PARTICIPATION AGREEMENT
AMONG
STEINROE VARIABLE INVESTMENT TRUST
XXXXX XXX & XXXXXXX INCORPORATED
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
and
XXXXXXX XXXXXX & CO., INC.
This Agreement, made and entered into as of this l5th day of April,
1994 by and among TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(hereinafter "Transamerica"), a California life insurance company, on
its own behalf and on behalf of its Separate Account VA-5 (the
"Account"); STEINROE VARIABLE INVESTMENT TRUST, a business trust
organized under the laws of Massachusetts (hereinafter the "Fund");
XXXXX XXX & FARNHAM INCORPORATED hereinafter the "Adviser"), a Delaware
corporation; and XXXXXXX XXXXXX & CO., INC., a California corporation
(hereinafter "Schwab").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies
and/or variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements similar to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and representing
the interest in a particular managed portfolio of securities and other
assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated July 1, 1988 (File
No. 812-7044), granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act")
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of life
insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolio(s) are
registered under the Securities Act of 1933, as amended (hereinafter the
"1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and any
applicable state securities laws; and
WHEREAS, Transamerica has registered or will register certain
variable annuity contracts supported wholly or partially by the Account
(the "Contracts") under the 1933 Act and said Contracts are listed in
Schedule A hereto, as it may be amended form time to time by mutual
written agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of Transamerica on September 28, 1993, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, Transamerica has registered or will register the Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Transamerica intends to purchase shares in the Portfolio(s)
listed in Schedule B hereto, as it may
be amended from time to time by mutual written agreement (the
"Designated Portfolio(s)"), on behalf of the Account to fund the
aforesaid Contracts, and the Fund is authorized to sell such shares to
unit investment trusts such as the Account at net asset value; and
WHEREAS, Schwab will perform certain services for the Fund and
Adviser in connection with the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-
end investment companies or series thereof not affiliated with the Trust
(the "Unaffiliated Funds") on behalf of the Account to fund the
Contracts; and
NOW, THEREFORE, in consideration of their mutual promises,
Transamerica, Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to Transamerica those shares of the
Designated Portfolio(s) which the Account orders, executing such orders
on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Portfolios.
For purposes of this Section 1.1, Transamerica shall be the designee of
the Fund for receipt of such orders and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice
of the applicable order by 9:30 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make shares of the Designated Portfolio(s)
available for purchase at the applicable net asset value per share by
Transamerica and the Account on those days on which the Fund calculates
its Designated Portfolio(s)' net asset value pursuant to rules of
the SEC, and the Fund shall calculate such net asset value on each day
which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the
"Board") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board, acting in good
faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s)
to any insurance company or separate account unless an agreement
containing provisions substantially the same as Sections 2.1, 3.6, 3.7,
3.8, and Article VII of this Agreement is in effect to govern such
sales.
1.4. The Fund agrees to redeem for cash, on Transamerica's
request, any full or fractional shares of the Fund held by Transamerica,
executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. Request for redemption identified by Transamerica, or its
agent, as being in connection with surrenders, annuitizations, or death
benefits under the Contracts, upon prior written notice, may be executed
within seven (7) calendar days after receipt by the Fund or its designee
of the requests for redemption. If permitted by an order of the SEC
under Section 22(e) of the 1940 Act, the Fund shall be permitted to
delay sending redemption proceeds to Transamerica beyond the foregoing
deadlines, provided, however, that the Account receives similar relief
to defer paying proceeds to contract Owners, and further, that the
Account is treated no less favorably than the other shareholders of the
Designated Portfolios. This Section 1.4 may be amended, in writing, by
the parties consistent with the requirements of the 1940 Act and
interpretations thereof. For purposes of this Section 1.4, Transamerica
shall be the designee of the Fund for receipt of requests for redemption
and receipt by such designee shall constitute receipt
by the Fund, provided that the Fund receives notice of the applicable
request for redemption by 9:30 a.m. Eastern time on the next following
Business Day.
1.5 The Parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may
be sold to other insurance companies (subject to Section 1.3 and Article
VI hereof) and the cash value of the Contracts may be invested in
Unaffiliated Funds.
1.6. Transamerica shall pay for Fund shares by 11:00 a.m. Eastern
time on the next Business Day after an order to purchase Fund shares is
made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire and/or by a credit for any
shares redeemed the same day as the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions
of Fund shares by 11:00 a.m. Eastern time on the next Business Day after
a redemption order is received in accordance with Section 1.4 hereof.
Payment shall be in federal funds transmitted by wire and/or a credit
for any shares purchased the same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to Transamerica or
the Account. Shares ordered from the Fund will be recorded in an
appropriate title for the Account or the appropriate sub-account of the
Account.
1.9. The Fund or its designee shall furnish same day notice (by
wire or telephone, followed by written confirmation) to Transamerica of
any income dividends or capital gain distributions payable on the
Designated Portfolio(s)' shares. Transamerica hereby elects to receive
all such income dividends and capital gain distributions as are payable
on the Portfolio shares in additional shares of that Portfolio.
Transamerica reserves the right to revoke this election and to receive
all such income, dividends and capital gain distributions in cash. The
Fund or its designee shall notify Transamerica by the end of the next
following Business Day of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Designated Portfolio available to Transamerica on a daily basis as soon
as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:00 p.m. Eastern time. The Fund or its designee
shall notify Transamerica by 5:45 p.m. Eastern time in the event that
the Fund cannot meet such 6:00 p.m. deadline. In such event the Fund
shall use its best efforts to make such value available as soon
thereafter as is practicable. If the Fund provides incorrect share net
asset value information, Transamerica shall be entitled to an adjustment
to the number of shares purchased or redeemed to reflect the correct net
asset value per share (and, if and to the extent necessary, Transamerica
shall make adjustments to the number of units credited and/or unit
values for the Contracts for the periods affected). Any error in the
calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
Transamerica. Any error of a an amount less than $0.01 per share shall
be corrected in the next Business Day's net asset value per share.
ARTICLE II. Representations and Warranties
2.1. Transamerica represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be
issued and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. Transamerica 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 applicable law (Section 10506 of the California Insurance
Law) and has registered the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund represents and warrants that Designated Portfolio
shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with all
applicable federal securities laws including without limitation the 1933
Act, the 1934 Act, and the 1940 Act and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous
offering of its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule
12b-1 under the 1940 Act and to impose an asset-based or other charge to
finance distribution expenses as permitted by applicable law and
regulation. In any event, the Fund and Adviser agree to comply with
applicable provisions and SEC staff interpretations of the 1940 Act to
assure that the investment advisory or management fees paid to the
Adviser by the Fund are legitimate and not excessive. To the extent
that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment
policies, fees and expenses of the Designated Portfolio(s) are and shall
at all times remain in compliance with the insurance and other
applicable laws of the State of California and any other applicable
state to the extent required to perform this Agreement. The Fund
further represents and warrants that Designated Portfolio shares will be
sold in compliance with the insurance laws of the State of California
and all applicable state insurance and securities laws. Transamerica
will advise the Fund of any applicable changes in California insurance
law that affect the Designated Portfolios, and the Fund will be deemed
to be in compliance with this Section 2.4 so long as the Fund complies
with such advice of Transamerica. The Fund shall register and qualify
the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund with the
concurrence of Transamerica. Without limiting the generality of the
foregoing, the Fund represents and warrants that it is and shall at all
times remain in compliance with the policies and restrictions enumerated
in Schedule C hereto, except as to those items disclosed to and not
objected to by the Department of Insurance of the State of California.
2.5. The Fund represents and warrants that it is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all material aspects
with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities
laws and that it shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of
Delaware and any applicable state and federal securities laws.
2.7. The Fund and the Adviser represent and warrant that all of
their officers, employees, investment advisers, and other individuals or
entities dealing with money and/or securities of the Fund are, and shall
continue to be at all times, covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than
the minimal coverage required by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.8. Schwab represents and warrants that it has completed,
obtained and performed, in all material respects, all registrations,
filings, approvals, and authorizations, consents and examinations
required by any government or governmental authority as may be necessary
to perform this Agreement. Schwab does and will comply, in all material
respects, with all applicable laws, rules and regulations in the
performance of its obligations under this Agreement.
2.9. The Fund will provide Transamerica with as much advance
notice as is reasonably practicable of any material change affecting the
Designated Portfolio(s) (including, but not limited
to, any material change in its registration statement or prospectus
affecting the Designated Portfolio(s) and any proxy solicitation
affecting the Designated Portfolio(s) and consult with Transamerica in
order to implement any such change in an orderly manner, recognizing the
expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the
prospectus for the Contracts. The Fund or Adviser agree to share
equitably in expenses incurred by Transamerica as a result of actions
taken by the Fund, consistent with the allocation of expenses contained
in Schedule F.
2.10. The Insurance Company represents, assuming that the Fund
complies with Article VI of this Agreement, that the Contracts are
currently treated as annuity contracts under applicable provisions of
the Internal Revenue Code of 1986 (the "Code"), as amended, and that it
will make every effort to maintain such treatment and that it will
notify the Fund immediately upon having a reasonably basis for believing
that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.11. Transamerica represents and warrants that it will not
purchase Fund shares with assets derived from tax-qualified retirement
plans except indirectly, through Contracts purchased in connection with
such plans.
2.12. Transamerica represents and warrants that it will not
transfer or otherwise convey shares of any Designated Portfolio, without
the prior written consent of the Fund, which consent shall not be
unreasonably withheld.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Fund or the Adviser shall provide
Transamerica and Schwab with as many copies of the Fund's current
prospectus for the Designated Portfolio(s) as Transamerica and Schwab
may reasonably request for marketing purposes (including distribution to
Contract owners with respect to new sales of a Contract). If requested
by Transamerica in lieu
thereof, the Adviser or Fund shall provide such documentation (including
a final copy of the new prospectus for the Designated Portfolio(s)) and
other assistance as is reasonably necessary in order for Transamerica
once each year (or more frequently if the prospectus for the Designated
Portfolio are amended) to have the prospectus for the Contracts and the
Fund's prospectus for the Designated Portfolio(s) printed together in
one document. The Fund and Adviser agree that the prospectus, and semi-
annual and annual reports for the Designated Portfolio(s) provided
pursuant to this Section 3.1 will described only the Designated
Portfolio(s) and will not name or describe any other portfolios or
series that may be in the Fund unless required by law.
3.2. If applicable state or Federal laws or regulations require
that the Statement of Additional Information ("SAI") for the Fund be
distributed to all Contract purchasers, then the Adviser or the Fund
shall provide Transamerica with the Fund's SAI or documentation thereof
in such quantities and/or with expenses to be borne in accordance with
Schedule F hereof.
3.3. The Fund or the Adviser shall provide Transamerica and Schwab
with as many copies of the Fund's SAI as each of them may reasonably
request. The Fund or the Adviser shall also provide such SAI to any
owner of a Contract or prospective owner who requests such SAI (although
it is anticipated that such requests will be made to Schwab).
3.4. The Fund shall provide Transamerica with copies of its
prospectus, SAI, proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such
quantity as Transamerica shall reasonably require for distributing to
Contract owners.
3.5. It is understood and agreed that, except with respect to
information regarding Transamerica or Schwab provided in writing by that
party, neither Transamerica nor Schwab are responsible for the content
of the prospectus or SAI for the Designated Portfolio(s). It is also
understood and agreed that, except with respect to information regarding
the Fund, Adviser or
the Designated Portfolio(s) provided in writing by the Fund or the
Adviser, neither the Fund nor Adviser are responsible for the content of
the prospectus or SAI for the Contracts.
3.6. If and to the extent required by law, Transamerica shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance with
instructions from Contract owners; and
(iii) vote Designated Portfolio shares for which no
instructions have been received in the same proportion
as Designated Portfolio shares for instructions have
been received from Contract owners, so long as and to
the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges for
variable contract owners. Transamerica reserves the
right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by
law.
3.7. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding shares of a
Designated Portfolio calculates voting privileges in the manner required
by the Shared Funding Exemptive Order. Transamerica's procedures
currently are in compliance with such requirements, as described in
Schedule G. The Fund agrees to promptly notify Transamerica of any
changes of interpretations or amendments of the Shared Funding Exemptive
Order.
3.8. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings (except insofar as the SEC may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the Fund
currently intends, comply with Section 16(c) of the 1940 Act (although
the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the
requirements of Section 16(a) with respect to periodic elections of
directors or trustees and with whatever rules the Commission may
promulgate with respect thereto. The Fund reserves the right, upon 45
days prior written notice to Transamerica and Schwab, to take all
actions, including but not limited to, the dissolution, merger, and sale
of all assets of the Fund or any Designated Portfolio upon the sole
authorization of the Board, to the extent permitted by the laws of The
Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. Transamerica and Schwab shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature
or other promotional material that Transamerica or Schwab, respectively,
develops or proposes to use and in which the Fund (or a Portfolio
thereof), its investment adviser or one of its sub-advisers or the
underwriter for the Fund shares is named in connection with the
Contracts, at least 10 (ten) Business Days
prior to its use. No such material shall be used if the Fund or its
designee objects to such use within 5 (five) Business Days after receipt
of such material.
4.2. Transamerica and Schwab shall not give any information or
make any representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its
designee or by the Adviser, except with the permission of the Fund or
the Adviser.
4.3. The Fund or Adviser shall furnish, or shall cause to be
furnished, to Transamerica and Schwab, a copy of each piece of sales
literature or other promotional material in which Transamerica and/or
its separate account(s), or Schwab is named at least 10 (ten) Business
Days prior to its use. No such material shall be used if Transamerica or
Schwab objects to such use within 5 (five) Business Days after receipt
of such material.
4.4. The Fund and the Adviser shall not give any information or
make any representations on behalf of Transamerica or concerning
Transamerica, 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 or other promotional material approved
by Transamerica or its designee, except with the permission of
Transamerica.
4.5. The Fund and Adviser shall not give any information or make
any representations on behalf of or concerning Schwab, or use Xxxxxx'x
name except with permission of Schwab.
4.6. The Fund will provide to Transamerica and Schwab at least one
complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, proxy statements, sales literature
and other promotional materials, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that
relate to the Designated Portfolio(s), contemporaneously with the filing
of such document(s) with the SEC or NASD or other regulatory
authorities.
4.7. Transamerica or Schwab will provide to the Fund at least one
complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting
instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or the
Account, contemporaneously with the filing of such document(s) with the
SEC, NASD, or other regulatory authority.
4.8. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available
to customers or the public, including brochures, circulars, research
reports, market letters, form letters seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
4.9. At the request of any party to this Agreement, each other
party will make available to the other party's independent auditors
and/or representative of the appropriate regulatory agencies, all
records, data and access to operating procedures that may be reasonably
requested in connection with compliance and regulatory requirements
related to this Agreement or any party's obligations under this
Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other
compensation to Transamerica under this Agreement, and Transamerica
shall pay no fee or other compensation to the Fund or Adviser under this
Agreement, although the parties hereto will bear certain expenses in
accordance with Schedule F, Articles III, V, and other provisions of
this Agreement.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, as further provided in Schedule F.
The Fund shall see to it that all shares of the Designated Portfolio(s)
are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual
distribution (mailing costs) of the Fund's prospectus and distribution
(mailing costs) of the Fund's proxy materials and reports to owners of
Contracts offered by Transamerica, as provided in Schedule F.
5.4. The Fund and Adviser acknowledge that a principal feature of
the Contracts is the Contract owner's ability to choose from a number of
unaffiliated mutual funds (and portfolios or series thereof), including
the Designated Portfolio(s) and the Unaffiliated Funds, and to transfer
the Contract's cash value between funds and portfolios. The Fund and
Adviser agree to cooperate with Transamerica and Schwab in facilitating
the operation of the Account and the Contracts as intended, including
but not limited to cooperation in facilitating transfers between
Unaffiliated Funds.
5.5. Schwab agrees to provide certain administrative services,
specified in Schedule D hereto, in connection with the arrangements
contemplated by this Agreement. The parties acknowledge and agree that
the services referred to in this Section 5.5 are recordkeeping,
shareholder communications, and other transaction facilitation and
processing, and related administrative services only and are not the
services of an underwriter or a principal underwriter of the Fund and
that Schwab is not an underwriter for the shares of the Designated
Portfolio(s), within the meaning of the 1933 Act or the 0000 Xxx.
5.6. As compensation for the services specified in Schedule D
hereto, the Adviser agrees to pay Schwab a monthly Administrative
Service Fee based on the percentage per annum on Schedule D hereto
applied to the average daily value of the shares of the Designated
Portfolio(s) held in the Account with respect to Contracts sold by
Schwab. This monthly Administrative Service Fee is due and payable
before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
6.1. The Fund and Adviser represent and warrant that the Fund will
at all times sell its shares and invest its assets in such a manner as
to ensure that the Contracts will be treated as annuity contracts under
the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund and Adviser represent and warrant that
the Fund and each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation [Section] 1.817-
5, as amended from time to time, and any Treasury interpretations
thereof, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such Section or
Regulations. The Fund and the Adviser agree that shares of the
Designated Portfolio(s) will be sold only to Participating Insurance
Companies and their separate accounts.
6.2. No shares of any series or portfolio of the Fund will be sold
to the general public.
6.3. The Fund and Adviser represent and warrant that the Fund and
each Designated Portfolio is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will
maintain such qualification (under Subchapter M or any successor or
similar provisions) as long as this Agreement is in effect.
6.4. The Fund or Adviser will notify Transamerica immediately upon
having a reasonable basis for believing that the Fund or any Portfolio
has ceased to comply with the aforesaid Section 817(h) diversification
or Subchapter M qualification requirements or might not so comply in the
future.
6.5. The Fund and Adviser acknowledge that full compliance with
the requirements referred to in Sections 6.1, 6.2, and 6.3 hereof is
absolutely essential because any failure to meet those requirements
would result in the Contracts not being treated as annuity contracts for
federal income tax purposes, which would have adverse tax consequences
for Contract owners and could also adversely affect Transamerica's
corporate tax liability. The Fund and Adviser also acknowledge that it
is solely within their power and control to meet those requirements.
Accordingly, without in any way limiting the effect of Section 8.3
hereof and without in any way limiting or restricting any other remedies
available to Transamerica, the Adviser will pay all costs associated
with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply
with Sections 6.1, 6.2 or 6.3 hereof, including all costs associated
with reasonable and appropriate corrections or responses to any such
failure; such costs may include, but are not limited to, the costs
involved in creating, organizing, and registering a new investment
company as a funding medium for the Contracts and/or the costs of
obtaining whatever regulatory authorizations are required to substitute
shares of another investment company for those of the failed Portfolio
(including but not limited to an order pursuant to Section 26(b) of the
1940 Act); such costs are to include, but are not limited to, fees and
expenses of legal counsel and other advisors to Transamerica and any
federal income taxes or tax penalties (or "toll charges" or exactments
or amounts paid in settlement) incurred by Transamerica with respect to
itself or owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund shall provide Transamerica or its designee with
reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the
times provided for and substantially in the form attached hereto as
Schedule E; provided, however, that providing such reports does not
relieve the Fund or Adviser of their responsibility for such compliance
or of their liability for non-compliance.
ARTICLE VII. Potential Conflicts and Compliance With Shared Funding
Exemptive Order
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Designated Portfolio(s) are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of
contract owners. The Board shall promptly inform Transamerica if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. Transamerica will report any potential or existing conflicts
of which it is aware to the Board. Transamerica will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive
Order, by providing the Board with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by Transamerica to inform the Board whenever
contract owner voting instructions are disregarded. Such
responsibilities (other than the duty to report, which is unqualified)
shall be carried out by Transamerica with a view only to the interests
of its Contract Owners.
7.3. If it is determined by a majority of the Board, or a majority
of its directors who are not interested persons of the Fund, the Adviser
or any sub-adviser to any of the Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists,
Transamerica and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a
majority of the Independent Directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
up to and including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Designated Portfolio
and reinvesting such assets in a different investment medium, including
(but not limited to) another Designated Portfolio of the Fund, or
submitting the question whether such segregation
should be implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by Transamerica to disregard contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, Transamerica may be required, at the Fund's election, to
withdraw the Account's investment in the Fund and terminate this
Agreement; provided, however; that such withdrawal and termination shall
be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within
six (6) months after the Fund gives written notice that this provision
is being implemented, and until the end of the effective date of such
termination the Fund shall continue to accept and implement orders by
Transamerica for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
Transamerica conflicts with the majority of other state regulators, then
Transamerica will withdraw the Account's investment in the Fund and
terminate this Agreement within six months after the Board informs
Transamerica in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of
the effective date of such termination, the Fund shall continue to
accept and implement orders by Transamerica for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Trustees shall determine whether any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. Transamerica shall not be required by
Section 7.3 to establish a new funding medium for the Contracts if an
offer to do so has been declined by vote of a majority of Contract
owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict,
then Transamerica will withdraw the Account's investment in the Fund and
terminate this Agreement within six (6) months after the Board informs
Transamerica in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as
determined by a majority of the Independent Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) or terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5
of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By Transamerica
8.1(a). Transamerica agrees to indemnify and hold harmless the
Fund and its officers and each member of its Board and the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of
Transamerica) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus or SAI for
the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to Transamerica or
Schwab by or on behalf of the Adviser or Fund for use in
the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statement, prospectus, or statement
or additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Transamerica
or persons under its control) or wrongful conduct of
Transamerica or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
Shares; or
(iv) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
if such a statement or omission was made in reliance upon
information furnished in writing to the Fund by or on
behalf of Transamerica; or
(v) arise as a result of any failure by Transamerica to
provide the services and furnish the materials under the
terms of this Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by Transamerica in
this Agreement or arise out of or result from any other
material breach of this Agreement by Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). Transamerica shall not be liable under this
indemnification provision with respect to any losses, claims, expenses,
damages, liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). Transamerica shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
Transamerica in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Transamerica of any such claim
shall not relieve Transamerica from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the extent that
Transamerica has been prejudiced by such failure to give notice. In
case any such action is
brought against the Indemnified Parties, Transamerica shall be entitled
to participate, at its own expense, in the defense of such action.
Transamerica also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from Transamerica to such party of Transamerica's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and Transamerica will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify Transamerica
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts
or the operation of the Fund.
8.2. Indemnification By Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the Fund and
its officers and each member of its Board and the Adviser (collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Schwab) or litigation (including
legal and other expenses), to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon Xxxxxx'x dissemination of
information regarding the Fund that is both (A)
materially incorrect and (B) that was not either
contained in the Fund's registration statement or sales
literature or provided in writing to Schwab, or approved
in writing, by or on behalf of the Fund or the Adviser;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the sales literature for the Contracts or arise out of
or are based upon the omission or the alleged omission to
state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing
to Transamerica or Schwab by or on behalf of the Adviser
or Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Schwab or
persons under its control) or wrongful conduct of Schwab
or persons under its control, with respect to the sale or
distribution of the Contracts; or
(iv) arise as a result of any failure by Schwab to provide the
services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Schwab in this
Agreement or arise out of or result from any other
material breach of this Agreement by Schwab; or
(vi) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statements, prospectus, or statement
of additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contract;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). Schwab shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.2(c). Schwab shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified Schwab in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify Schwab of any such claim shall not relieve Schwab from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that Schwab has been prejudiced by such
failure to give notice. In case any such action is brought against the
Indemnified Parties, Schwab shall be entitled to participate, at its own
expense, in the defense of such action. Schwab also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from Schwab to such party of Xxxxxx'x
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and
Schwab will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d). The Indemnified Parties will promptly notify Schwab of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless
Transamerica and Schwab and each of their directors and officers and
each person, if any, who controls Transamerica or Schwab within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or SAI or
sales literature for the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Adviser or Fund
by or on behalf of Transamerica or Schwab for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct
of the Fund or Adviser or persons under their control,
with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
covering the Contracts or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to
Transamerica or Schwab by or on behalf of the Adviser or
Fund; or
(iv) arise as a result of any failure by the Fund or Adviser
to provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or
Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Adviser;
as limited by and in accordance with the provisions of Sections 8.3(b)
and 8.3(c) hereof. This indemnification is in addition to and apart
from the responsibilities and obligations of the Adviser specified in
Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to Transamerica or to Schwab or the
Account, whichever is applicable.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party
of the Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). Transamerica and Schwab agree promptly to notify the
Adviser of the commencement of any litigation or proceedings against it
or any of its officers and directors in connection with the issuance or
sale of the Contracts or the operation of the Account.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless
Transamerica and Schwab, and each of their directors and officers and
each person, if any, who controls Transamerica or Schwab within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.4) against any and all losses,
claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties
may be required to pay or may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
8.4(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to Transamerica, Schwab, the Fund, the
Adviser or the Account, whichever is applicable.
8.4(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that the Fund has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Fund will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.4(d). Transamerica and Schwab each agree promptly to notify the
Fund of the commencement of any litigation or proceedings against itself
or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Contracts, the operation of the Account, or the sale or acquisition of
shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of
California, except the California conflict of laws provisions.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Designated Portfolios, upon one (1)
year advance written notice delivered to the other parties;
provided, however, that such notice shall not be given
earlier than one year following the date of this Agreement;
or
(b) at the option of Transamerica by written notice to the
other parties with respect to any Designated Portfolio based
upon Transamerica's reasonable and good faith determination
that shares of such Designated Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of Transamerica by written notice to the
other parties with respect to any Designated Portfolio in the
event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by Transamerica; or
(d) at the option of the Fund in the event that formal
administrative proceedings are instituted against
Transamerica or Schwab by the NASD, the SEC, the Insurance
Commissioner of like official of any state or any other
regulatory body regarding Transamerica's or Xxxxxx'x duties
under this Agreement or related to the sale of the Contracts,
the operation of any Account, or the purchase of the Fund
shares or the shares or sponsor of any Unaffiliated Fund,
provided, however, that the Fund determines in its sole
judgement exercised reasonably and in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of Transamerica or Schwab to perform
its obligations under this Agreement or would have a material
adverse impact upon the Fund; or
(e) at the option of Transamerica in the event that formal
administrative proceedings are instituted against the Fund or
Adviser by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that Transamerica determines in its sole judgement
exercised reasonably and in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Fund or Adviser to perform its
obligations under this Agreement; or
(f) at the option of Transamerica by written notice to the
Fund and the Adviser with respect to any Portfolio if
Transamerica reasonably and in good faith believes that the
Portfolio will fail to meet the Section 817(h)
diversification requirements or Subchapter M qualifications
specified in Article VI hereof; or
(g) at the option of either the Fund or Adviser, if (i) the
Fund or Adviser, respectively, shall determine, in their sole
judgement reasonably exercised in good faith, that either
Transamerica or Schwab has suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact on
Transamerica's or Xxxxxx'x ability to perform its obligations
under this Agreement, (ii) the Fund or Adviser notifies
Transamerica or Schwab, as appropriate, of that determination
and its intent to terminate this Agreement, and (iii) after
considering the actions taken by Transamerica or Schwab and
any other changes in circumstances since the giving of such
notice, the determination of the Fund or Adviser shall
continue to apply on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the
effective date of termination; or
(h) at the option of either Transamerica or Schwab, if (i)
Transamerica or Schwab, respectively, shall determine, in its
sole judgment reasonably exercised in good faith, that either
the Fund or Adviser have suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact upon the
Fund's or Adviser's ability to perform its obligations under
this Agreement, (ii) Transamerica or Schwab notifies the Fund
or Adviser, as appropriate, of that determination and its
intent to terminate this Agreement, and (iii) after
considering the actions taken by the Fund or Adviser and any
other changes in circumstances since the giving of such
notice, the determination of Transamerica or Schwab shall
continue to apply on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the
effective date of termination; or
(i) termination at the option of Transamerica in the event
that formal administrative proceedings are instituted against
Schwab by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any
regulatory body regarding Xxxxxx'x duties under this
Agreement or related to the sale of the Fund's shares or the
Contracts, the operation of any Account, or the purchase of
Fund shares, provided, however, that Transamerica determines
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of Schwab to perform its obligations
related to the Contracts.
10.2. Notice Requirement. No termination of this Agreement shall
be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties of its intent to terminate,
which notice shall set forth the basis for such termination.
10.3. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Adviser, shall, at the option of
Transamerica, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts
shall be permitted to reallocate investments in the Designated
Portfolio(s) (as in effect on such date), redeem investments in such
Designated Portfolios(s) and/or invest in such Designated Portfolios(s)
upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of
this Agreement, each party's obligations under Article VIII to indemnify
other parties shall survive and not be affected by any termination of
this Agreement. In addition, with respect to Existing Contracts, all
provisions of this Agreement shall also survive and not be affected by
any termination of this Agreement.
10.5. Survival of Agreement. A termination by Schwab shall
terminate this Agreement only as to that party, and this Agreement shall
remain in effect as to the other parties; provided, however, that in the
event of a termination by Schwab the other parties shall have the option
to terminate this Agreement upon 60 (sixty) days notice, rather than the
one (1) year specified in Section 10.1(a).
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time
specify in writing to the other party.
If to the Fund:
SteinRoe Variable Investment Trust
c/o Liberty Investment Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
If to Transamerica:
Transamerica Occidental Life Insurance Company
000 Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: President, Living Benefits Division
If to the Adviser:
Xxxxx Xxx & Xxxxxxx Incorporated
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Secretary
If to Schwab:
Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not disclose, disseminate
or utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as such information may come into the public domain. Without
limiting the foregoing, no party hereto shall disclose any information
designated as proprietary by another party.
12.2. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
12.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation
the Securities and Exchange Commission, the NASD and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the California Insurance Commissioner with any
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain
whether the variable annuity operations of Transamerica are being
conducted in a manner consistent with the California Variable Annuity
Regulations and any other applicable law or regulations.
12.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
12.7. This Agreement or any of the rights or obligations hereunder
may not be assigned by any party without the prior written consent of
all parties hereto.
12.8. All persons dealing with the Fund and any Designated
Portfolio shall look solely to the assets of such Designated Portfolio
for the enforcement of any claims against the Fund hereunder. Each
other party acknowledges and agrees that none of the Trustees, officers
or shareholders of the Fund shall have any personal liability for any
obligations entered into by or on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
Transamerica:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By its authorized officer,
By: [SIGNATURE]
Title: President, Living Benefits Division
Date: 4/12/94
Fund:
XXXXX XXX & XXXXXXX INCORPORATED
By its authorized officer,
By: XXXXXXX X. XXXXXX
Title: President
Date: 4/4/94
Adviser:
STEINROE VARIABLE INVESTMENT TRUST
on behalf of the Designated Portfolio
By its authorized officer,
By: XXXXXXX X. XXXXXXXXXXX
Title: President
Date: 4/7/94
Schwab:
XXXXXXX XXXXXX & CO., INC.
By its authorized officer,
By: [SIGNATURE]
Title: Vice President
Date: April 4, 1994
SCHWAB INVESTMENT ADVANTAGE, A VARIABLE ANNUITY
SCHEDULE A
----------
Contracts Form Numbers
--------- ------------
Transamerica Occidental Life Insurance Company
----------------------------------------------
Group Annuity Contract Form No. GNP-215-193
Dollar Cost Averaging Endorsement Form No. GPM-020-193
Automatic Payout Option Endorsement Form No. GPM-021-193
Systematic Withdrawal Option Endorsement Form No. GPM-022-193
Acceptance of Group Annuity Contract Form No. GNA-212-193
Variable Annuity Application Form No. GNA-213-193
Certificate of Participation Form No. GNC-37-193
XXX Endorsement Form No. GCE-020-193
Benefit Distribution Endorsement Form No. GCE-021-193
Dollar Cost Averaging Endorsement Form No. GCE-022-193
Automatic Payout Option Endorsement Form No. GCE-923-193
Systematic Withdrawal Option Endorsement Form No. GCE-024-193
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-003-193
Variable Annuity Application Form No. FTGA-004-193
Certificate of Participation Form No. FTCG-101-193
XXX Endorsement Form 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
Annuity Rate Table Endorsement Form No. FTCE-010-193
SCHEDULE B
----------
Designated Portfolios
---------------------
Capital Appreciation Fund
SCHEDULE C
----------
Certain Investment Policies and Restrictions
Imposed by the
California Department of Insurance
Pursuant to Section 2.4 hereof, the Fund represents and warrants
that it is and shall at all times remain in compliance with the
following investment policies and restrictions. THESE ARE IN ADDITION
TO other related obligations of the Fund, including the general
obligation to comply with all applicable laws and regulation, including
but not limited to California insurance laws and regulations, the
Investment Company Act of 1940, and other applicable insurance and
securities laws.
[Note: The following are derived from a questionnaire used by the
California Department of Insurance as part of an insurance company's
application for qualification to transact a variable annuity business.
The parenthetical references below are to question numbers in that
questionnaire.]
The Fund represents and warrants that:
1. All repurchase agreements will be transacted only with entities
meeting specific credit and solvency standards administered and verified
by the Adviser (46(a)).
2. All repurchase transactions will be executed pursuant to a
comprehensive master repurchase agreement setting forth the terms and
conditions of the transaction, and having the incidents of a valid
promissory note in favor of the Fund (46(b)).
3. A valid, binding security interest in favor of the Fund or portfolio
thereof will be created and perfected in all collateral securing such
repurchase agreements (46(c)).
4. All such repurchase agreements will be secured at all times by
collateral consisting of liquid assets having a market value of not less
than 102% of the cash or assets transferred to the other party (46(d)).
5. All securities lending activities will be entered into only with
entities meeting specific credit and solvency standards administered and
verified by the Adviser (47).
6. All investments in instruments or certificates of any sort issued by
the U.S. Office of a bank or other savings institution domiciled in a
foreign nation, or a foreign branch of a U.S.
savings institution, will be instruments or certificates payable in the
United States and in U.S. dollars (48).
7. All investments of the Fund which possess a readily-available market
value will be valued either at their market value on the date of
valuation, or at amortized cost if it approximates market value within
the limits and constraints imposed by the U.S. Securities and Exchange
Commission (49).
8. All investments of the Fund which lack a readily-available market
will be valued according to specific, objective methods or procedures
set forth in writing (50).
9. The investment manager of each portfolio or series of the Fund
possesses substantial expertise and experience as an investment manager
or advisor of a portfolio consisting of asset and investments of the
same type as he or she will manage in regard to the portfolio or series.
(If experience is less than three years, please provide resume of
investment manager; note that in this case, the Company must provide
notarized certifications that it has fully investigated and is satisfied
with the qualifications, background, and expertise of the investment
manager.) (52).
10. At no time during the past ten years have the managers of any
portfolio or series resigned to avoid dismissal or been dismissed or
requested to resign from any position involving investment duties, on
account of violation of any law, rule or ethical standard relating to
insurance, annuities, or securities (53).
11. The investment advisory agreements concerning the Fund's operations
provide in substance that notwithstanding any other provisions of the
agreement, it is understood and agreed that the Fund shall retain the
ultimate responsibility for and control of all investments made pursuant
to the agreement, and reserve the right to direct, approve or disapprove
any action taken on its behalf by the investment advisor (54).
12. Every custodian holding securities or other assets of the Fund is
an institution permitted to serve in such capacity by the Investment
Company Act of 1940 and/or reviewed and approved for such purposes by
the U.S. Securities and Exchange Commission (55).
13. The Fund refuses to employ in any material connection with the
handling of assets of the Fund, any person who:
(a) In the last 10 years has been convicted of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving
violations of Xxxxx 00, Xxxxxx Xxxxxx Code [Sections] 1341, 1342, or
1343 (58(a)).
(b) Within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of, any
provision of any state insurance law involving fraud, deceit or knowing
misrepresentation (59(b)).
(c) Within the last 10 years has been found by any federal or state
regulatory authorities to have violated, or have acknowledged violation
of, any provisions of federal or state securities laws involving fraud,
deceit, or knowing misrepresentation (58(c)).
14. The Fund will make inquiries and attempt to determine that no
persons, firms, or employees of firms which supply consulting,
investment, administrative, custodial or other services affecting the
administration of the Company's variable annuity business (including
such services for the Fund), have been subject to the sanctions
described in the preceding representation (59).
15. The Fund will seek to prevent its officers and Board members, and
officers, directors and portfolio managers of the investment advisor,
from receiving, directly or indirectly, any commission, or any other
compensation with respect to the purchase or sale of assets of the Fund
(61).
16. No officer, director, trustee, or member of any governing board or
body of the Fund will receive directly or indirectly any commissions or
any other compensation contingent upon the writing, issuance, sale,
procurement of application for, or renewal, of any variable annuity
contract (62).
17. All service agreements affecting the administration of the Fund
allow the Fund to terminate such contracts without payment of any
penalty, forfeiture, compulsory buyout amount, or performance of any
other obligation which could deter termination (65).
18. All service agreements affecting the administration of the Fund
afford the Fund a right to cancel the contract and discharge the
servicing entity or person in the event such entity of person fails to
perform in a satisfactory manner (66).
19. All service agreements affecting the administration of the Fund
provide that the Fund shall own and control all the pertinent records
pertaining to its operations (67).
20. All service agreements affecting the administration of the Fund
provide that the Fund shall have the right to inspect, audit and copy
all records pertaining to performance of services under the agreement
(68).
SCHEDULE D
----------
ADMINISTRATIVE SERVICES
-----------------------
To be performed by Xxxxxxx Xxxxxx & Co., Inc.
X. Xxxxxx will provide the properly registered and licensed personnel
and systems needed for all customer servicing support - for both fund
and annuity information and questions - including:
delivery of prospectus - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectus;
X. Xxxxxx will calculate on a daily basis for each fund the number of
shares and the asset balance on which the fee is to be paid pursuant to
this agreement. Also provided will be a monthly summary of the reports,
expressed in both shares and dollar amounts.
X. Xxxxxx will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to Transamerica who will
retransmit them to each fund.
D. For its services, Schwab shall receive a fee of 0.20% per annum
applied to the average daily value of the shares of the fund held by
Xxxxxx'x customers, payable by the Adviser directly to Schwab, such
payments being due and payable within 15 (fifteen) days after the last
day of the month to which such payment relates.
SCHEDULE E
----------
Reports per Section 6.6
-----------------------
With regard to the reports relating to the quarterly testing of
compliance with the requirement of Section 817(h) and Subchapter M under
the Internal Revenue Code (the "Code") and the regulations thereunder,
the Fund shall provide within twenty (20) Business Days of the close of
the calendar quarter a report in the attached form regarding the status
under such sections of the Code of the Designated Portfolio(s), and if
necessary, identification of any remedial action to be taken to remedy
non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred
to hereinafter as "RIC status," the Fund will provide the reports on the
following basis: the year-end report in the attached form will be
provided 45 days after the end of the calendar year, but prior thereto,
the Fund will provide the additional interim and supplemental reports,
described below.
The additional reports are as follows:
1. A report in the usual reporting format and content, as of November
30, of each future fiscal year. The report will be provided under cover
of a letter from the Adviser stating that the Fund is in full compliance
with the requirements of Section 817(h) and Subchapter M of the Code.
Assuming such satisfactory report, the Fund will not provide any
additional interim reports. The report will be delivered by facsimile
by the twentieth day of December.
2. In the alternative, if a problem, as defined below, is identified in
the November report or its accompanying transmittal letter, additional
interim reports, on a weekly basis, starting on the 15th of December and
through the 30th of December, also will be supplied ("additional interim
reports"). The additional interim reports will not follow the format of
the regular reports, but will specifically address the problem
identified in the November 30 report. If any interim report,
thereafter, memorializes the cure of the problem, subsequent additional
reports will not be required.
With regard to the delivery of the additional reports, they will be
transmitted by facsimile on the next Business Day, subject to the
following schedule of special dates: if the 15th of December is a
Saturday, the required report date will be accelerated to the 14th of
December; if the 15th of December is a Sunday, the report will be
transmitted on the 16th of December.
3. A problem with regard to RIC status is defined as any violation of
the following standards, as referenced to the applicable sections of the
Code:
(a) Less than ninety-five percent of gross income is derived from
sources of income specified in Section 851(b)(2);
(b) Twenty-five percent or greater gross income is derived from the sale
or disposition of assets specified in Section 851(b)(3);
(c) Fifty-five percent or less of the value of total assets consists of
assets specified in Sections 851(b)(4)(A); and
(d) Twenty percent or more of the value of total assets is invested in
the securities of one issuer, as that requirement is set forth in
Section 851(b)(4)(B).
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
Liberty Investment Services, Inc.
Requirements for Regulated Investment
Companies and Specific Investment
Restrictions
Source: AICPA Audit and Accounting
Guide - Audits of Investment Companies
To qualify as a regulated investment company for tax
purposes, an investment company generally must:
a) Derive at least 90 percent of its gross income RIC 3,4 RIC 3,4 RIC 3,4 RIC 3, 4
from dividends, interest, income from securities
on loan, and gains (without including losses) from
the sale or other disposition of securities.
(Perform monthly.)
b) Derive less than 30 percent of its gross income 10.68% 13.29% 22.10% 13.74%
from gains (without including losses) on the sale or
other disposition of securities held for less than
three months (short-short test). (Perform monthly.)
c) Distribute at least 90 percent of its investment DONE @Y/E DONE @Y/E DONE @Y/E Y
company taxable income for the taxable year.
(Perform quarterly.)
To meet the diversification requirements at the RIC RIC RIC RIC
end of each quarter of the taxable year, at least WORKSHEET WORKSHEET WORKSHEET WORKSHEET
50 percent of the value of the company's total 5 C 5 C 5 C 5 C
assets must be represented by cash and cash
equivalents, U.S. government securities, securities PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLO
of other regulated investment companies, and other MANAGER MANAGER MANAGER MANAGER
securities. For that purpose, other securities do CHECKLIST CHECKLIST CHECKLIST CHECKLIST
not include investments in the securities of any 3, 33 3, 33 3, 33 3, 33
one issuer that represent more than 5 percent of
the value of the investment company's total assets
or more than 10 percent of the issuer's
outstanding voting securities. The diversification
requirements further prohibit an investment company
from investing more than 25 percent of its total
assets in the securities of any one issuer, except
for the securities of the U.S. government or other
regulated investment companies. The requirements
also prohibit investing more than 25 percent of the
company's total assets in two or more issuers
controlled by the investment company that are engaged
in the same (or similar) or related trade or
business. For that purpose, the company controls
the issuers if it has 20 percent or more of the
combined voting power. the investment company
should keep a record of those quarterly
computations. (Perform monthly.)
Municipal Bond Funds
A dividend qualifies as an exempt-interest dividend
only if both of the following conditions are met:
a) At least 50 percent of the value of the total N/A N/A N/A N/A
assets of the regulated investment company at the
close of each quarter of its taxable year consists
of certain tax-exempt government obligations.
b) The dividend is designated by the regulated N/A N/A N/A N/A
investment company as an exempt-interest dividend
in a written notice mailed to shareholders not later
than sixty days after the end of its taxable year.
Page 1 of 6
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
CAPITAL APPRECIATION FUND
Source: Prospectus dated May 1, 1992
Investment Techniques
1) The Capital Appreciation Fund may invest up to PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
25% of its total assets in securities of foreign MG CHECK- MG CHECK- MG CHECK- MG CHECK-
issuers that are not publicly traded in the U.S. LIST 24 LIST 24 LIST 24 LIST 24
(foreign securities).
2) The Fund may enter into forward contracts to sell NOTED NOTED NOTED NOTED
an amount of foreign currency approximating the
value of some or all of the Fund's portfolio
securities denominated in such foreign currency.
The Fund may also enter into forward foreign
currency contracts to protect against loss
between Trade and Settlement dates resulting
from changes in foreign currency exchange rates.
3) The Fund may invest in securities purchased on a NOTED NOTED NOTED NOTED
when-issued or delayed-delivery basis.
4) The Fund may invest in securities purchased on a NOTED NOTED NOTED NOTED
standby commitment basis.
NOTE: The Fund may receive a commitment fee in
consideration for its standby commitment.
NOTE: When the adviser deems a temporary defensive
position advisable, the Fund may invest, without
limitation, in high-quality fixed-income securities,
or hold assets in cash or cash equivalents.
5) The Fund may not:
a) with respect not 75% of the value of its SEE RIC SEE RIC SEE RIC SEE RIC
total assets, invest more than 5% of its total WORKSHEET WORKSHEET WORKSHEET WORKSHEET
assets in the securities of any one issuer
(except that this restriction does not apply to
U.S. Government Securities);
b) invest more than 25% of its total assets (at PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
market) in the securities of issuers in any MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
particular industry (except for U.S. Government 3 3 3 3
Securities);
c) acquire more than 10% of the outstanding voting 33 33 33 33
securities of any one issuer;
d) borrow money except as a temporary measure for PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
extraordinary or emergency purposes, and then MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
the aggregate borrowings at any one time may 14 14 14 14
not exceed 33 1/3% of its assets at market.
The fund will not purchase additional
securities if the fund's borrowings less
proceeds receivable exceeds 5% of total assets;
e) invest more than 15% of its total assets (at PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
market) in repurchase agreements maturing in MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
more than seven days or other illiquid 13 13 13 13
securities.
NOTE: THE SEC HAS ISSUED A POLICY STATEMENT EFFECTIVE MARCH 20, 1992,
WHICH WOULD ALLOW THE FUND TO INVEST UP TO 15% IN ILLIQUID SECURITIES.
A SHAREHOLDER MEETING HELD IN APRIL 1993 APPROVED THE NECESSARY CHANGE
TO A FUNDAMENTAL POLICY.
Note: In each case, if a percentage limit is satisfied at the time
of investment investment or borrowing, a later increase or decrease
resulting from a change in the value of a security or decrease in a
Fund's assets will not constitute a violation of the limit.
Page 2 of 6
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
Source: Statement of Additional
Information dated 5/1/92
Investment Restrictions - Fundamental
(Required shareholder vote to amend)
The Fund may not:
1) with respect to 75% of the value of the total RIC RIC RIC RIC
assets of the Fund, invest more than 5% of the WORKSHEET WORKSHEET WORKSHEET WORKSHEET
value of its total assets, taken at market
value at the time of a particular purchase,
in the securities of any one issuer, except
securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
2) purchase securities of any one issuer if more CHECKLIST CHECKLIST CHECKLIST CHECKLIST
than 10% of the outstanding voting securities 33 33 33 33
of such issuer would at the time be held by the
Fund;
3) act as an underwriter of securities, except 1 1 1 1
insofar as it may be deemed an underwriter for
purposes of the Securities Act of 1933 on
disposition of securities acquired subject to
legal or contractual restrictions on resale;
4) invest in a security if more than 25% of its 3 3 3 3
total assets (taken at market value at the
time of a particular purchase) would be
invested in the securities of issuers in any
particular industry, except that this
restriction does not apply to securities issued
or guaranteed by the U.S. Government or its
agencies or instrumentalities;
5) purchase or sell real estate (although it may 2 2 2 2
purchase securities secured by real estate or
interests therein, and securities issued by
companies which invest in real estate or interests
therein), commodities or commodity contracts,
except that it may enter into (a) futures and
options on futures and (b) forward contracts;
6) purchase securities on margin (except for use 4, 5, 22 4, 5, 22 4, 5, 22 4, 5, 22
of short-term credits as are necessary for
the clearance of transactions), make short sales
of securities, or participate on a joint or
a joint and several basis in any trading account
in securities, except in connection with
transactions in options, futures, and options
on futures;
7) make loans, but this restriction shall not 6, 7, 8 6, 7, 8 6, 7, 8 6, 7, 8
prevent a Fund from (a) buying a part of an
issue of bonds, debentures, or other obligations
which are publicly distributed, or from investing
up to an aggregate of 15% of its total assets
(taken at market value at the time of each
purchase) in parts of issues of bonds,
debentures or other obligations of a type
privately placed with financial institutions,
(b) investing in repurchase agreements, or
(c) lending portfolio securities, provided that
it may not lend securities if, as a result,
the aggregate value of all securities loaned
would exceed 15% of its total assets (taken at
market value at the time of such loan); or
Page 3 of 6
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
8) Invest more than 15% of the Fund's net assets 13 13 13 13
(taken at market value at the time of each
purchase) in illiquid securities including
repurchase agreements maturing in more than
seven days;
NOTE: THE SEC HAS ISSUED A POLICY STATEMENT
EFFECTIVE MARCH 20, 1992, WHICH WOULD ALLOW THE
FUND TO INVEST UP TO 15% IN ILLIQUID SECURITIES.
A SHAREHOLDER MEETING HELD IN APRIL 1993 APPROVED
THE NECESSARY CHANGE TO A FUNDAMENTAL POLICY.
9) borrow, except that it may (a) borrow up to 14 14 14 14
33 1/3% of its total assets from banks, taken
at market value at the time of such borrowing,
as a temporary measure for extraordinary or
emergency purposes, but not to increase
portfolio income (the total of reverse
repurchase agreements and such borrowings
will not exceed 33 1/3% of its total assets,
and the Fund will not purchase additional
securities when its borrowings, less proceeds
receivable from sales of portfolio securities,
exceed 5% of its total assets) and (b) enter
into transactions in options, futures, and
options on futures.
10) invest in companies for the purpose of 9 9 9 9
exercising control or management;
11) purchase more than 3% of the stock of another 10,11,12 10,11,12 10,11,12 10,11,12
investment company or purchase stock of
other investment companies equal to more
than 5% of the Fund's total assets (valued
at time of purchase) in the case of any one
other investment company and 10% of such
assets (valued at the time of purchase) in
the case of all other investment companies in
the aggregate; any such purchases are to be
made in the open market where no profit to a
sponsor or dealer results from the purchase,
other than the customary broker's commission,
except for securities acquired as part of a
merger, consolidation or acquisition of assets;
12) mortgage, pledge, hypothecate or in any 15 15 15 15
manner transfer, as security for indebtedness,
any securities owned or held by it, except as
may be necessary in connection with (a)
permitted borrowings and (b) options, futures
and options on futures;
13) issue senior securities, except to the extent 16 16 16 16
permitted by the Investment Company Act of 1940
(including permitted borrowings);
14) purchase portfolio securities for the Fund from, 17 17 17 17
or sell portfolio securities to, any of the
officers and directors or Trustees of the Trust
or of its investment adviser;
15) invest more than 5% of its net assets (valued at 18, 19 18, 19 18, 19 18, 19
time of purchase) in warrants, nor more than 2%
of its net assets in warrants that are not
listed on the New York or American Stock
Exchanges;
16) write an option on a security unless the option 25 25 25 25
is issued by the Options Clearing Corporation,
an exchange or similar entity;
Page 4 of 6
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
17) buy or sell an option on a security, a futures 26 26 26 26
contract or an option on a futures contract
unless the option, the futures contract, or the
option on the futures contract is offered
through the facilities of a recognized
securities association or listed on a
recognized exchange or similar entity;
18) purchase a put or call option if the aggregate 27 27 27 27
premiums paid for all put and call options
exceed 20% of its net assets (less the
amount by which any such positions are
in-the-money), excluding put and call
options purchased as closing transactions.
Note: If a percentage limit is satisfied at the
time of investment or borrowing, a later increase or
decrease in a Fund's assets will not constitute a
violation of the limit.
Page 5 of 6
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
Source: Portfolio Management Handbook
dated December 20, 1988
(Updated for subsequent events)
1) The Fund may, up to a minimum of 15% of the CHECKLIST CHECKLIST CHECKLIST CHECKLIST
value of its total assets, loan its portfolio 8 8 8 8
securities to broker-dealer firms or other
institutional investors to generate additional
income.
2) The Fund is permitted to enter into repos with 20 20 20 20
member banks of the Federal Reserve System which
have at least $1 billion in deposits, primary
dealers in U.S. government securities or other
financial institutions believed by SteinRoe to
be creditworthy.
The Fund may enter into repos only with 20 20 20 20
financial institutions which, in SteinRoe's
judgment, meet the creditworthiness standards
adopted by the Board of Trustees of the Trust.
At present, the following institutions have been
approved:
a) State Street Bank and Trust Company
b) Daiwa Securities of America, Inc.
c) Xxxxxxx Xxxxx Money Markets, Inc.
d) Xxxxxx Xxxxxxx, Inc.
e) Salomon Brothers
Not more than 15% of the Fund's net assets may 13 13 13 13
be invested in illiquid securities, specifically
including repos maturing in more than 7 days.
3) The Fund may not purchase any securities (debt 34 37 37 37
or equity) issued by persons in the securities
or investment banking business except as
permitted by rule 12-d3-1 of the 1940 Act (i.e.,
broker-dealer firms, underwriters, advisers of
investment companies or other investment advisory
firms).
4) The Fund and other investment companies advised 22 22 22 22
by Xxxxx Xxx & Farn. are prohibited by the 1940
Act from engaging in joint transactions with one
another. Accordingly, the Fund and other
investment companies for which combined purchases
or sales are made should be obligated to deliver
or make payment for only the portion of the
combined purchase or sale being made by it.
5) No portfolio transaction for the Fund should be 23 23 23 23
placed with broker-dealer firms affiliated with
Xxxxx Xxx & Farnham. The following lists all
such broker-dealer firms:
a) Liberty Securities Corporation
b) Keyport Financial Services Corp.
In addition, no portfolio transactions should
be placed with New England Securities Corporation.
Page 6 of 6
CAFQTR
MDA
03/31/94
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND
REGULATED INVESTMENT COMPANY
QUARTERLY COMPLIANCE CHECKLIST
FISCAL YEAR END DECEMBER 31, 1993
Requirements for qualification
------------------------------
To qualify as a regulated investment company for tax purposes, set
forth more fully in the Code, an investment company generally must:
Prepared By: DAR DAR MDA MDA
Reviewed By:
QUALIFIES (Y/N)
QTR 1 QTR 2 QTR 3 QTR 4
1. Be a domestic corporation, other than a personal Y Y Y Y
holding company, registered at all times
during the taxable year under the 1940 Act.
2. Elect to be taxed as a regulated investment Y Y Y Y
company or have previously made such election.
3. Derive at least 90 percent of its gross income Y Y Y Y
from dividends, interest, and gains (disregarding
losses) from the sale or other disposition of
securities. (See attached worksheet)
4. Derive less than 30 percent of its gross income Y Y Y Y
from gains (disregarding losses) on the sale or
other disposition of securities held for less
than three months. (See attached worksheet)
5. Meet certain requirements as to diversification Y Y Y Y
of its total assets at the close of each quarter
of the taxable year. (See attached worksheet)
6. Pay out at least 90 percent of its investment done @ done @ done @ Y
company taxable income (as defined) for the year end year end year end
taxable year. (See attached worksheet)
7. Comply with certain record-keeping and Y Y Y Y
notification (to shareholders) requirements in
addition to the records required of an ordinary
corporation.
INTERNAL REVENUE CODE WORKSHEET
CAPITAL APPRECIATION FUND
FISCAL YEAR ENDED DECEMBER 31, 1993
Prepared By: DAR DAR MDA MDA
Reviewed By:
QTR 1 QTR 2 QTR 3 QTR 4
1. Total assets (gross assets) at
the end of each fiscal quarter. $61,076,549 $70,834,462 $84,520,930 $98,402,768
2. 5% of total assets. 3,053,827 3,541,723 4,226,047 4,920,138
3. Portfolio securities at value in None None None None
excess of the 5% test.
SECURITY NAME
-------------
QTR 1.
QTR 2.
QTR 3.
QTR 4. Grupo Radio Centro SA
If there was any purchase of the securities named in line 3 above,
during the quarter under review, it must be determined if that
acquisition caused an investment of more than 5% of the company's
total assets as follows:
NOTES:
QTR 1.
QTR 2.
QTR 3.
QTR 4. No purchases since July 2, 1993, increase due to
market appreciation.
QTR 1 QTR 2 QTR 3 QTR 4
Total assets at quarter
end prior to acquisition
date.
---------------------------------------------------------------------
For securities listed above:
(1) (2) (3)
Value of Add: purchases Less: sales of Value of Percent of value
security of security at security at prior security of security
at prior cost including quarter end acquired acquired to total
Security quarter end latest acquisition value (1+2-3) assets*
-------- ----------- ------------------ ----------------- -------- -----------------
QTR 1. 0.00%
0.00%
QTR 2. 0.00%
0.00%
QTR 3. 0.00%
0.00%
QTR 4. 0.00%
0.00%
*If greater than 5%, security cannot be included in line B-2 of
quarterly compliance requirement 5.
INTERNAL REVENUE CODE WORKSHEET
CAPITAL APPRECIATION FUND
FISCAL YEAR ENDED DECEMBER 31, 1993
Prepared By: MDA Reviewed By: _________
Requirements 3 and 4: (4th quarter computation)
Income (for the taxable year to date):
Net gain on securities sold (tax basis) $19,052,047
Add back capital losses on sale
of investments 1,731,678
Interest and dividends from invest-
ments (net of taxes) 662,360
Other Income (income equalization) 10,277
Net exchange gains 0
-----------
D. TOTAL $21,456,362
-----------
E. 10 Percent of Line D $2,145,636
-----------
F. 30 Percent of Line D $6,436,909
-----------
Other Income (income other than dividends,
interest and gains on securities) cannot
exceed Line E. 10,277 0.05%
---------- ------
Gains on securities held less than three
months must be less than line F 2,9468,664 13.74%
---------- ------
Requirement 5:
Assets
A. Cash, receivables, securities,
and total other assets $98,402,768
-----------
B-1 Cash, receivables,
government securities,
and securities of other
regulated investment
companies 3,557,882
B-2 Other securities not in-
cluding either (a)
securities of any one
issuer having a value in
excess of 5 percent of line
(A) or (b) securities repre-
senting more than 10 percent
of the outstanding voting
securities of any one
issuer. 89,007,242
----------
B-3 (B-1 plus B-2) $92,565,124
-----------
C. 25 percent of line A $24,600,692
Line B-3 must be at least 50 percent
of line A 94.07%
------
No one issuer other than government securities or securities
of other regulated investment investment companies can
exceed Line C. 0.00%
------
ISSUER: Grupo Radio Centro Corp. 5.92%
CAFCOMP Liberty Investment Services
MDA Section 817(h) Diversification Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 31-Dec-93
Total Assets: $98,402,768
-----------
5% 4,920,138
-----------
Safe Harbor Review
1. List the amounts of the following investment classifications
and their percentage relationship to total assets:
A) Cash, cash items* and receivables 3,557,882 3.62%
B) U.S. Government Securities 0
C) Securities of other RIC's --------- -----
Total: 3,557,882 3.62%
(must be no more than 55%) --------- -----
Applying the Section 817(h) definition of investment,
list the following:
1. All securities of the same issuer: 0 -----
(see detail)
2. All securities of a particular gov't 0 -----
agency: (see detail)
3. All direct obligations of the U.S. 0 -----
Treasury, including cash in excess of
FDIC-insured bank accounts
4. $100,000 of each certificate of deposit 16,540 0.02%
and FDIC-insured bank accounts (include
in Safe Harbor Review as a U.S. Government
Security (see detail):
5. All other securities (securities which 89,007,242 90.45%
individually represent less than 5% of
total assets) (# of investments 82
largest inv. 4.57% Countrywide Funding
6. Securities which represent 5% or more 5,827,500 5.92%
of total assets (see detail) Groupo
Radio Centro Corp.
NOTE: No more than 55% of the value of total assets may be
represented by any 1 investment 5.92% (single
largest investment) Groupo Radio Centro Corp.
No more than 70% of the value of total assets may be
represented by any 2 investments 10.49% (two largest
investments) Countrywide Funding 4.57%
No more than 80% of the value of total assets may be
represented by any 3 investments 14.55% (three largest
investments) Fundex Corp. 4.06%
No more than 90% of the value of total assets may be
represented by any 4 investments 18.61% (four
largest investments) Southland Corp. 4.06%
CAFCOMP
MDA
SRVIT Capital Appreciation Fund Detail Sheet
Period Ended: 31-Dec-93
Securities of the Same Issuer:
Corp. 0 0.00%
------- -------
Total 0 0.00%
Govt. 0 0.00%
------- 0.00%
------- 0.00%
0 0.00%
------- ------
Sub-Total 0 0.00%
------- 0.00%
Total 0 0.00%
Definition of "investment" under Section 817(h).
A) All securities of the same issuer, regardless of the type
or class, all interests in the same real property project,
and all interests in the same commodity are each treated as
a single investment.
B) All securities of a particular agency or instrumentality
of the U.S. Government, regardless of whether or not backed
by the full faith credit of the U.S. Treasury, are treated
as a single investment.
C) All direct obligations of the U.S. Treasury, including
cash in excess of FDIC-insured bank accounts are treated
as a single investment.
D) To the extent insured by the FDIC, all certificates of
deposit and other FDIC-insured accounts are considered
as a security of the FDIC (i.e., $100,000 of each
certificate of deposit.
CAFCOMP Liberty Investment Services
MDA Monthly Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 3/15/94
Total Assets: $113,025,435 Net Assets: $110,215,399
5%: 5,651,272
1. List the amounts of the following investment classifications and
their percentage relationship to total assets:
A) Cash, cash items* and receivables 90,942 0.1%
B) U.S. Government Securities ----------- -----
C) Securities of other RIC's ----------- -----
D) Other securities (exclude any
securities above 5% of assets) 112,925,222 99.9%
Subtotal (> or = 75%) 113,016,164 100.0%
Total Assets 113,025,435 100.0%
E) Municipal Obligations (> or = 50%) ----------- ------
2. List the three largest holdings and their percentage of total
assets (excluding Govt. Sec)
A) *Ford Motor Cr. Co. 4,999,089 4.4%
B) *Xxxxxx Xxxxxx Corp. 4,947,195 4.4%
C) *Xxxxxxx Xxxxx + Co., Inc. 4,700,000 4.2%
*Includes commercial paper
3. Depending on the type of fund, list the appropriate amount
for the largest:
A) Industry classification
(< or = 25%) --------- ----
B) Issues located in the same state --------- ----
4. List the following sources of gross income:
A) Interest Income 154,331 2.6%
B) Dividend Income (net of taxes) 80,379 1.4%
C) Securities Gains (see detail) 5,692,314 96.0%
D) Income from securities on loan --------- -----
E) Other sources (< or = 10%) 304 0.0%
F) Gross income 5,927,328 100.0%
5. Determine the percentage of short-short income to
gross income:
A) Gross income 5,927,328
B) Short-short gains (< or = 30%) 1,813,927
C) Short-short percentage 30.6%
*Cash items do not include certificates of deposit, bank obligations
or commercial paper. A repurchase agreement should be treated as
the security of the bank or broker-dealer, not as cash or a U.S.
Government Security.
CAFCOMP Liberty Investment Services
MDA Section 817(h) Diversification Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 3/15/94
Total Assets: $113,025,435
5%: 5,651,272
Safe Harbor Review
1. List the amount of the following investment classifications
and their percentage relationship to total assets:
A) Cash, cash items* and receivables 90,942 0.1%
B) U.S. Government Securities ------ 0.0%
C) Securities of other RIC's ------ ----
Total: 90,942 0.1%
(must be no more than 55%)
Applying the Section 817(h) definition of investment, list the
following:
1. All securities of the same issuer: -------- -----
(see detail)
2. All securities of a particular gov't ------- -----
agency: (see detail)
3. All direct obligations of the U.S. ------- -----
Treasury, including cash in excess of
FDIC-insured bank accounts
4. $100,000 of each certificate of deposit 42,762 0.0%
and FDIC-insured bank accounts (include
in Safe Harbor Review as a U.S. Government
Security (see detail):
5. All other securities (securities which 112,925,222 99.9%
individually represent less than 5% of
total assets) (# of investments 92
largest inv. 4.4%) *Ford Motor Cr. Co.
6. Securities which represent 5% or more None ----
of total assets (see detail)
NOTE: No more than 55% of the value of total assets may be
represented by any 1 investment 4.4% (single
largest investment) *Ford Motor Cr. Co.
No more than 70% of the value of total assets may be
represented by any 2 investments 8.8% (two largest
investments) *Xxxxxx Xxxxxx Corp. 4.4%
No more than 80% of the value of total assets may be
represented by any 3 investments 13.0% (three largest
investments) *Xxxxxxx Xxxxx + Co., Inc. 4.2%
No more than 90% of the value of total assets may be
represented by any 4 investments 16.7% (four
largest investments) Grupo Radio Centro SA 3.7%
CAFCOMP
MDA
SRVIT Capital Appreciation Fund Detail Sheet
Period Ended: 3/15/94
Security Gains
gross gains net gains net gains gains
(from G/L rep) (from G/L rep) 3/15/94
-------------- ------------- --------- -------
Long term 1,600,411 1,583,507 1,998,860 415,353
Short term 1,807,066 1,382,483 1,438,040 55,557
Short 3 1,747,837 1,747,837 1,813,927 66,090
--------- --------- --------- -------
Total 5,155,313 4,713,826 5,250,827 537,001
Add: gains
1/1 - 1/15 537,001
---------
security
gains for
period 5,692,314
=========
Securities of the Same Issuer:
Govt: FNMA -------------- -----------
FHLMC -------------- -----------
GNMA -------------- -----------
SLMA -------------- -----------
Sub-Total -------------- -----------
U.S. Treasury -------------- -----------
Total Govt -------------- -----------
Corp.
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
Total -------------- -----------
A) All securities of the same issuer, regardless of the type
or class, all interests in the same real property project,
and all interests in the same commodity are each treated as
a single investment.
B) All securities of a particular agency or instrumentality
of the U.S. Government, regardless of whether or not backed
by the full faith credit of the U.S. Treasury, are treated
as a single investment.
C) All direct obligations of the U.S. Treasury, including
cash in excess of FDIC-insured bank accounts are treated
as a single investment.
D) To the extent insured by the FDIC, all certificates of
deposit and other FDIC-insured accounts are considered
as a security of the FDIC (i.e., $100,000 of each
certificate of deposit.
SCHEDULE F
EXPENSES
1. The Fund and Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of costs that reflects the Fund's share of total
costs determined according to the number of pages of the
parties' and other funds' respective portions of the
documents.
2. The Adviser and Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of the costs that reflects the Adviser's share of
the total costs determined according to the number of pages of
the parties' and other funds' respective portions of the
documents.
RESPONSIBLE
ITEM FUNCTION PARTY
PROSPECTUS
Annual Update Printing 1
Distribution 1
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales)
Existing Supply quantities described in Section 3.4 1
Owners: Distribution 1
Interim Updates
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales
If required by Participating Insurance
Company (PIC) PIC
If required by Schwab Schwab
Existing If required by Fund or Adviser: Fund
Owners: If required by PIC: PIC
If required by Schwab: Schwab
STATEMENTS Same as Prospectus Same
OF ADDITIONAL
INFORMATION
PROXY Printing Fund
MATERIALS Distribution
OF THE FUND (a) If required by law: Fund
(b) If required by participating insurance
company: PIC
(c) If required by Schwab: Schwab
ANNUAL Printing Fund
REPORTS Distribution 1
& OTHER
COMMUNICATIONS
WITH SHAREHOLDERS
OF THE FUND
OPERATIONS All operations and related expenses, including Fund
OF FUND the cost of registration and qualification of
the Fund's shares, preparation and filing of the
Fund's prospectus and registration statement,
proxy materials and reports, the preparation of
all statements and notices required by any
federal or state law and all taxes on the
issuance of the Fund's shares, and all costs
of management of the business affairs of the
Fund.
* Schwab will advise the Adviser and the Fund of the allocation of the
foregoing expenses among the parties as soon as possible after such
allocations are determined.
SCHEDULE G
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund, the Fund and
Transamerica. The defined terms herein shall have the meanings assigned
in the Participation Agreement except that the term "Transamerica" shall
also include the department or third party assigned by Transamerica to
perform the steps delineated below.
1. The number of proxy proposals is given to Transamerica by the
Fund as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time the Fund will inform
Transamerica of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before the
meeting.
2. Promptly after the Record Date, Transamerica will perform a
"tape run", or other activity, which will generate the names,
addresses and number of units which are attributed to each
contractowner/policyholder (the "Contract Owners") as of the
Record Date. Allowance should be made for account adjustments
made after this date that could affect the status of the
Contract Owners' accounts of the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. Transamerica will use its
best efforts to call in the number of Contract Owners to the
Adviser, as soon as possible, but no later than one week after
the Record Date.
3. The Fund's Annual Report must be sent to each Contract Owner
by Transamerica either before or together with the Contract
Owner's receipt of a proxy statement. The Fund will provide
at least one copy of the last Annual Report to Transamerica.
4. The text and format for the Voting Instructions Card ("Cards"
or "Card") is provided to Transamerica by the Fund.
Transamerica shall produce and personalize the Voting
Instruction cards. The Fund's Administrator, Liberty
Investment Services, Inc. must approve the Card before it is
printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the
Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological
process due to possible uncertainties relating to the
proposals.)
5. During this time, the Fund's Administrator will develop and
produce the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be
sent to Transamerica for insertion into envelopes (envelopes
and return envelopes are provided and paid for by
Transamerica). Contents of envelope sent to Contract Owners
by Transamerica will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid) addressed to
Transamerica or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small single sheet of paper that requests Contract Owners
to vote as quickly as possible and that their vote is
important. One copy will be supplied by the Fund.)
e. Cover letter - optional, supplied by Transamerica and
reviewed and approved in advance by the Fund's
Administrator.
6. The above contents should be received by Transamerica
approximately 3-5 business days before mail date. Individual
in charge at Transamerica reviews and approves the contents of
the mailing package to ensure correctness and completeness.
Copy of this approval sent to the Fund's Administrator.
7. Package mailed by Transamerica.
* The Fund must allow at least a 15-day solicitation time to
Transamerica as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar
days from (but not including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually
takes place in another department or another vendor depending
on the process used. An often used procedure is to sort cards
on arrival by proposal into vote categories of all yes, no, or
mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for
postmark information would be due to an insurance company's
internal procedure.
9. If cards are mutilated, or for any reason are illegible or are
not signed properly, they are sent back to the Contract Owner
with an explanatory letter, a new Card and return envelope.
The mutilated or illegible Card is disregarded and considered
to be not received for purposes of vote tabulation. Such
mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
10. There are various control procedures used to ensure proper
tabulation of votes and accuracy of the tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the
vote is progressing may then be calculated. If the initial
estimates and the actual vote do no coincide, then an
internal audit of that vote should occur. This may entail a
recount.
11. The actual tabulation of votes is done in units which are then
converted to shares. (It is very important that the Fund
receives the tabulations stated in terms of a percentage and
the number of shares.) The Fund's Administrator must review
and approve tabulation format.
12. Final tabulation in shares is verbally given by Transamerica
to the Fund's Administrator on the morning of the meeting not
later than 10:00 a.m. Denver time. The Fund's Administrator
may request an earlier deadline if required to calculate the
votes in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will
be required from Transamerica as well as an original copy of
the final vote. The Fund's Administrator will provide a
standard form for each Certification.
14. Transamerica will be required to box and archive the Cards
received from the Contract Owners. In the event that any vote
is challenged or is otherwise necessary for legal, regulatory,
or accounting purposes, the Fund's Administrator will be
permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
