains (loss) on disposition of investment
<S> <C> <C> <C>
in fixed maturities $ 19 $ (36) $ 809
Proceeds from disposition of investment in
fixed maturities 30,738 20,742 27,686
Gross gains on disposition of investment in
fixed maturities 283 - 819
Gross losses on disposition of investment in
fixed maturities 264 36 10
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The components of change in net unrealized investment gains (losses) in the
accompanying statement of shareholder's equity are as follows (in thousands):
1995 1994 1993
-------------- -------------- ---------
Change in unrealized gains (loss)
<S> <C> <C> <C>
on fixed maturities $ 52,381 $ (39,296) $ 12,040
Change in related DPAC adjustments (35,776) 14,700 -
Related deferred taxes (5,812) 8,609 (4,212)
-------------- -------------- -------------
$ 10,793 $ (15,987) $ 7,826
============== ============== ==============
</TABLE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
<TABLE>
<CAPTION>
Significant components of changes in DPAC are as follows (in thousands):
1995 1994 1993
-------------- -------------- ---------
<S> <C> <C> <C>
Balance at beginning of year $ 61,435 $ 33,884 $ 22,698
Amounts deferred:
Commissions 8,645 10,617 8,025
Other 3,481 3,770 4,928
Amortization (2,197) (1,536) (1,767)
Fair value adjustment (35,776) 14,700 -
-------------- -------------- --------------
Balance at end of year $ 35,588 $ 61,435 $ 33,884
============== ============== ==============
</TABLE>
NOTE D--POLICY LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1995 1994
<S> <C> <C>
Liabilities for investment-type products $ 272,839 $ 235,203
Liabilities for non-traditional life insurance
products 147,987 135,280
------------- --------------
$ 420,826 $ 370,483
============= ==============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE E--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1995 1994
<S> <C> <C>
Current tax liabilities $ 512 $ 1,034
Deferred tax liabilities 4,021 -
------------- --------------
$ 4,533 $ 1,034
============= ==============
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1995 1994
Deferred policy acquisition costs $ 16,899 $ 13,992
Life insurance policy liabilities (16,563) (15,740)
Unrealized investment gains (losses) 3,705 (2,106)
Other - net (20) (13)
------------- -------------
$ 4,021 $ (3,867)
============= =============
</TABLE>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the balance sheet.
<TABLE>
<CAPTION>
Components of provisions for income taxes (benefits) are as follows (in
thousands):
1995 1994 1993
-------------- -------------- ---------
<S> <C> <C> <C>
Current tax expense $ (665) $ 1,016 $ 1,446
Deferred tax expense 1,996 (30) (680)
Adjustment for enacted change in tax laws - - 98
-------------- -------------- --------------
$ 1,331 $ 986 $ 864
============== ============== ==============
</TABLE>
The differences between federal income taxes computed at the statutory rate and
provision for income taxes are primarily due to the amortization of goodwill.
An income tax refund of $0.1 million, and income tax payments of $1.1 million
and $0.9 million in 1995, 1994 and 1993, respectively, was received from and
paid to TOLIC.
NOTE F--REINSURANCE
The Company is involved in the cession of reinsurance to affiliated 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>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
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
Gross Ceded to Affiliated Net
Amount TOLIC Companies Amount
1995
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 4,085,406 $ 198,199 $ 2,643,198 $ 1,244,009
================== ================= ================== ==================
Premiums and other
considerations $ 20,336 $ 0 $ 6,841 $ 13,495
================== ================= ================== ==================
Benefits paid or
provided $ 41,258 $ 9,274 $ 0 $ 31,984
================== ================= ================== ==================
1994
Life insurance in force,
at end of year $ 5,399,638 $ 687,608 $ 2,473,081 $ 2,238,949
================== ================= ================== ==================
Premiums and other
considerations $ 20,174 $ 2,559 $ 6,779 $ 10,836
================== ================= ================== ==================
Benefits paid or
provided $ 37,700 $ 11,072 $ 0 $ 26,628
================== ================= ================== ==================
1993
Life insurance in force,
at end of year $ 5,407,563 $ 892,003 $ 2,551,143 $ 1,964,417
================== ================= ================== ==================
Premiums and other
considerations $ 20,231 $ 3,598 $ 8,725 $ 7,908
================== ================= ================== ==================
Benefits paid or
provided $ 30,875 $ 7,927 $ 0 $ 22,948
================== ================= ================== ==================
</TABLE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates (the "Plan").
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 Plan 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 primarily invested in publicly traded stocks
and bonds.
The Company's pension costs charged to income were not significant.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
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.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with TOLIC and certain of its other
affiliates in the normal course of operations, including reinsurance
transactions, computer services, investment services and advertising services.
The reinsurance recoverable from TOLIC, including the amount receivable for
policy claims paid, amounted to $1.9 million and $4.3 million at December 31,
1995 and 1994, respectively.
NOTE I--LEASES
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expense for properties occupied by the Company was
$0.9 million, $1.0 million and $0.8 million in 1995, 1994 and 1993,
respectively. The following is a schedule by years of future minimum rental
payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1995 (in
thousands):
1996 $ 821
1997 843
1998 843
1999 671
2000 384
Sublease revenue (875)
$ 2,687
NOTE J--LITIGATION
The Company is a defendant in various legal actions arising from the normal
course of operations. Contingent liabilities arising from litigation are not
considered material in relation to the financial position or results of
operations of the Company.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE K--REGULATORY MATTERS
The Company is subject to state insurance laws and regulations, principally
those of the State of New York. 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. Those statutory amounts are determined in conformity
with statutory accounting practices prescribed or permitted by the Department of
Insurance of New York ("New York Department"). Currently, no dividends can be
paid by the Company without prior approval of New York Department.
<TABLE>
<CAPTION>
The Company's statutory net income income (loss) and capital and surplus are
summarized as follows (in thousands):
1995 1994 1993
-------------- -------------- ---------
<S> <C> <C> <C>
Statutory net income (loss) $ 1,779 $ (5,238) $ (5,568)
Statutory capital and surplus, at end of year 22,713 16,612 14,556
</TABLE>
NOTE L--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
1995 1994
------------------------------- ------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities $ 433,428 $ 433,428 $ 329,118 $ 329,118
Policy loans 10,764 10,910 9,341 8,726
Cash 16,257 16,257 15,777 15,777
Accrued investment income 7,511 7,511 6,160 6,160
Financial Liabilities:
Liabilities for investment-type
contracts:
Single and flexible premium
deferred annuities 154,292 151,433 145,674 146,183
Single premium immediate
annuities 118,547 114,553 89,529 71,670
</TABLE>
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(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
First Transamerica Life Insurance
Company authorizing establishment of the
Variable Account. (5)
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement
between First Transamerica Life
Insurance Company and Charles
Schwab & Co., Inn (10)
(b) Agency Agreement between First
Transamerica Life Insurance
Company and Charles Schwab & Co., Inn (10)
(4) Group Contract Form, Certificate Form, and
Endorsements. (6)
(a) Group Contract Form and Endorsements.
(i)Form of Flexible Purchase
Payment Deferred Group
Annuity
Contract (Form No. FTGP-501-193).
(ii)Form of Dollar Cost Averaging
Option Endorsement to
Contract
(Form No. FTGE-003-193).
(iii)Form of Automatic Payout
Option Endorsement to
Contract
(Form No. FTGE-004-193).
(iv)Form of Systematic Withdrawal
Option Endorsement to
Contract
(Form No. FTGE-005-193).
(b) Certificate of Participation Form
and Endorsements.
(i)Form of Certificate of
Participation (Form No.
FTCG-101-193).
(ii)Form of IRA Endorsement to
Certificate (Form No.
FTCE-005-193).
(iii)Form of Benefit Distribution
Endorsement to Certificate
(Form
No. FTCE 006 193).
(iv)Form of Dollar Cost Averaging
Option Endorsement to
Certificate (Form No. FTCE-007-193).
(v)Form of Automatic Payout Option Endorsement to
Certificate
(Form No. FTCE-009-193).
(vi)Form of Systematic Withdrawal
Option Endorsement to
- 63 -
<PAGE>
Certificate (Form No. FTCE 009-193).
(vii) Form of Annuity Rate Table
Endorsement to Certificate
(Form No. FTCE-010-193).
(5) (a) Form of Acceptance of Group Annuity
Contract
(Form No. FTGA-003193) (6)
(b) Form of Variable Annuity Application
to Certificate (Form No. FTGA
004-193). (6)
(6) (a) Declaration of Intention and Charter
of First Transamerica Life
Insurance Company. (1)
(b) By-Laws of First Transamerica Life
Insurance Company. (1)
(7) Not applicable.
(8) (a) Draft Participation Agreement among SteinRoe Variable Investment
Trust, Stein Roe & Farnam Incorporated, First Transamerica Life
Insurance Company, and Charles Schwab & Co., Ink (8)
(b) Draft Participation Agreement among INVESCO Variable Investment
Funds, Inc., INVESCO Funds Group, Inc. First Transamerica Life
Insurance Company, and Charles Schwab & Co., Ink (8)
(c) Draft Participation Agreement among Schwab Annuity Portfolios, Charles
Schwab Investment Management, Inc. First Transamerica Life Insurance
Company, and Charles Schwab & Co., Inc. (8)
(d) Draft Participation Agreement among Lexington Emerging Markets Fund,
Inc., Lexington Management Corporation, First Transamerica Life
Insurance Company, and Charles Schwab & Co., Inc. (8)
(e) Draft Participation Agreement among TCI Portfolios, Inc. Investors
Research Corporation, First Transamerica Life Insurance Company, and
Charles Schwab & Co., Inc. (8)
(f) Draft Participation Agreement among Insurance Management Series,
Federated Advisers, Federated Securities Corporation, First Transamerica
Life Insurance Company, and Charles Schwab & Co., Ink (8)
(g) Drab Participation Agreement among Strong Discovery Fund II, Inc.
Strong/Corneliuson Capital Management, Inc. Strong Funds Distributors,
First Transamerica Life Insurance Company, and Charles Schwab & Co.,
Ink (8)
(h) Draft Participation Agreement among Janus Aspen Series, Janus Capital
Corporation, First Transamerica Life Insurance Company, and Charles
Schwab & Co., Inc. (8)
(i) Draft Administrative Services Agreement between Charles Schwab &
Co., Inc. and First Transamerica Life Insurance Company. (8)
(9) Opinion and Consent of Counsel. (10)
(10) (a) Consent of Counsel. (10)
(b) Consent of Independent Auditors. (10)
(11) No financial statements are omitted from item 23.
- 64 -
<PAGE>
(12) Not applicable.
(13) Performance Data Calculations. (7) (9)
(14) Not applicable.
(15) Powers of Attorney.
Marc C. Abrahms (6) James Inzerillo (6)
Barbara Biben (4) Daniel E. Jund (10)
James T. Byrne, Jr. (6) Cecelia Kempler (4)
Thomas J. Cusack (10) Charles E. LeDoyen (3)
James W. Dederer (3) John A. Paganelli (3)
John A. Fibiger (3) James B. Roszak (3)
David E. Gooding (3)
(1) 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-2NLNY
on Form N-4, File No. 33-55154 (December 1, 1992).
(2) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 1 to the
Registration Statement of First Transamerica Life Insurance
Company's Separate Account VA
2LNY on Form N-4, File No. 33-55152 (June 8, 1993).
(3) Incorporated by reference to the like-numbered exhibit to
Pre-Effective Amendment No.1 to the
Registration Statement of First Transamerica Life Insurance
Company's Separate Account VA
2LNY on Form N-4, File No. 33-55152 (February 10, 1993).
(4) Incorporated by reference to the like-numbered exhibit to
Pre-Effective Amendment No. 1 the
Registration Statement of First Transamerica Life Insurance
Company's Separate Account VA
2NLNY on Form N-4, File No. 33-55154 (October 18, 1993).
(5) Incorporated by reference to the like-numbered exhibit to the
initial filing of the Registration Statement of First
Transamerica Life Insurance Company's Separate Account
VA-5NLNY on Form N-4, File No. 33-71748 (November 17, 1993).
(6) Incorporated by reference to the like-numbered exhibit to
Pre-Effective Amendment No. 1 to the
Registration Statement of First Transamerica Life Insurance
Company's Separate Account VA
5NLNY, on Form N-4, File No. 33-71748 (February 2, 1994).
(7) 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-5 on Form 4, File No. 33-71746 (May 2, 1994).
(8) Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment
No. 1 to this Form N-4 Registration Statement, File No.
33-71748 (October 4, 1994).
(9) Incorporated by reference to the like-numbered exhibit to
Post-Effective
Amendment No. 2 to this Form N-4 Registration Statement,
File No. 33-71748 (April 28, 1995).
(10) Filed herewith.
- 65 -
<PAGE>
Item 25. Directors and Officers of the Depositor
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION AND OFFICES WITH DEPOSITOR
James W. Dederer, CLU* Chairman of the Board, General
Counsel, Corporate Secretary and Director
John A. Paganelli** President, Chief Executive Officer and Director
William Hurst* Assistant Secretary
Sally Yamada Treasurer
Wilbur L Fulmer* Tax Officer
Alexander Smith** Vice President and Controller
William J. Lyons** Vice President and Chief Underwriter
Joan L Robinson** Second Vice President
Marc C. Abrahms*** Director
David E. Gooding* Director
Thomas J. Cusack* Director
Charles E. LeDoyen* Director
John Fibiger* Director
James B. Roszak* Director
James Inzerillo++ Director
Daniel E. Jund* Director
James T. Byrne, Jr.**** Director
Cecelia Kempler +++ Director
Barbara Biben ++++ Director
* The address of the officers so indicated is 1150 South Olive Street, Los
Angeles, CA 90015 ** The address of the officers so indicated is 575 Fifth
Avenue, New York, NY 10017 *** The address of the director so indicated is 335
North Main Street, West Hartford, CT 06117 **** The address of the director so
indicated is 280 Park Avenue, New York, NY 10017 + The address of the director
so indicated is 1290 Avenue of the Americas, New York, NY 10104 ++ The address
of the director so indicated is 12 Wayburn Road, Scarsdale, NY 10583
(home address-retired)
+++ The address of the director so indicated is 125 West 55th Street, New York,
NY 10019 ++++ The address of the director o indicated is 317 Alexander Street,
Rochester, NY 14604
- 66 -
<PAGE>
Item 26. Person Controlled by or Under Common Control With the Depositor or
Registrant.
The Depositor, First Transamerica Life Insurance Company
(Transamerica), is wholly owned by Transamerica Occidental Life Insurance
Company. The Registrant is a segregated asset account of Transamerica.
The following chart indicates the persons controlled by or
under common control with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
*Coast Service Company - California
*Inter-America Corporation - California
*LMS Co. - California
*Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. (25% ownership) - Delaware
River Thames Insurance Company Ltd. (51% ownership) - United Kingdom
*RTI Holdings, Inc. - Delaware
*TCS Inc. - Delaware
*Trans International Entities Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
*Transamerica Corporation (Oregon) - Oregon
ss.Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
Transamerica Financial Services Finance Company - Delaware (TFG owns
100% of common stock; TFC owns 100% of preferred stock)
Transamerica HomeFirst, Inc. - California
Transamerica Finance Corporation - Delaware
- 67 -
<PAGE>
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Corporation, California -
California
Transamerica Insurance Finance Corporation, Canada -
Canada
Transamerica Insurance Finance Company (U.K.) - Maryland
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
Transamerica Insurance Administrators, Inc. - Delaware
First Credit Corporation - Delaware
*Pacific Agency, Inc. - Indiana
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation - Washington
Transamerica Financial Consumer Discount Company - Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services - Wyoming
Transamerica Financial Services Company - Ohio
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - Arizona
Transamerica Financial Services, Inc. - Hawaii
Transamerica Financial Services, Inc. - Kansas
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services (Inc.) - Oklahoma
Transamerica Financial Services of Dover, Inc. - Delaware
TELCO Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
BWAC Seventeen, Inc. - Delaware
*Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada -
Canada
*TCF Commercial Leasing Corporation, Canada - Ontario
Transamerica Commercial Finance France S.A. - France
- 68 -
<PAGE>
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited -
United Kingdom (51%)
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmattschappij B.V. - Netherlands
*Transamerica Finanzierungs GmbH - Germany
(BWAC Twenty-One, Inc./Transamerica GmbH Inc.)
Transamerica Finanzierungs GmbH - Germany
TA Leasing Holding Co., Inc. - Delaware
Transamerica Leasing Inc. - Delaware
Transamerica Leasing Holdings, Inc. - Delaware
Greybox Services Ltd. - United Kingdom
Greybox L.L.C. - Delaware
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing Srl. - Italy
ansamerica Container Acquisition Corporation - Delaware
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil S/C Ltda. - Brazil
Transamerica Leasing GmbH - Germany
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing Limited - United Kingdom
ICS Terminals (U.K.) Limited - United Kingdom
Transamerica Leasing Proprietary Limited - South Africa
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing (Belgium) N.V. -
Belgium
Transamerica Trailer Leasing (Netherlands) B.V. - Netherlands
Transamerica Trailer Leasing A/S - Denmark
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - France
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Spain, S.A. - Spain
Transamerica Transport Inc. - New Jersey
*Transamerica Homes, Inc. - Delaware
Transamerica Information Management Services, Inc. - Delaware
- 69 -
<PAGE>
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
*Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas, Inc. - Texas
TBK Insurance Agency of Ohio - Ohio
Transamerica Financial Resources Insurance Agency of Alabama, Inc. -
Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts,
Inc. - Massachusetts
Transamerica Securities Sales Corporation - Maryland
Transamerica International Insurance Services, Inc. - Delaware
Bulkrich Trading Limited (50%) - Hong Kong
Home Loans & Finance Limited - United Kingdom
Transamerica Occidental Life Insurance Company - California
Bulkrich Trading Limited (50%) - Hong Kong
First Transamerica Life Insurance Company - New York
*NEF Investment Company - Delaware
Transamerica Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Missouri
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
TC Cable, Inc. (75% ownership)
*Transamerica International Limited - Canada
Transamerica Investment Services, Inc. - Delaware
Transameric Investors, Inc. - Maryland
*Transamerica Land Capital, Inc. - California
*Bankers Mortgage Company of California - California
ss.Transamerica LP Holdings Corp. - Delaware
oTransamerica Real Estate Tax Service
oTransamerica Flood Hazard Certification - New Jersey
Transamerica Realty Services, Inc. - Delaware
*The Gilwell Company - California
- 70 -
<PAGE>
Pyramid Investment Corporation - Delaware
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Transamerica Properties, Inc. - Delaware
Transamerica Real Estate Management Co. - California
Transamerica Retirement Management Corporation - Delaware
Ventana Inn, Inc. - California
*Transamerica Systems Corporation - Delaware
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
oA Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contract Owners
As of April 1, 1996, there were 84 Owners of Non-Qualified Individual
Contract and 1 Owner of Qualified Individual Contracts.
Item 28. Indemnification
Transamerica's Bylaws provide in Article VIII as follows:
Section 1. Indemnification: (a) The Corporation shall indemnify to the
fullest extent now or hereafter provided for or permitted by law each person
involved in, or made or threatened to be made a party to, any action, suit,
claim or proceeding, whether civil or criminal, including any investigative,
administrative, legislative, or other proceeding, and including any action by or
in the right of the Corporation or any other corporation, or any partnership,
joint venture, trust, employee benefit plan, or other enterprise (any such
entity, other than the Corporation, being hereinafter referred to as an
"Enterprise"), and including appeals therein (any such action or process being
hereinafter referred to as a Proceeding), by reason of the fact that such
person, such person's testator or intestate (i) is or was a director or officer
of the Corporation, or (ii) is or was serving, at the request of the
Corporation, as a director, officer, or in any other capacity, of any other
Enterprise, against any and all judgments, amounts paid in settlement, and
expenses, including attorneys' fees, actually and reasonably incurred as a
result of or in connection with any Proceeding, except as provided in Subsection
(b) below.
(b) No indemnification shall be made to or on behalf of any such person
if a judgment or other final adjudication adverse to such person establishes
that such person's acts were committed in bad faith or were the result of active
and deliberate dishonesty and were material to the cause of action so
adjudicated, or that such person personally gained in fact a financial profit or
other advantage to which such person was not legally entitled. In addition, no
indemnification shall be made with respect to any Proceeding initiated by any
such person against the Corporation, or a director or officer of the
Corporation, other than to enforce the terms of this Article VIII, unless such
Proceeding was authorized by the Board of Directors. Further, no indemnification
shall be made with respect to any settlement or compromise of any Proceeding
unless and until the Corporation has consented to such settlement or compromise.
- 71 -
<PAGE>
(c) Written notice of any Proceeding for which indemnification may be
sought by any peon shall be given to the Corporation as soon as practicable. The
Corporation shall then be permitted to participate in the defense of any such
proceeding or, unless conflicts of interest or position exist between such peon
and the Corporation in the conduct of such defense, to assume such defense. In
the event that the Corporation assumes the defense of any such Proceeding, legal
counsel selected by the Corporation shall be reasonably acceptable to such
person. After such an assumption, the Corporation shall not be liable to such
person for any legal or other expenses subsequently incurred unless such
expenses have been expressly authorized by the Corporation. In the event that
the Corporation participates in the defense of any such Proceeding, such person
may select counsel to represent him in regard to such a Proceeding; however,
such peon shall cooperate in good faith with any request that common counsel be
utilized by the parties to any Proceeding who are similarly situated, unless to
do so would be inappropriate due to actual or potential differing interests
between or among such parties.
(d) In making any determination regarding any person's entitlement to
indemnification hereunder, it shall be presumed that such person is entitled to
indemnification, and the Corporation shall have the burden of proving the
contrary.
Section 2. Advancement of Expenses. Except in the case of a Proceeding
against a director, officer, or other person specifically approved by the Board
of Directors, the Corporation shall, subject to Section 1 of this Article VIII
above, pay expenses actually and reasonably incurred by or on behalf of such a
person in defending any Proceeding in advance of the final disposition of such
Proceeding. Such payments shall be made promptly upon receipt by the
Corporation, from time to time, of a written demand by such person for such
advancement, together with an undertaking by or on behalf of such person to
repay any expenses so advanced to the extent that the person receiving the
advancement is ultimately found not to be entitled to indemnification for pan or
all of such expenses.
Section 3. Rights Not Exclusive. The rights to indemnification and
advancement of expenses granted by or pursuant to this Article VIII (i) shall
not limit or exclude, but shall be in addition to, any other rights which may be
granted by or pursuant to any statute, corporate charter, by-law, resolution of
stockholders or directors or agreement, (ii) shall be deemed to constitute
contractual obligations of the Corporation to any person who serves in a
capacity referred to in Section 1 of this Article VIII at any time while this
Article VIII is in effect, (iii) shall continue to exist after the repeal of
modification of this Article VIII with respect to events occurring prior thereto
and (iv) shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the estate, spouse, heirs, executors,
administrators or assigns of such person. It is the intent of this Article VIII
to require the Corporation to indemnify the persons referred to herein for the
aforementioned judgments, amounts paid in settlement, and expenses, including
attorneys' fees, in each and every circumstance in which such indemnification
could lawfully be permitted by express provisions of by-laws, and the
indemnification required by this Article VIII shall not be limited by the
absence of an express recital of such circumstances.
Section 4. Indemnification of Employees and Others. The Corporation
may, from time to time, with the approval of the Board of Directors, and to the
extent authorized, grant rights to indemnification, and to the advancement of
expenses, to any employee or agent of the Corporation or to any person serving
at the request of the Corporation as a director or officer, or in any other
capacity, of any other Enterprise, to the fullest extent of the provisions of
this Article VIII with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
Section 5. Authorization of Contracts. The Corporation may, with the
approval of the Board of Directors, enter into an agreement with any person who
is, or is about to become, a director, officer, employee or agent of the
Corporation, or who is serving, or is about to serve, at the request of the
Corporation, as a director, officer, or in any other capacity, of any other
Enterprise, which agreement may provide for indemnification of such person and
advancement of expenses to such person upon terms, and to the extent, not
prohibited by law. The failure to enter into any such agreement shall not affect
or limit the rights of any such person under this Article VIII.
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<PAGE>
Section 6. Insurance. The Corporation may purchase and maintain
insurance to indemnify the Corporation
and any person eligible to be indemnified under this Article VIII within the
limits permitted by law.
Section 7. Severability. If any provision of this Article VIII is
determined at any time to be unenforceable
in any respect, the other provisions shall not in any way be affected or
impaired thereby.
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 anion, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of First Transamerica Life Insurance Company
are covered under a Directors and Officers liability program which includes
$55,000,000 for corporate reimbursement for the directors and officers of
Transamerica Occidental Life Insurance Company and its subsidiaries as insureds.
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. The term Glossy means any amount which the insureds are legally
obligated to pay for claim for Wrongful Acts. The term "Wrongful Acts" means any
breach or alleged breach of duty, neglect, error, misstatement, misleading
statement or omission actually or allegedly 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 the policy
year 11/25/94 to 11/25/95. The primary policy is with Corporate Officers and
Directors Assurance Holding Limited (CODA).
Item 29. Principal Underwriter
The business, profession, vocation or employment of a substantial
nature in which each director and/or executive officer of Schwab and/or the
Investment Manager is or has been engaged during the past two fiscal years for
his or her own account in the capacity of director, officer, employee, partner
or trustee is indicated in the table below. The principal business address for
each of the Schwab directors and/or officers listed below is 101 Montgomery
Street, San Francisco, California 94104.
<TABLE>
<CAPTION>
NAME OF DIRECTOR
AND/OR OFFICER NAME OF COMPANY CAPACITY
<S> <C> <C> <C> <C> <C> <C>
Charles R. Schwab Charles Schwab & Co., Inc. Chairman and Director
The Charles Schwab Corporation Chairman, Chief Executive Officer
and Director
Charles Schwab Investment Chairman and Director
Management, Inc.
The Charles Schwab Trust Chairman and Director
Company
- 73 -
C-73
<PAGE>
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer
and Director
The Charles Schwab Corporation President, Chief Operating Officer
and Director
Charles Schwab Investment Director
Management, Inc.
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
and Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January 1996; Senior Executive
Vice President and Chief Operating
Officer until January 1995
The Charles Schwab Corporation Executive Vice President until
January 1996; Senior Executive
Vice President until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
- 74 -
C-74
<PAGE>
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President - Schwab
Institutional
The Charles Schwab Corporation Executive Vice President - Schwab
Institutional
The Charles Schwab Trust Company Director and Executive Vice
President
A. John Gambs Charles Schwab & Co., Inc. Executive Vice President, Chief
Financial Officer and Director
The Charles Schwab Corporation Executive Vice President and Chief
Financial Officer
Charles Schwab Investment Chief Financial Officer and
Management, Inc. Director
The Charles Schwab Trust Chief Financial Officer
Company
Mayer & Schweitzer, Inc. Director
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President -
Business Strategy
Charles Schwab & Co., Inc. Executive Vice President -
Business Strategy
Timothy F. McCarthy Charles Schwab Investment Chief Executive Officer
Management, Inc.
Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds
The Charles Schwab Corporation Executive Vice President - Mutual
Funds
- 75 -
C-75
<PAGE>
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
October 1995
Fidelity Investment Advisor Group President until 1994
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President -
Electronic Brokerage
The Charles Schwab Corporation Executive Vice President -
Electronic Brokerage
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President - Retail
Brokerage
The Charles Schwab Corporation Executive Vice President - Retail
Brokerage
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - Capital
Markets and Trading until February
1996
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President - Human
Resources and Corporate Support
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
Commercial Credit Corporation Managing Director until February
1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice
President
- 76 -
C-76
<PAGE>
The Charles Schwab Corporation Treasurer and Senior Vice
President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp Charles Schwab & Co., Inc. Senior Vice President -
SchwabFunds
Charles Schwab Investment President and Chief Operating
Management, Inc. Officer
Stephen B. Ward Charles Schwab Investment Senior Vice President and Chief
Management, Inc. Investment Officer
Frances Cole Charles Schwab Investment Vice President, Chief Counsel,
Management, Inc. Chief Compliance Officer and
Assistant Corporate Secretary
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Corporate Secretary
Management, Inc.
The Charles Schwab Trust Assistant Corporate Secretary
Company
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Assistant Corporate Secretary
Management, Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
- 77 -
C-77
<PAGE>
The Charles Schwab Trust Assistant Corporate Secretary until
Company February 1996
David H. Lui Charles Schwab Investment Vice President and Senior Counsel
Management, Inc.
Christina M. Perrino Charles Schwab Investment Vice President and Senior Counsel
Management, Inc.
</TABLE>
- 78 -
<PAGE>
- 79 -
<PAGE>
- 80 -
<PAGE>
The following table lists the amounts of commissions paid to the
principal underwriter during the last fiscal year.
Name of
Principal Net Underwriting Compensation on Brokerage
Underwriter Discounts & Commission Redemption Commissions Compensation
Schwab
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.
Item 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 pan of any
application to purchase a Policy 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.
- 81 -
<PAGE>
(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.
- 82 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, First Transamerica Life Insurance Company certifies that
this Amendment meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Los Angeles, State of California on this 26th day of April, 1996
SEPARATE ACCOUNT VA-5NLNY
OF FIRST TRANSAMERICA
LIFE INSURANCE COMPANY
(REGISTRANT)
FIRST TRANSAMERICA
LIFE INSURANCE COMPANY
(DEPOSITOR)
BY: _______________________________
James W. Dederer, Chairman, Director,
General Counsel and Corporate Secretary
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
_________________________ * President, Chief Executive Officer April 26, 1996
John A. Paganelli and Director
__________________________ * Vice President and Controller, April 26, 1996
Alexander Smith
__________________________ * Director April 26, 1996
Marc C. Abrahms
__________________________ * Director April 26, 1996
Thomas J. Cusack
__________________________ * Director April 26, 1996
David E. Gooding
- 83 -
<PAGE>
Signature Title Date
___________________________ * Director April 26, 1996
Charles E. LeDoyen
___________________________ * Director April 26, 1996
John Fibiger
___________________________ * Director April 26, 1996
James B. Roszak
___________________________ * Director April 26, 1996
James Inzerillo
___________________________ * Director April 26, 1996
Daniel E. Jund
___________________________ * Director April 26, 1996
James T. Byrne, Jr.
___________________________ * Director April 26, 1996
Barbara Biben
___________________________ * Director April 26, 1996
Cecelia Kempler
</TABLE>
___________________________ on April 26, 1996 as Attorney-in-Fact
*By: James W. Dederer pursuant to powers of attorney previously
filed and in his own capacity as Chairman
of the Board, Director, General Counsel,
and Corporate Secretary.
- 84 -
<PAGE>
- 85 -
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
No. of Exhibit No.
(3) (a) Principal Underwriting Agreement between First
Transamerica Life
Insurance Company and Charles Schwab and Co., Inc. C-23
(b) Agency Agreement between First Transamerica Life
Insurance Company
and Charles Schwab and Co., Inc. C-24
(9) Opinion and Consent of Counsel C-25
(10) (a) Consent of Counsel C-26
(b) Consent of Independent Auditors C-27
(15) Powers of Attorney C-29
- 86 -
<PAGE>
EXHIBIT (3) (a)
PRINCIPAL UNDERWRITING AGREEMENT BETWEEN FIRST
TRANSAMERICA LIFE INSURANCE COMPANY AND CHARLES
SCHWAB AND CO., INC.
- 87 -
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
PRINCIPAL UNDERWRITING AGREEMENT made this ____ day of
__________, 1994, by and between Charles Schwab & Co., Inc. (the "Underwriter")
and First Transamerica Life Insurance Company ("FTL"), on its own behalf and on
behalf of its Separate Account VA-5NLNY (the "Account"), a separate account of
FTL, as follows:
WHEREAS, the Account was established under authority of a
resolution of FTL's Board of Directors on November 10, 1993, in order to set
aside and invest assets attributable to certain flexible purchase payment
variable annuity contracts (the "Contracts," as specified in Schedule A hereto)
issued by FTL; and
WHEREAS, the Underwriter is registered as a broker-dealer with
the Securities and Exchange Commission (the "SEC") under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, FTL and the Account desire to have the Contracts sold
and distributed through the Underwriter and the Underwriter is willing to sell
and distribute such Contracts under the terms stated herein.
NOW THEREFORE, the parties hereto agree as follows:
1. FTL grants to the Underwriter the right to be, and the Underwriter
agrees to serve as, the exclusive distributor and exclusive principal
underwriter of the Contracts during the term of this Agreement in accordance
with the marketing plan and plan of operations mutually agreed to by the parties
and as amended or revised from time to time. The Underwriter agrees to use its
best efforts to solicit applications for the Contracts, and to undertake, at its
own expense to perform all duties and functions which are necessary and proper
for the distribution of the Contracts.
2. All purchase payments for the Contracts shall be remitted promptly
in full together with such application, forms and any other required
documentation to FTL or its agent. Purchase payments for the Contracts may be
made (a) by checks or money orders drawn to the order of "First Transamerica
Life Insurance Company;" or (b) by authorized debit of the applicant's account
with the Underwriter and wire transfer of proceeds to FTL; or (c) by wire
transfer to such account as FTL may specify; or (d) by such other means as may
be agreed to by FTL. The Underwriter shall hold purchase payments received by it
on behalf of FTL in a fiduciary capacity.
3. The Underwriter agrees to offer the Contracts for sale in
accordance with the registration statement therefor then in effect.
<PAGE>
4. FTL represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act") and that the
Contracts will be issued in compliance in all material respects with all
applicable federal and state laws. FTL further represents and warrants that it
is an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established the Account prior to any
issuance or sale thereof as a segregated asset account under New York Insurance
Law and has registered or, prior to any issuance or sale of the Contracts, will
register the Account as a unit investment trust in accordance with the
provisions of the Investment Company Act of 1940 (the "1940 Act") to serve as a
segregated investment account for the Contracts.
FTL shall be responsible for the qualification and/or
registration of the Contracts under applicable federal and state laws and for
qualifying the contract for sale in New York and any restrictions or conditions
applicable in New York, and FTL shall immediately notify the Underwriter of any
changes in such qualifications, registrations, restrictions or conditions. On
behalf of the Account, FTL shall furnish the Underwriter with copies of all
prospectuses, statements of additional information, financial statements and
other documents in such quantities which the Underwriter reasonably requests for
use in connection with the distribution of the Contracts. FTL shall provide the
Underwriter with drafts of all amendments to the registration statement for the
Contracts under the 1933 Act one week prior to filing such statement with the
SEC.
5. The Underwriter represents that it is duly registered as a
broker-dealer under the 1934 Act and is a member in good standing of the NASD
and, to the extent necessary to offer the Contracts and otherwise enter into and
carry out all transactions contemplated by this Agreement, has obtained or will
obtain all approvals, licenses, authorizations, orders or consents, and shall be
duly registered or otherwise qualified under the securities and insurance laws
of any state or other jurisdiction where offers or sales of the Contracts may be
made. The Underwriter shall be bonded as required by all applicable laws and
regulations. The Underwriter shall be responsible for carrying out its sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities laws and regulations and state
insurance laws and regulations.
Without limiting the generality of the foregoing, the Underwriter
agrees that it shall be fully responsible for:
(a) ensuring that no associated person (as defined in Article
I of the NASD's By-Laws) of the Underwriter shall offer or sell the
Contracts on its behalf, or sign an application or enrollment form as
agent, or receive compensation for soliciting purchases of the
Contracts (sometimes referred to as a Schwab Annuity Specialist or
"SAS"), until such person is duly registered as a representative of the
Underwriter, duly licensed and appointed by FTL, and appropriately
licensed, registered or otherwise qualified to offer and sell such
Contracts under the federal securities laws and any applicable
securities and insurance laws of New York ; and
2
<PAGE>
(b) training, supervising and controlling of all such persons
for purposes of complying on a continuous basis with the NASD Rules of
Fair Practice and with federal and state securities law requirements
applicable in connection with the offering and sale of the Contracts.
In this connection, the Underwriter shall:
(1) conduct such training (including the preparation and
utilization of training materials) of SASs as in the opinion
of the Underwriter is necessary to accomplish the purposes of
this Agreement;
(2) establish and implement reasonable written procedures
for supervision of sales practices of SASs, agents,
representatives or brokers selling the Contracts;
(3) take reasonable steps to ensure that its associated
persons shall not make recommendations to an applicant to
purchase a Contract and shall not sell a Contract in the
absence of reasonable grounds to believe that the purchase of
the Contract is suitable for such applicant; and
(4) establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of the SASs and
submit reports to FTL as may be agreed to between the parties
from time to time.
(c) developing sales materials for the Contracts and filing
such materials as necessary with the NASD, subject to approval
of all such materials by FTL.
6. (a) The Underwriter shall furnish, or cause to be furnished,
to FTL, each piece of sales literature or other promotional
material that the Underwriter develops or uses and in which
FTL, the Account, or the Contracts are named, at least 10
(ten) Business Days prior to its use. No such material shall
be used if FTL objects to such use within 5 (five) Business
Days after receipt of such material.
(b) FTL shall furnish, or shall cause to be furnished, to the
Underwriter, each piece of sales literature or other
promotional material in which the Underwriter is named at
least 10 (ten) Business Days prior to its use. No such
material shall be used if the Underwriter objects to such use
within 5 (five) Business Days after receipt of such material.
(c) The Underwriter shall not make any representations on
behalf of FTL or concerning FTL, the Account, or the Contracts
other than the information or representations contained in a
registration statement or prospectus for the Contracts, as
such registration statement and prospectus may be amended or
supplemented from time to time, or in reports for the Account,
or in sales literature of other promotional material approved
by FTL or its designee,
3
<PAGE>
except with the permission of FTL.
(d) The phrase "sales literature or other promotional
material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a
newspaper, magazine, or other periodicals, radio, television,
telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published articles), and
registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy
materials.
7. FTL and the Underwriter in its capacity as broker-dealer shall cause
to be maintained and preserved for the periods prescribed such accounts, books,
and other documents as are required of them by the Investment Company Act of
1940, the 1934 Act, and any other applicable securities laws and regulations.
The books, accounts and records of FTL, the Account, and the Underwriter as to
all transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions. FTL, as agent for the
Underwriter, shall be responsible for sending all required confirmations on
customer transactions in compliance with applicable securities laws and
regulations, as modified by any exemption or other relief obtained by FTL or
Underwriter. The Underwriter shall cause FTL to be furnished with such reports
as FTL may reasonably request for the purpose of meeting its reporting and
recordkeeping requirements under the securities and insurance laws of any
applicable states or jurisdictions.
8. Each party to this agreement shall bear all expenses of fulfilling
its duties and obligations hereunder. With respect to the printing and mailing
of prospectuses, these obligations and the responsible parties include those
listed below:
Printing Costs Mailing Costs
Annuity Product Prospectus
For Marketing Purposes Schwab Schwab
For New Policy Issue Transamerica Transamerica
For Annual Updates Transamerica Transamerica
Portfolio Prospectuses
For Marketing Purposes Fund Schwab
For New Policy Issue Fund Transamerica
For Annual Updates Fund Schwab
As used above, the "Fund" can mean either the fund, the adviser, or the
fund's distributor.
4
<PAGE>
9. (a) FTL shall immediately notify the Underwriter of (i)
the issuance by any
court or regulatory body of any stop order, cease and desist
order, or other
similar order with respect to the Contract's Registration
Statement or
Prospectus, (ii) any request by the SEC for any amendment to
the Contract's
Registration Statement or Prospectus, (iii) the initiation of
any proceedings for
that purpose or for any other purpose relating to the
registration or offering of
interests in the Contracts, and (iv) any other action or
circumstances that may
prevent the lawful offer or sale of any of the Contracts in
any state or
jurisdiction. FTL will make every reasonable effort to
prevent the issuance of
any stop order, cease and desist or similar order and if
any such order is
issued, to obtain the lifting thereof at the earliest
possible time.
(b) The Underwriter shall immediately notify FTL of (i) the
issuance by any regulatory body of any order having a material
effect with respect to the Underwriter, (ii) the initiation of
any proceeding for any purpose relating to the sale of the
Contracts, and (iii) of any other actions or circumstances
that may prevent the lawful offer or sale of any of the
Contracts in any state or jurisdiction. In addition, the
Underwriter shall promptly advise FTL if any of their SASs is
or becomes subject to any proceedings or is sanctioned or
suspended (i) by the SEC or NASD, (ii) by any Court for
securities law violations, or (iii) by any state regulatory
authority. Each party shall promptly notify the other party of
any written customer complaints regarding the Contracts or the
sale thereof and the proposed response thereto, and each party
shall cooperate in the proposed response to and the resolution
of customer complaints.
10. Indemnification:
10(a). Of the Underwriter With Respect to the Registration Statement
and Prospectus
for the Contracts or Sales Literature.
FTL shall indemnify and hold harmless the Underwriter against any and
all losses, claims, damages or liabilities (or actions in respect thereof), to
which the Underwriter may become subject, including amounts paid in settlement
with the written consent of FTL, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or the Prospectus, or Sales Literature for the
Contracts or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse the Underwriter for
reasonable legal or other expenses reasonably incurred by them in connection
with investigating or defending against such loss, claim, damage, liability or
action in respect thereof; provided, however, that FTL shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the
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Registration Statement or Prospectus or Sales Literature for the Contracts in
reliance upon and in conformity with information furnished in writing by the
Underwriter, or any affiliate of the Underwriter, or any Fund participating in
the Account, or any affiliate of such Fund, for use in the preparation thereof,
and provided, however, that FTL shall not be liable in any such cases to the
extent that any such loss, claim damages, liability, or action arises out of or
is based on any matter relating to the mutual funds (or portfolios thereof) in
which the Account invests ("Funds"). The indemnities in this paragraph 10(a)
shall, upon the same terms and conditions, extend to and inure to the benefit of
each director and officer of the Underwriter and any person controlling the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act.
10(b). Of The Company With Respect to the Registration Statement and
Prospectus or
Sales Literature for the Contracts.
Except as provided in paragraph 10(c) below, the Underwriter shall
indemnify and hold harmless FTL against any losses, claims, damages or
liabilities (or actions in respect thereof), to which FTL may become subject,
including amounts paid in settlement with the written consent of the
Underwriter, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, Prospectus or Sales Literature for the Contracts, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, Prospectus or Sales Literature in reliance upon and in conformity
with information furnished in writing by the Underwriter for use in the
preparation thereof; and will reimburse FTL for reasonable legal or other
expenses reasonably incurred by FTL in connection with investigating or
defending against any such loss, claim, damage, liability or action. The
indemnities in this paragraph 10(b) shall, upon the same terms and conditions,
extend to and inure to the benefit of each director and officer of FTL and any
person controlling FTL within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act.
10(c). Of FTL With Respect to Other Matters.
(i) The Underwriter shall indemnify and hold harmless FTL from any
losses, claims, damages or liabilities (or actions in respect thereof) to which
the FTL may become subject, including amounts paid in settlement with the
written consent of the Underwriter, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or result from gross
negligence, illegal or fraudulent acts or omissions by the Underwriter or its
officers, directors, employees, agents, SASs or principals, including, but not
limited to, solicitation of Contracts, and will reimburse FTL for reasonable
legal or other expenses reasonably incurred by FTL in connection with
investigating or defending against any such loss, claim, damage, liability or
action, except as stated below in subparagraph 10(c)(iii).
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(ii) The Underwriter shall indemnify and hold harmless FTL for any
losses, claims, damages or liabilities (or actions in respect thereof) to which
FTL may become subject, including amounts paid in settlement with the written
consent of the Underwriter, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
unauthorized use of sales materials or advertisements or any oral or written
misrepresentations or any unlawful sales practices concerning the Contracts by
the Underwriter or its officers, directors, employees, agents, SASs or
principals, and will reimburse FTL for reasonable legal or other expenses
reasonably incurred by FTL in connection with investigating or defending against
any such loss, claim, damage, liability or action, except as stated below in
subparagraph 10(c)(iii) except if such loss, claim, damage or liability arises
or results from information provided by FTL and relied on by Underwriter.
(iii) Scope of Indemnities. The indemnities in this paragraph 10(c)
shall, upon the same terms and conditions, extend to and inure to the benefit of
each director and officer of FTL and any person controlling FTL within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act. The
indemnities in this paragraph 10(c) shall not extend to losses, claims, damages
or liabilities (or actions in respect thereof) arising out of death claims or
claims related to the mortality risk of the Contracts.
10(d). Of the Underwriter With Respect to Other Matters.
FTL shall indemnify and hold harmless the Underwriter, against any
losses, claims, damages or liabilities (or actions in respect thereof) to which
the Underwriter may become subject, including amounts paid in settlement with
the written consent of FTL, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or result from gross
negligence, illegal or fraudulent acts or omissions by FTL or its employees,
officers, directors, agents or principals and will reimburse the Underwriter,
for reasonable legal or other expenses reasonably incurred by the Underwriter in
connection with investigating or defending against any such loss, claim, damage,
liability or action except that this indemnification shall not apply to
Underwriter's willful misfeasance, bad faith, gross negligence or reckless
disregard of duties. The indemnities in this paragraph 10(d) shall, upon the
same terms and conditions, extend to and inure to the benefit of each director
and officer of the Underwriter, and any person controlling the Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act.
10(e). Notice of Actions.
(i) Notice Required. Within a reasonable time after service on an
indemnified party of the summons or other first legal process giving information
of the nature of an action (or after such indemnified party shall have received
notice of such service on any designated agent), FTL shall, if a claim in
respect thereof is to be made against the Underwriter, notify the Underwriter in
writing of the commencement thereof and the Underwriter shall, if a claim in
respect thereof is to be made against FTL, notify FTL in writing of the
commencement thereof; but the omission so to notify any indemnifying party shall
not relieve it from any lia-
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bility which it may have to any indemnified party otherwise than pursuant to
this Section 10. In case any such action shall be brought against any
indemnified party, and an indemnifying party shall have been notified of the
commencement thereof as aforesaid, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel approved by such indemnified party, which approval shall not be
unreasonably withheld. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the indemnified
party shall cooperate fully in such defense and the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
(ii) Effect of Notice. Any notice given by the indemnifying party to an
indemnified party of participation in or control of the litigation of any claim
by the indemnifying party will in no event be deemed to be an admission by the
indemnifying party of liability, culpability or responsibility, and the
indemnifying party will remain free to contest liability with respect to the
claim among the parties or otherwise.
11. FTL will consult with and provide 10 (ten) business days advance
notice to the Underwriter before making any changes to the Annuity Contracts.
12. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts, and the investment managers enrolled in Schwab's
Financial Advisor Service Program and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain, except as permitted by this Agreement for as otherwise necessary
to service the Contracts and/or respond to appropriate regulatory authorities.
Nothing in this Section 12 shall prevent Schwab from using the list of
contractholders for marketing purposes. In no event shall the names and
addresses of owners or prospective owners be furnished by FTL to any other
company or person (except as required by law or regulation) or used to solicit
sales of any kind, including but not limited to any other products, securities
or services. Without limiting the foregoing, no party hereto shall disclose any
information that another party reasonably considers to be proprietary. The
intent of this Section 12 is that no party or any affiliate thereof shall
utilize, or permit to be utilized, its knowledge of the other party which is
derived as a result of the relationship created by this Agreement and any
related agreements, except to the extent necessary by the terms of this
Agreement or the related agreements.
13. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities
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reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Superintendent with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of FTL are being conducted in a manner consistent with the New York
Variable Annuity Regulations then in effect and any other applicable law or
regulations.
14. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and Federal laws or under any other contract.
15. The Underwriter shall be responsible for selecting the mutual fund
portfolios in which the Account will invest and for determining that such
portfolios are suitable for the Contracts, but no such portfolios will be added
to or deleted from those available under the Contracts without the consent of
FTL, which consent shall not be withheld unreasonably.
16. The term "Schwab Investment Advantage" is a trademark of the
Underwriter, and FTL acknowledges that it has no rights to use that term (except
as may be set forth in a license agreement between the parties to this
Agreement).
17. (a) This Agreement may be terminated by either party
hereto upon 6 (six)
months' notice to the other party.
(b) This Agreement may be terminated at any time upon the
mutual written
consent of the parties thereto.
(c) This Agreement shall automatically be terminated in
the event of its
assignment.
(d) In the event of any material breach (as defined below) of
this Agreement by any party, the aggrieved party may, at its
option, terminate this Agreement by giving notice of
termination, effective upon the date specified in such
termination notice. This remedy shall be in addition to any
other remedies available under this Agreement or at law.
18. FTL shall be deemed to have materially breached this
Agreement and failed to
perform hereunder upon the occurrence of any of the following events:
(a) FTL shall become insolvent or otherwise admit in writing
its inability to pay its debts when they become due, seek
protection under any law for the protection of insolvents, or
have a receiver, rehabilitator, conservator or similar
official appointed for it under any law pertaining to the
insolvency of FTL; or
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(b) FTL shall breach any material provision of this Agreement
and such breach shall remain uncured for more than 30 days
following the FTL's receipt of the Underwriter's written
notice of such breach.
19. The Underwriter shall be deemed to have materially breached this
Agreement and failed to perform hereunder upon the occurrence of any of the
following events:
(a) The Underwriter shall become insolvent or otherwise admit
in writing its inability to pay its debts when they become
due, become bankrupt, seek protection under any law for the
protection of insolvents, or have a receiver, rehabilitator,
conservator or similar official appointed for it under any law
pertaining to the Underwriter's insolvency; or
(b) The Underwriter shall breach any material provision of
this Agreement and such breach shall remain uncured for more
than 30 days following the Underwriter's receipt of written
notice by FTL of such breach.
20. Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except the obligations to settle accounts hereunder,
including purchase payments subsequently received for Contracts in effect at the
time of termination or issued pursuant to applications received by FTL prior to
termination.
21. Nothing in this Agreement shall be deemed to impose any limitation
on the rights of FTL (a) to immediately terminate FTL's appointment of any SAS
under the law of New York, with reasonable cause and with ten (10) business days
advance written notice, and (b) to require the Underwriter to immediately
terminate any agreement between the Underwriter and any such SAS to the extent
necessary to preclude any such SAS from representing FTL.
22. This Agreement shall be subject to the provisions of the Investment
Company Act of 1940 and the 1934 Act and the rules, regulations, and rulings
thereunder and of the NASD, from time to time in effect, including such
exemptions from the Investment Company Act as the Securities and Exchange
Commission may grant, and the terms hereof shall be interpreted and construed in
accordance therewith. Without limiting the generality of the foregoing, the term
"assigned" shall not include any transaction exempted from Section 15(c)(2) of
the Investment Company Act.
23. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties are entitled to under state
and federal laws. Failure of either party to insist upon strict compliance with
any of the conditions of this Agreement shall not be construed as a waiver of
any of the conditions, but the same shall remain in full force and effect. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver
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constitute a continuing waiver.
24. The Underwriter shall submit to all regulatory and administrative
bodies having jurisdiction over the operations of the Account, present or
future, any information, reports or other material which any such body by reason
of this Agreement may request or require pursuant to applicable laws or
regulations.
25. If any provisions of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
26. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New York without regard to the conflict
of law provisions thereof.
27. Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration in the forum
jointly selected by FTL and the Underwriter (but if applicable law requires some
other forum, then such other forum) in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
28. All notices hereunder are to be made in writing and shall be
given:
if to FTL to:
President
First Transamerica Life Insurance Company
575 Fifth Avenue, 36th Floor
New York, New York 10017
with a simultaneous copy to:
Regina M. Fink, Esq., Law Department
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
if to Schwab to:
General Counsel
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officials thereunder duly authorized
and seals to be affixed, as of the day and year first above written.
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
By______________________________________________________
James W. Dederer
Title: Chairman, General Counsel and Corporate Secretary
CHARLES SCHWAB & CO., INC.
By______________________________________________________
Title____________________________________________________
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<PAGE>
EXHIBIT (3) (b)
AGENCY AGREEMENT BETWEEN FIRST TRANSAMERICA
LIFE INSURANCE COMPANY AND CHARLES
SCHWAB AND CO., INC.
- 88 -
<PAGE>
AGENCY AGREEMENT
AGREEMENT dated as of ______________ 1994, by and between FIRST
TRANSAMERICA LIFE INSURANCE COMPANY ("FTL"), and Charles Schwab & Co.,
Inc. ("Schwab").
WITNESSETH:
WHEREAS, Schwab is an insurance agent and desires to distribute certain
contracts issued by FTL; and
WHEREAS, FTL desires to issue certain variable annuity contracts
through Schwab acting as insurance agent for such products;
NOW, THEREFORE, in consideration of their mutual promises, FTL and
Schwab hereby agree as follows:
1. Definitions
Affiliate -- With respect to a person, any other person controlling,
controlled by or under common control with, such person.
Application -- An application for a Contract.
Contracts -- The class or classes of variable annuity contracts set
forth on Schedule 1 to this Agreement, as amended from time to time.
"Class of Contracts" shall mean those Contracts issued by FTL on the
same policy form or forms and covered by the same Registration
Statement.
Annuity Service Center -- Schwab Annuity Service Center, P.O Box 7806,
San Francisco, CA 94120-9327, (800) 838-0649 or such other location as
may be designated in writing.
Representative -- When used with reference to Schwab or FTL, an
individual who is an associated person, as that term is defined in the
Securities Exchange Act of 1934, thereof.
Territory -- The state of New York.
2. Distribution Activities
a. Appointment and Authority
(1) FTL appoints Schwab, and Schwab accepts such appointment,
as its
<PAGE>
exclusive insurance agent in the Territory for sales of the Contracts.
It is understood that, pursuant to the Principal Underwriting
Agreement, FTL has granted to Schwab the right to be the exclusive
distributor and the exclusive principal underwriter of the Contracts in
the Territory. FTL hereby authorizes Schwab to solicit Applications and
Purchase Payments directly from customers and prospective customers in
the Territory.
(2) The Contracts shall be solicited and sold by
Representatives licensed as insurance agents who are employees of
Schwab. Schwab has the power and authority to select and recommend
Schwab Representatives for appointment as agents of FTL, and only
Representatives so recommended by Schwab shall become agents of FTL
with authority under this Agreement to engage in solicitation
activities with respect to the Contracts. Schwab shall be solely
responsible for background investigations of the Schwab Representatives
to determine their qualifications, good character and moral fitness to
sell the Contracts. FTL shall appoint in New York such selected and
recommended agents, provided that FTL reserves the right, which right
shall not be exercised unreasonably, to refuse to appoint as agent any
Schwab Representative or, once appointed, to terminate the same at any
time with or without cause. In the event FTL elects to exercise its
right to refuse to appoint or to terminate the appointment of a
recommended agent it shall not act except upon ten (10) days prior
written notice to Schwab.
(3) Schwab and Schwab Representatives shall not have
authority, and shall not grant authority to Schwab Representatives, on
behalf of FTL: to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; or to waive any Contract
forfeiture provisions to extend the time of paying any Purchase
Payment. Schwab shall not expend, nor contract for the expenditure of,
the funds of FTL. Schwab shall not possess or exercise any authority on
behalf of FTL other than that expressly conferred on Schwab by this
Agreement.
b. Solicitation Activities, Applications and Premiums
Schwab shall use its best efforts to market the Contracts in
accordance with the marketing plan and plan of operations mutually
agreed to by the parties and as amended or revised from time to time.
Solicitation activities shall be subject to applicable securities and
insurance and other laws and regulations, this Agreement and the
policies and procedures of FTL.
(1) FTL and Schwab shall develop together Applications
and other materials for use by Schwab in its
solicitation activities with respect to the
Contracts. FTL shall notify Schwab in writing if
delivery of a Statement of Additional Information
with a Prospectus to a prospective purchaser is
required.
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(2) Schwab shall require that Schwab Representatives
appointed by FTL as agents not make recommendations
to an applicant to purchase a Contract in the absence
of reasonable grounds to believe that the purchase of
the Contract is suitable for the applicant. While not
limited to the following, a determination of
suitability shall be based on information supplied to
a Schwab Representative after a reasonable inquiry
concerning the applicant's insurance and investment
objectives and financial situation and needs.
(3) All Purchase Payments paid, under the Schwab
Investment Advantage Variable Annuity Contract by
check or money order that are collected by the Schwab
Annuity Service Center shall be remitted promptly in
full, together with any Applications, forms and any
other required documentation, to FTL. Checks or money
orders in payment of Purchase Payments shall be drawn
to the order of "First Transamerica Life Insurance
Company." Purchase Payments may be transmitted by
wire order to the Schwab Annuity Service Center in
accordance with FTL's written procedures. If any
Purchase Payment is held at any time by Schwab,
Schwab shall hold such Purchase Payment in a
fiduciary capacity. All such Purchase Payments,
whether by check, money order or wire, shall be the
property of FTL.
(4) Schwab acknowledges that FTL shall have the
unconditional right to reject, in whole or in part,
any Application.
(5) It is specifically understood and agreed that all
soliciation activities and all negotiations of
contracts shall be in New York and all contracts
shall be issued and delivered in New York.
c. Independent Contractor
Schwab shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and
nothing herein contained shall constitute Schwab or Schwab
Representatives or employees as employees of FTL in connection with the
distribution of the Contracts.
d. Supervision
Schwab shall train, supervise and be responsible (to the
extent required by applicable insurance law) for the conduct of the
Schwab Representatives in their solicitation of Applications and
Premiums, and shall supervise their compliance with applicable rules
and regulation of any insurance regulatory agencies that have
jurisdiction over variable insurance product activities.
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e. Regulations
Schwab shall observe and comply with the applicable state
insurance laws and regulations and FTL's procedures and policies.
3. Compensation
a. FTL shall pay Schwab as provided on Schedule 2, as reviewed
from time to
time, but not less than annually, and as amended as mutually
agreed.
b. FTL shall have no obligation for payment of any commissions
or other
compensation for the services of Schwab Representatives.
Any compensation
to Schwab's Representatives will be the sole obligation of
Schwab.
4. Expenses
a. Expenses
Except as set forth in this Agreement each party to this
Agreement shall bear all expenses of fulfilling its duties and
obligations hereunder.
b. Appointment Fees
Fees imposed by state insurance regulatory authorities for
appointment or renewal thereof of Schwab and Schwab
Representatives appointed as agents of FTL shall be paid by
FTL.
5. Licensing
a. It is understood that neither Schwab, nor its employees may
engage in services
which would require insurance agent licensing in a state other
than New York.
Schwab further agrees to undertake all actions necessary,
including license and
examination fees, to effect licensing of itself and its
employees and renewals
thereof as required for the business of this Agreement. FTL
agrees to take all
actions necessary, including the payment of all appointment
filing fees, to
effect the appointment of Schwab, its employees and renewals
thereof as
required for the business of this Agreement. "Properly
licensed" includes the
filing of an appointment by FTL, Schwab and/or other person
when required by
the laws or regulations of the applicable jurisdiction.
b. It is further understood and agreed that Schwab will undertake
to effect and
maintain licensing for itself and Schwab Representatives as
may otherwise be
required by the National Association of Securities Dealers,
Inc. and the
Securities and Exchange Commission.
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6. Complaints and Investigations Proceedings
FTL and Schwab shall notify each other promptly in writing of
any customer complaint or notice of any investigation or proceeding.
Schwab and FTL shall cooperate fully in responding to any customer
complaint and in any regulatory or judicial investigation or proceeding
in connection with the offering or sale of the Contracts distributed
under this Agreement.
7. Indemnification
a. By FTL
FTL shall indemnify and hold harmless Schwab and its
affiliates and each person who controls or is an associated person with
Schwab and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted),
to which Schwab and/or any such person may become subject, under any
statute or regulation, any National Association of Securities Dealers
rule or interpretation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
(1) result of any breach by FTL of any provision of this
Agreement; or
(2) proximately result from any activities of FTL's
officers, directors, employees or agents or their
failure to take action in connection with the sale,
processing or administration of the Contracts.
This indemnification shall be in addition to any liability that FTL may
otherwise have; provided, however, that no person shall be entitled to
indemnification pursuant to this provision if such loss, claim, damage
or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking
indemnification.
b. By Schwab
Schwab shall indemnify and hold harmless FTL and each person
who controls or is an associated person with FTL and any officer,
director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which FTL 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
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based upon:
(1) the breach by Schwab of any provision of this Agreement;
(2) any unlawful sales practices by Schwab or a Schwab
Representative under state insurance laws but not
including any violations resulting from a failure to
comply with such laws to the extent that such
compliance is a responsibility of FTL's under such
laws, this Agreement or otherwise; or
(3) claims by agents or employees of Schwab or Schwab
Representatives
for commissions or other compensation or remuneration
of any type.
This indemnification shall be in addition to any liability that Schwab
may otherwise have; provided, however, that no person shall be entitled
to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking
indemnification.
c. General
After receipt by a party entitled to indemnification
("indemnified party") under this Section of notice of the commencement
of any action, if a claim in respect thereof is to be made against any
person obligated to provide indemnification under this Section
("indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party shall not relieve the indemnifying party of any
liability under this Section 6, except to the extent that the omission
results in a failure of actual notice to the indemnifying party and
such indemnifying party is damaged solely as a result of the failure to
give such notice. The indemnifying party, upon the request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
from and against any loss or liability
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by reason of such settlement or judgment.
The indemnification provisions contained in this Section shall
remain operative and in full force and effect, regardless of (1) any
investigation made by or on behalf of FTL or Schwab or by or on behalf
of any controlling person thereof, and (3) any termination of this
Agreement. A successor by law of Schwab or FTL, as the case may be,
shall be entitled to the benefits of the indemnification provisions
contained in this Section .
This Section shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall
survive any such termination.
8. Termination
a. This Agreement may be terminated by either party with or
without cause upon
six months written notice.
b. This Agreement shall terminate automatically if it is assigned
by a party
without the prior written consent of the other party.
c. This Agreement may be terminated by written notice to the
other party upon
termination of the Principal Underwriting Agreement and the
Administrative
Services Agreement between FTL and Schwab.
d. This Agreement may be terminated, immediately with written
notice, at the option of either party to this Agreement upon
the other party's material breach of any provision of this
Agreement or of any material misrepresentation made in this
Agreement, unless such breach has been cured within 30 days
after receipt of written notice of breach from the
non-breaching party.
e. Upon termination of this Agreement all authorizations, rights
and obligations shall cease except (1) the obligation to
settle accounts hereunder; and (2) the provisions contained in
Sections 4, 5, 6 and 7 hereof.
9. Miscellaneous
a. Confidentiality
Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts, and the investment managers enrolled in Schwab's Financial
Advisor Service Program and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the
7
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affected party until such time as such information may come into the public
domain, except as permitted by this Agreement for as otherwise necessary to
service the Contracts and/or respond to appropriate regulatory authorities.
Nothing in this Section 9 shall prevent Schwab from using the list of
contractholders for marketing purposes. In no event shall the names and
addresses of owners or prospective owners be furnished by FTL to any other
company or person (except as required by law or regulation) or used to solicit
sales of any kind, including but not limited to any other products, securities
or services. Without limiting the foregoing, no party hereto shall disclose any
information that another party reasonably considers to be proprietary. The
intent of this Section 9 is that no party or any affiliate thereof shall
utilize, or permit to be utilized, its knowledge of the other party which is
derived as a result of the relationship created by this Agreement and any
related agreements, except to the extent necessary by the terms of this
Agreement or the related agreements.
b. Binding Effect
Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action by such party and when so executed
and delivered this Agreement shall be the valid and binding obligation of such
party enforceable in accordance with its terms. This Agreement shall be binding
on and shall inure to the benefit of the respective successors and assigns of
the parties hereto provided that neither party shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other party.
c. Amendment of Schedule
The parties to this Agreement may amend, subject to reasonable prior
written notice, Schedule 1 to this Agreement from time to time to reflect
additions of or changes in any class of Contracts, Separate Accounts, Funds and
Fund Series that have been agreed upon by the parties. Schwab may amend from
time to time to reflect changes in its licensing status. The provisions of this
Agreement shall be equally applicable to each such class of Contracts, Separate
Accounts and Funds that may be added to the Schedules, unless the context
otherwise requires. Any other changes in the terms and provisions of this
Agreement shall be made by written agreement between FTL and Schwab.
d. Rights, Remedies, etc. Are Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws. Failure of either party to insist upon strict compliance with any
of the conditions of this Agreement shall not be construed as a waiver of any of
the conditions, but the same shall remain in full force and effect. No waiver of
any of the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a
8
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continuing waiver.
e. Notices
All notices hereunder are to be made in writing and shall be given:
if to FTL to:
President
First Transamerica Life Insurance Company
575 Fifth Avenue, 36th Floor
New York, New York 10017-2422
with a simultaneous copy to:
Regina M. Fink, Esq., Law Department
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
If to Schwab to:
General Counsel
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
f. Arbitration
Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration in a
forum jointly selected by FTL and Schwab (but, if applicable law
requires some other forum, then such other forum) in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
g. Interpretation; Jurisdiction
This Agreement constitutes the whole agreement between the
parties hereto
9
<PAGE>
with respect to the subject matter hereof, and supersedes all prior
oral or written understandings, agreements or negotiations between the
parties with respect to such subject matter. No prior writing by or
between the parties with respect to the subject matter hereof shall be
used by either party in connection with the interpretation of any
provision of this Agreement. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the internal
laws of the State of New York without giving effect to principles of
conflict of laws. However, no decision, question, dispute or issue
arising from or in any way related to the matters referred to in
Section 2(b)(5) will be submitted to or subject to arbitration, and no
arbitrator shall be empowered to consider or decide any such decision,
question, dispute, issue or matter.
h. Severability
This is a severable Agreement. In the event that any provision
of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention
of the parties hereto that such provision shall be enforced to the
extent permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly enforceable as
if the provision at issue had never been a part hereof.
i. Section and Other Headings
The headings contained in this Agreement are included for
convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or effect.
j. Counterparts
This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, each party hereto represents that the officer signing this
Agreement on the party's behalf is duly authorized to execute this Agreement;
and the parties hereto have caused this Agreement to be duly executed by such
authorized officers on the date specified below.
FIRST TRANSAMERICA LIFE
INSURANCE COMPANY
By:_________________________________
Name: James W. Dederer
Title: Chairman, General Counsel and Corporate Secretary
CHARLES SCHWAB & CO., INC.
By:_________________________________
Name:_______________________________
Title:______________________________
11
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Schedule 1
Contracts Subject to Agency Agreement
Effective October 1, 1994
First Transamerica Life Insurance Company
Group Annuity Contract Form No. FTGP-501-193
Dollar Cost Averaging Endorsement Form No. FTGE-003-193
Automatic Payout Option Endorsement Form No. FTGE-004-193
Systematic Withdrawal Option Endorsement Form No. FTGE-005-193
Acceptance of Group Annuity Contract Form No. FTGA-004-193
Modification of Allocation of New Purchase Payments Provision Form No.
FTGE-007-194
Variable Annuity Application Form No. FTGA-004-194(6194)
Certificate of Participation From No. FTCG-101-193
IRA Endorsement From No. FTCE-005-193
Benefit Distribution Endorsement Form No. FTCE-006-193
Dollar Cost Averaging Endorsement Form No. FTCE-007-193
Automatic Payout Option Endorsement Form No. FTCE-008-193
Systematic Withdrawal Option Endorsement Form No. FTCE-009-193
Unisex Annuity Rate Tables Endorsement Form No. FTCE-010-193
Modification of Allocation of New Purchase Payments Provision Form No
FTCE-011-194
Annuity Rate Table Endorsement Form No. FTCE-010-193
<PAGE>
Schedule 2
FTL shall pay monthly to Schwab 90 basis points of each premium received by FTL.
<PAGE>
<PAGE>
EXHIBIT(9)
OPINION AND CONSENT OF COUNSEL
<PAGE>
April 17, 1996
First Transamerica Life
Insurance Company
575 Fifth Avenue, 36th Floor
New York, New York 10017
Gentlemen:
With reference to the Post-Effective Amendment No. 3 to the Registration
Statement on Form N-4 filed by First Transamerica Life Insurance Company and its
Separate Account VA-5NLNY with the Securities and Exchange Commission covering
certain variable annuity contracts (File No. 33-71748), I have examined such
documents and such law as I considered necessary and appropriate, and on the
basis of such examinations, it is my opinion that:
1.) First Transamerica Life Insurance Company is duly organized
and validly existing under the laws of the State of New York.
2.) The variable annuity contracts, when issued as contemplated by
the said Form N-4 Registration Statement, as amended, will
constitute legal, validly issued and binding obligations of
First Transamerica Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the said Post-
Effective Amendment No. 3 to the Form N-4 Registration Statement and to the
reference to my name under the caption "Legal Matters" in the Prospectus
contained in the said Post-Effective Amendment No. 3. In giving this consent, I
am not admitting that I am in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
James W. Dederer
Chairman, General Counsel
and Corporate Secretary
<PAGE>
- 89 -
<PAGE>
EXHIBIT (10) (a)
CONSENT OF COUNSEL
- 90 -
<PAGE>
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
April 17, 1996
First Transamerica Life Insurance Company
575 Fifth Avenue
Re: Separate Account VA-5NLNY , File No. 33-71748
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. 3 to
the Form N-4 Registration Statement for Separate Account VA-5NLNY. In giving
this consent, we do not admit that we are in the catefory 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
- 91 -
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our firm under the captions "Condensed Financial
Information" and "Accountants" in the Prospectus and to the use of our reports
dated April 15, 1996 and February 14, 1996 on Separate Account VA-5NLNY of First
Transamerica Life Insurance Company and First Transamerica Life Insurance
Company, respectively, contained in the Statement of Additional Information.
Ernst & Young LLP
Los Angeles, California
April 26, 1996
- 92 -
<PAGE>
EXHIBIT (15)
POWER OF ATTORNEY
POWER OF ATTORNEY
The undersigned director of First Transamerica Life Insurance Company,
a New York corporation (the "Company"), hereby constitutes and appoints Aldo
Davanzo, James W. Dederer, Charles E. LeDoyen and David E. Gooding and each of
them (with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to
execute
and file any of the documents referred to below relating to registrations
under
the Securities Act of 1933 and under the Investment Company Act of 1940
with
respect to any life insurance or annuity policies: registration statements
on
any form or forms under the Securities Act of 1933 and under the Investment
Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and his or their substitutes being empowered
to act with or without the others or other, and to have full power and
authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in
person,
hereby ratifying and confirming all that said attorneys-in-fact and agents,
or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand,
this ______ day of January, 1996.
-----------------------------
Thomas J. Cusack
<PAGE>
POWER OF ATTORNEY
The undersigned director of First Transamerica Life Insurance Company,
a New York corporation (the "Company"), hereby constitutes and appoints
Aldo
Davanzo, James W. Dederer, Charles E. LeDoyen and David E. Gooding and
each of
them (with full power to each of them to act alone), his or her true and
lawful
attorney-in-fact and agent, with full power of substitution to each, for him
or
her and on his or her behalf and in his or her name, place and stead, to
execute
and file any of the documents referred to below relating to registrations
under
the Securities Act of 1933 and under the Investment Company Act of 1940
with
respect to any life insurance or annuity policies: registration statements
on
any form or forms under the Securities Act of 1933 and under the Investment
Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith,
each of
said attorneys-in-fact and agents and his or their substitutes being
empowered
to act with or without the others or other, and to have full power and
authority
to do or cause to be done in the name and on behalf of the undersigned
each and
every act and thing requisite and necessary or appropriate with respect
thereto
to be done in and about the premises in order to effectuate the same, as
fully
to all intents and purposes as the undersigned might or could do in
person,
hereby ratifying and confirming all that said attorneys-in-fact and agents,
or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand,
this ______ day of January, 1996.
-----------------------------
Daniel E. Jund
<PAGE>
