PROFILE
of the
TRANSAMERICA CLASSICsm VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
May 1, 1998
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Classicsm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual funds portfolios
("portfolios") in the Variable Account and two general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. Transamerica guarantees the safety of money invested in the general
account options. Certain portfolios and general account options may not be
available in all states.
The contract is a deferred annuity and it has two phases: the accumulation
phase, and the annuitization phase. During the accumulation phase, you can make
additional payments on your contract, transfer money among the investment
options, and withdraw some or all of your investment. During this phase, your
earnings accumulated on a tax-deferred basis for individuals, but some or all of
any money you withdraw may be taxable. Tax deferral is not available for
non-qualified contracts owned by corporations and some trusts.
During the annuity phase, Transamerica will make periodic payments to
you. The dollar amount of the payments may depend on the amount of money
invested and earned during the accumulation phase and on other factors, such as
the annuitants' age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from Transamerica. You may choose fixed
payments, where the dollar amount of each payment generally remains the same, or
variable payments, where the dollar amount of each payment may increase or
decreased based on the investment performance of the portfolios you select. You
can choose among payments for the lifetime of an individual, or payments for the
longer of one lifetime or a guaranteed period of 10, 15 or 20 years, or payments
for one lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $5,000 ($2,000 for
IRAs) to purchase a contract. You can make additional payments of at least
$1,000 each ($100 each if made under an automatic payment plan deducted from
your bank account). You may cancel your contract during the free look period
(see item 10 below).
The Transamerica Classic Variable Annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement and other
long-term goals. Individuals in high tax brackets get the most benefit from the
tax deferral feature. You should not invest in the contract for short-term
purposes or if you cannot take the risk of losing some of your investment.
<PAGE>
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the
following 17 portfolios:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You can earn or lose money in any of these portfolios. These portfolios
are described in their own prospectuses. All portfolios may not be available in
all states.
GENERAL ACCOUNT: You can also allocate payments to the general account
options, where Transamerica guarantees the principal invested plus an annual
interest rate of at least 3%. The general account options include a fixed
account and guarantee period options.
5. Expenses. Transamerica makes certain charges and deductions in order to
provide the benefits and features available under the contract:
If you withdraw your money within seven years of investing it, there
may be a withdrawal charge of up to 6% of the amount invested.
Transamerica deducts an annual account fee of no more than $30
(the fee is waived for account values
over $50,000).
Transamerica deducts insurance and administrative charges of 1.35% per
year from your average daily value in the variable account.
If you elect the Living Benefits Rider (or Waiver of CDSL Rider),
Transamerica will deduct a monthly fee equal to 1/12 of 0.05% of the
account value.
The first 18 transfers each year are free (then Transamerica will
deduct a $10 fee for each additional
transfer).
Advisory fees are also deducted by the portfolios' manager, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your
investment and/or amounts you use to purchase annuity benefits
(depending on your state's law).
The following chart shows these charges (not including the optional
Living Benefits Rider fee, any transfer fees or premium taxes). The $30 annual
account fee is included in the first column as a charge of 0.075%. The third
column is the sum of the first two columns. The examples in the last two columns
show the total amounts you would be charged if you invested $1,000, the
investment grew 5% each year, and you withdrew your entire investment after one
year or 10 years. Year one includes the withdrawal charge and year 10 does not.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Sub-Accounts Charges Charges Charges 1 Year 10 Years
---------------------------------------------------------------------
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.425% 0.74% 2.165 $72.96 $249.81
Alliance VPF Growth & Income 1.425% 0.72% 2.145 $72.76 $247.75
Alliance VPF Premier Growth 1.425% 0.95% 2.375 $75.06 $271.12
Dreyfus VIF Capital Appreciation Growth 1.425% 0.80% 2.225 $73.56 $255.95
Dreyfus VIF Small Cap 1.425% 0.78% 2.205 $73.36 $253.90
Janus Aspen Balanced 1.425% 0.83% 2.255 $73.86 $259.00
Janus Aspen Worldwide Growth 1.425% 0.74% 2.165 $72.96 $249.81
MFS Emerging Growth 1.425% 0.87% 2.295 $74.26 $263.06
MFS Growth & Income 1.425% 1.00% 2.425 $75.56 $276.13
MFS Research 1.425% 0.88 % 2.305 $74.36 $264.07
Morgan Stanley UF Fixed Income 1.425% 0.70% 2.125 $72.56 $245.69
Morgan Stanley UF High Yield 1.425% 0.80% 2.225 $73.56 $255.95
Morgan Stanley UF International Magnum 1.425% 1.15% 2.575 $77.06 $290.98
OCC Accumulation Trust Managed 1.425% 0.87% 2.295 $74.23 $259.34
OCC Accumulation Trust Small Cap 1.425% 0.97% 2.395 $75.24 $270.64
Transamerica VIF Growth 1.425% 0.85% 2.275 $74.06 $261.03
Transamerica VIF Money Market 1.425% 0.60% 2.025 $71.55 $235.33
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31,
1997 (except for Transamerica VIF Money Market Portfolios) and do not reflect
expense reimbursements or fee waivers. The figures for Transamerica VIF Money
Market Portfolios are estimates for the year 1998, its first year of operation.
Expenses may be higher or lower in the future. See the "Variable Account Fee
Table" in the Transamerica Classic Variable Annuity prospectus for more detailed
information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
contract value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portions (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increase in the contract value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money our at any time during the
accumulation phase. Transamerica may assess a withdrawal charge of up to 6% of a
purchase payment, but no withdrawal charge will be assessed on money that has
been in the contract for seven years. In certain cases, if you elect the Living
Benefits Rider when you purchase the contract, the withdrawal change may be
waived if you are in a hospital or nursing home for a long period or, in some
states, if you are diagnosed with a terminal illness, or if you are receiving
medically required in-home care. Subject to certain conditions, each contract
year you may withdraw up to 15% of purchase payments received less than seven
years ago, without incurring a withdrawal charge. Withdrawals from qualified
contracts may be subject to severe restrictions and, in certain circumstances,
prohibited.
You may have to pay income taxes on amounts you withdraw and there may
also be a 10% tax penalty if you make withdrawals before you are 59 1/2 years
old.
If you withdraw money from a guarantee period prematurely, you may
forfeit some of the interest that you earned, but you will always receive the
principal you invested plus 3% interest.
8. Past Investment Performance. The value of the money you allocated to the
portfolios will go up or down, depending on the investment performance of the
portfolios you select. The following chart shows the adjusted past investment
performance on a year-by-year basis for each portfolio. These figures have
already been reduced by the insurance charges, the account fee, the advisory fee
and all the expenses of the portfolios. These figures do not include the
withdrawal charge, the fee for the optional Living Benefits Rider, any transfer
fees or premium taxes, which would reduce performance if applied. Past
performance is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
------------------------------------------------------------------------
SUB-ACCOUNT 1997 1996 1995 1994 1993
------------------------------------------------------------------------
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 36.16% 18.40% 35.18% -8.55% 9.43%
Alliance VPF Growth & Income 28.25% 21.65% 35.31% -1.09% 10.24%
Alliance VPF Premier Growth 33.43% 19.63% 43.41% -3.41% 11.16%
Dreyfus VIF Capital Appreciation Growth 26.84% 22.76% 31.76% 1.52% N/A
Dreyfus VIF Small Cap 17.21% 15.11% 29.06% 7.78% 67.23%
Janus Aspen Balanced 21.21% 14.55% 22.93% -0.66% N/A
Janus Aspen Worldwide Growth 21.63% 26.40% 25.28% -0.22% N/A
MFS Emerging Growth 21.48% 15.49% N/A N/A N/A
MFS Growth & Income 29.06% 21.67% N/A N/A N/A
MFS Research 19.76% 20.50% N/A N/A N/A
Morgan Stanley UF Fixed Income 8.40% N/A N/A N/A N/A
Morgan Stanley UF High Yield 11.94% N/A N/A N/A N/A
Morgan Stanley UF International Magnum 2.35% N/A N/A N/A N/A
OCC Accumulation Trust Managed 21.18% 20.45% 43.39% 1.71% 9.29%
OCC Accumulation Trust Small Cap 21.50% 16.88% 15.08% -1.43% 18.20%
Transamerica VIF Growth 50.31% 26.60% 52.98% 7.68% 21.70%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
SUB-ACCOUNT 1992 1991 1990 1989 1988
------------------------------------------------------------------------
- ---------------------------------------------------
Alger American Income & Growth 7.12% 22.70% -1.39% 5.91% N/A
Alliance VPF Growth & Income 6.42% N/A N/A N/A N/A
Alliance VPF Premier Growth N/A N/A N/A N/A N/A
Dreyfus VIF Capital Appreciation Growth N/A N/A N/A N/A N/A
Dreyfus VIF Small Cap 70.60% 156.10% N/A N/A N/A
Janus Aspen Balanced N/A N/A N/A N/A N/A
Janus Aspen Worldwide Growth N/A N/A N/A N/A N/A
MFS Emerging Growth N/A N/A N/A N/A N/A
MFS Growth & Income N/A N/A N/A N/A N/A
MFS Research N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed Income N/A N/A N/A N/A N/A
Morgan Stanley UF High Yield N/A N/A N/A N/A N/A
Morgan Stanley UF International Magnum N/A N/A N/A N/A N/A
OCC Accumulation Trust Managed 17.38% 43.71% -5.87% 31.08% N/A
OCC Accumulation Trust Small Cap 18.84% 46.61% -11.17% 16.36% N/A
Transamerica VIF Growth 13.55% 41.44% -12.60% 32.90% 29.23%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Death Benefit. If you die during the accumulation phase, a death benefit will
be paid to your beneficiary.
If you die before you turn 85, the death benefit will be the greatest
of three things: (1) the account value; (2) the sum of all purchase payments
less withdrawals and applicable premium taxes; or (3) the highest account value
on any contract anniversary prior to the earlier of the owner's (or joint
owner's) 85th birthday, plus purchase payment made less withdrawals and
applicable premium tax charges since that contract anniversary. If death occurs
after your or your joint owner's 85th birthday, the death benefit is equal to
the account value.
10. Other Information. The Transamerica Classic Variable Annuity offers other
features you might be interest in. Some of these features are as follows:
Free Look. After you get your contract, you have ten days to look it
over and decide if it is really right for you (this period may be longer in
certain states). If you decide not to keep the contract, you can cancel it
during this period by delivering a written notice of cancellation and returning
the contract to the Service Center at the address listed in item 11 below.
Unless otherwise required by law, Transamerica will refund the purchase payments
allocated to any general account option (less any withdrawals) plus the value in
the Variable Account as of the date the written notice and the contract are
received by the Service Center.
Telephone Transfers. You can generally arrange to transfer
money between the investments in your
contract by telephone.
Dollar Cost Averaging. You can instruct Transamerica to automatically
transfer money from either the money market sub-account or the fixed account to
any of the other variable sub-accounts each month. This is intended to give you
a lower average cost per share or unit than a single one time investment.
Automatic Rebalancing Option. The performance of each sub-account may
cause the allocation of value among the sub-accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
sub-accounts by reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have Transamerica send
you money automatically each month out of your contract during the accumulation
phase. There are limits on the amounts, and the payments may be taxable, and,
prior to age 59 1/2, subject to the penalty tax. If the total withdrawals
(including systematic withdrawals) made in a contract year exceed the allowed
amount to be withdrawn without a charge for that year, any applicable withdrawal
charge will then apply.
Automatic Payout Option. For qualified contracts, certain pension and
retirement plans require that certain amounts be distributed from the plan at
certain ages. You can arrange to have such amounts distributed automatically
during the accumulation phase.
These features may not be available in all state and may not be
suitable for your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
<PAGE>
PROSPECTUS FOR
TRANSAMERICA SERIES sm
TRANSAMERICA CLASSIC sm
VARIABLE ANNUITY
A Variable Annuity Issued by
Transamerica Life Insurance
and Annuity Company
And Prospectuses for:
Income and Growth Portfolio of The Alger American Fund
Growth and Income Portfolio and
Premier Growth Portfolio of Alliance Variable Products Series
Fund, Inc.
Capital Appreciation Portfolio and
Small Cap Portfolio of Dreyfus Variable Investment Fund
Balanced Portfolio and
Worldwide Growth Portfolio of Janus Aspen Series
Emerging Growth Series
Growth with Income Series and
Research Series of MFS Variable Insurance Trust
Fixed Income Portfolio
High Yield Portfolio and
International Magnum Portfolio of Morgan Stanley Universal Funds, Inc.
Managed Portfolio and
Small Cap Portfolio of OCC Accumulation Trust
Growth Portfolio and
Money Market Portfolio of Transamerica Variable Insurance
Fund, Inc.
May 1, 1998
<PAGE>
TRANSAMERICA SERIES sm TRANSAMERICA CLASSIC sm
VARIABLE ANNUITY A Flexible Premium Deferred Variable Annuity
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY 401 North Tryon
Street, Charlotte, North Carolina 28202
This prospectus describes the Transamerica Classic Variable Annuity, a
variable annuity contract ("contract") issued by Transamerica Life Insurance and
Annuity Company (referred to as "Transamerica"). The contract allows you, the
owner, to accumulate assets on a tax-deferred basis for retirement and other
long-term financial purposes.
You may direct your purchase payments, as well as any value accumulated
under the contract, to one or more variable sub-accounts of Separate Account
VA-6 or to the general account options, or to both. The money you place in each
variable sub-account will be invested solely in a corresponding mutual fund
investment portfolio ("portfolio"). The value of each variable sub-account will
vary in accordance with the investment performance of the portfolio in which
that variable sub-account invests. You bear the entire investment risk for all
assets you place in the variable sub-accounts. This means that, depending on
market conditions, the amount you invest in the variable sub-accounts may
increase or decline. Currently you may choose among the following 17 variable
sub-accounts:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You may also place your purchase payments or accumulated value in the
general account options. We are currently offering two general account options.
In one, the fixed account, Transamerica guarantees the return of the amount
invested at a specified rate of interest for at least 12 months. Transamerica
will periodically declare the rate of interest applicable to each amount
allocated to the fixed account. In the second option, the guarantee period
account, Transamerica guarantees the return of the amount invested at a declared
rate of interest for a specified guarantee period. Currently, the guarantee
periods available are three, five and seven years; there may be a reduction made
to the amount of interest credited on amounts withdrawn or transferred before
the end of these periods. For both general account options, 3% will be the
minimum rate of interest credited.
This prospectus contains vital information that you should know before
investing. You can obtain more information about the contract by requesting a
copy of the Statement of Additional Information ("SAI") dated May 1, 1998. The
SAI is available free by writing to Transamerica Life Insurance and Annuity
Company, Annuity Service Center, 401 North Tryon Street, Suite 700, Charlotte,
North Carolina, 28202 or by calling 800-420-7749. The current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this prospectus. The table of contents of the SAI is included at the end of
this prospectus. These securities have not been approved or disapproved by the
Securities and Exchange Commission, nor has the Commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
For your own benefit and protection, please read this prospectus
carefully before you invest. Keep it on hand for future reference. The date of
this prospectus is May 1, 1998.
<PAGE>
Under the terms of the contract, we promise to pay you a series of
monthly settlement option payments. Payments may be for a fixed or a variable
amount or a combination of both, for the life of the annuitant or for some other
period as you select prior to the annuity date.
On or before the annuity date, you may transfer assets between and
among the variable sub-accounts and the general account options. The fixed
account has restrictions on certain transfers while transfers from a guarantee
period account may be subject to an interest adjustment. After the annuity date,
transfers are permitted among the variable sub-accounts only if you elect to
receive variable settlement option payments.
On or before the annuity date, you may elect to withdraw all or a
portion of your cash surrender value in exchange for a cash payment. Withdrawals
out of the guarantee period account may be subject to an interest adjustment.
Withdrawals may be subject to a contingent deferred sales load, certain
administrative fees, premium tax charges, federal, state or local income taxes,
and/or a tax penalty.
This prospectus must be accompanied by current prospectuses
for the portfolios.
THIS PROSPECTUS MAY NOT BE OFFERED IN ANY JURISDICTION WHERE SUCH OFFERING IS
UNLAWFUL. ANY INFORMATION THAT A DEALER, SALESPERSON, OR OTHER PERSON GIVES YOU
ABOUT THIS CONTRACT SHOULD BE CONTAINED IN THIS PROSPECTUS. IF YOU RECEIVE ANY
INFORMATION ABOUT THE CONTRACT THAT IS NOT CONTAINED IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON THAT INFORMATION.
Please note that your investment in the contract:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency.
Investing in the contract involves certain investment risks, including possible
loss of principal.
This prospectus generally describes only the variable account
portion of the contract, except when the general account
options are specifically mentioned.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS................................................................5
SUMMARY....................................................................7
CONDENSED FINANCIAL INFORMATION...........................................18
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT...18
Transamerica Life Insurance and Annuity Company..................18
Published Ratings................................................18
The Variable Account.............................................19
THE PORTFOLIOS............................................................19
THE CONTRACT..............................................................24
Ownership........................................................25
PURCHASE PAYMENTS.........................................................25
Purchase Payments................................................25
Allocation of Purchase Payments..................................26
Investment Option Limit..........................................26
ACCOUNT VALUE.............................................................27
TRANSFERS.................................................................27
Before the Annuity Date..........................................27
Other Restrictions...............................................28
Telephone Transfers..............................................28
Dollar Cost Averaging......................................28
Automatic Asset Rebalancing................................29
After the Annuity Date.....................................30
CASH WITHDRAWALS....................................................30
Systematic Withdrawal Option...............................31
Automatic Payment Option (APO).............................31
DEATH BENEFIT.......................................................32
Payment of Death Benefit...................................32
Designation of Beneficiaries...............................33
Death of Owner Before Annuity Date.........................33
If Annuitant Dies Before Annuity Date......................34
Death After Annuity Date...................................34
Survival Provision.........................................35
CHARGES, FEES AND DEDUCTIONS........................................35
Contingent Deferred Sales Load.............................35
Free Withdrawals - Allowed Amount..........................35
Free Withdrawals - Living Benefits Rider...................36
Other Free Withdrawals.....................................36
Administrative Charges.....................................36
Mortality and Expense Risk Charge..........................37
Living Benefits Rider Fee..................................38
Premium Tax Charges........................................38
Transfer Fee...............................................38
Option and Service Fees....................................38
Taxes......................................................38
Portfolio Expenses.........................................38
Interest Adjustment........................................38
Sales In Special Situations................................39
SETTLEMENT OPTION PAYMENTS..........................................39
Annuity Date...............................................39
Settlement Option Payments.................................39
Election of Settlement Option Forms and Payment Options....40
Payment Options............................................40
Fixed Payment Option.......................................40
Variable Payment Option....................................40
Settlement Option Forms....................................41
FEDERAL TAX MATTERS.................................................42
Introduction...............................................42
Purchase Payments..........................................43
Taxation of Annuities......................................43
Qualified Contracts........................................45
Taxation of Transamerica ..................................47
Tax Status of Contract.....................................48
Possible Changes in Taxation...............................49
Other Tax Consequences.....................................49
PERFORMANCE DATA ...................................................49
DISTRIBUTION OF THE CONTRACT........................................51
PREPARING FOR YEAR 2000.............................................51
LEGAL PROCEEDINGS...................................................51
LEGAL MATTERS.......................................................51
ACCOUNTANTS.........................................................52
VOTING RIGHTS.......................................................52
AVAILABLE INFORMATION...............................................53
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS.............53
APPENDIX A - THE GENERAL ACCOUNT OPTIONS............................54
Fixed Account .............................................54
Guarantee Period Account ..................................55
APPENDIX B..........................................................58
Example of Variable Accumulation Unit Value Calculations...58
Example of Variable Annuity Unit Value Calculations........58
Example of Variable Annuity Payment Calculations...........58
APPENDIX C
Disclosure Statement for Individual Retirement
Annuities ............................................59
The contract is not available in all states.
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general
account options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract
is surrendered on or before the
annuity date. The cash surrender value is equal to: the account value;
less any account fee, interest
adjustment, contingent deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown on the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period
of at least twelve months for each
allocation or transfer.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges, or
transfers out to the variable account prior to the annuity date.
General Account Options: The fixed account and the guarantee period
account offered by us to which the owner
may allocate purchase payments and transfers.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee
period.
Guarantee Period: The number of years that a guaranteed rate of interest will
be credited to a guarantee period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods, each
with a different guaranteed rate of interest, offered under the guarantee period
account.
Living Benefits Rider: Also called a "Waiver of CDSL" rider in some contracts,
it provides benefits described on
page 36.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any amounts the
owner allocates to that variable sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box 31848,
Charlotte, North Carolina 28231-1848,
telephone 800-258-4260.
Status (Qualified and Non-Qualified): The contract has a qualified status
if it is issued in connection with a
tax-favored retirement plan or program. Otherwise, the status is non-qualified.
Valuation Day: Any day the New York Stock Exchange is open. To determine
the value of an asset on a day that is
not a valuation day, we will use the value of that asset as of the end of the
next valuation day.
Valuation Period: The time interval between the closing (generally 4:00 p.m.
Eastern Time) of the New York Stock
Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code.
Variable Accumulation Unit: A unit of measure used to determine the variable
accumulated value before the annuity date. The value of a variable accumulation
unit varies with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable
accumulation units under this contract prior
to the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account
which invests solely in shares of one of
the underlying portfolios.
We: The company, Transamerica.
You: The owner.
<PAGE>
SUMMARY
The Contract
The Transamerica Classic sm Variable Annuity is a flexible purchase
payment deferred annuity that is designed to aid your long-term financial
planning and retirement needs. The contract may be used in connection with a
retirement plan which qualifies as a retirement program under Sections 403(b),
408 or 408A of the Code, with various types of qualified pension and profit
sharing plans under Section 401 of the Code, or with non-qualified plans. Some
qualified contracts may not be available in all states or in all situations. The
contract is issued by Transamerica Life Insurance and Annuity Company
("Transamerica"), an indirect wholly-owned subsidiary of Transamerica
Corporation. Its principal office is at 401 North Tryon Street, Charlotte, North
Carolina 28202.
This contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used in this prospectus refers to either the individual
annuity contract or to a certificate issued under a group annuity contract. The
term "owner" refers to the owner(s) of the individual contract or the owner(s)
of the certificate, as appropriate.
Transamerica will establish and maintain an account for each contract.
Each owner will receive either an individual annuity contract or a certificate
evidencing the owner's coverage under a group annuity contract. The contract
provides that the account value, after certain adjustments, will be applied to a
settlement option on a future date you select ("annuity date").
You may allocate all or portions of your purchase payments to one or
more variable sub-accounts or to the general account options.
The account value prior to the annuity date, except for amounts in the
general account options, will vary depending on the investment experience of
each of the variable sub-accounts selected by the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, prior to the annuity date the owner bears the entire investment risk
under the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts
allocated to the variable account, so the proceeds of a surrender could be less
than the amount invested.
The initial purchase payment for each contract must be at least $5,000
($2,000 for contributory IRAs, SEP/IRAs and Roth IRAs). Generally each
additional purchase payment must be at least $1,000, unless an automatic
purchase payment plan is selected. See "Purchase Payments" page 25.
The Variable Account
The variable account is a separate account (designated Separate Account
VA-6) that is subdivided into variable sub-accounts. See "The Variable Account"
page 19. Assets of each variable sub-account are invested in a specified mutual
fund portfolio ("portfolio"). The variable sub-accounts currently available for
investment are:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
The portfolios pay their investment advisers and administrators certain
fees charged against the assets of each portfolio. The variable accumulated
value, if any, of a contract and the amount of any variable settlement option
payments will vary to reflect the investment performance of the variable
sub-accounts to which amounts have been allocated. Additionally, applicable
charges are deducted. See "Charges, Fees and Deductions" page 35. For more
information about the portfolios, see "The Portfolios" page 19 and the
accompanying portfolios' prospectuses.
General Account Options
There are two types of general account options - the fixed account and
the guarantee period account. See "The General Account Options" in Appendix A.
The amounts in the fixed account will be credited interest at a rate of
not less than 3% annually. Transamerica may credit interest at a rate in excess
of 3% at its discretion for any class. Each interest rate will be guaranteed to
be credited for at least 12 months.
The other general account option, the guarantee period account,
provides specified rates of interest for specified terms of, currently, three,
five and seven years, subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the 3%
minimum rate.
Investment Option Limit
Currently, the owner may not elect more than a total of 18 investment
options over the life of the contract. Investment options include variable
sub-accounts and general account options. See "Investment Option Limits" page 26
.
Transfers Before the Annuity Date
Prior to the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see "After the Annuity Date" page 30.
Transfers out of the fixed account are restricted to four per contract
year and to a limited percentage of the fixed account value. More frequent
transfers may be allowed under certain services and options, for example, dollar
cost averaging. Transfers out of a guarantee period prior to the end of the term
may be subject to an interest adjustment which may reduce interest credited to
the 3% minimum rate. See "General Account Options" in Appendix A.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 18 made during the same contract year. See "Transfers" on page 27
for additional limitations and information regarding transfers.
Withdrawals
You may withdraw all or part of the cash surrender value on or before
the annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $50,000.
Transamerica may delay payment of any withdrawal from the general account
options for up to six months. See "Cash Withdrawals" page 30.
Withdrawals may be taxable, subject to withholding and subject
to a penalty tax. Withdrawals from
qualified contracts may be subject to severe restrictions and, in
certain circumstances, prohibited. See
"Federal Tax Matters" page 42.
Contingent Deferred Sales Load
Transamerica does not deduct a sales charge when purchase payments are
made (although premium tax charges may be deducted). However, if any part of the
account value is withdrawn, a contingent deferred sales load of up to 6% of
purchase payments may be deducted. After a purchase payment has been held by
Transamerica for seven years, it may be withdrawn without charge. In most
states, the owner may elect, for an extra charge, an optional Living Benefits
Rider that provides that the contingent deferred sales load will be waived in
certain circumstances. No contingent deferred sales load is assessed on payment
of the death benefit, on transfers within the contract, or on certain
annuitizations. See "Contingent Deferred Sales Load" page 35, "Withdrawals" page
43 and "Living Benefits Rider" page 36.
Also, beginning 30 days from the contract effective date (or the end of
the free look period if later), any portion of the "allowed amount" may be
withdrawn each contract year without imposition of any contingent deferred sales
load. The allowed amount for each contract year is equal to 15% of purchase
payments, that were received during the last seven years, as of the prior
contract anniversary, less any withdrawals already taken that contract year. All
purchase payments not previously withdrawn that have been held at least seven
years are not subject to a contingent deferred sales load. For purposes of
calculating the contingent deferred sales load, withdrawals will be considered
to be taken first from purchase payments, on a first in/first out basis, and
then from earnings.
Other Charges and Deductions
Transamerica deducts a mortality and expense risk charge of 1.20%
(annually) of the assets in the variable account and an administrative expense
charge of 0.15% (annually) of these assets. The administrative expense charge
may change, but it is guaranteed not to exceed a maximum effective annual rate
of 0.35%. See "Mortality and Expense Risk Charge" page 37 and "Administrative
Charges" page 36.
An account fee of currently $30 (or 2% of the account value, if less)
is deducted at the end of each contract year and upon surrender. This fee may
change but it is guaranteed not to exceed $60 (or 2% of the account value, if
less) per contract year. If the account value is more than $50,000 on the last
business day of a contract year (or as of the date the contract is surrendered),
the account fee will be waived for that year.
After the annuity date, the annual annuity fee of $30 will be deducted
in equal installments from each periodic payment under the variable payment
option.
For each transfer in excess of 18 during a contract year,
a transfer fee of $10 will be imposed. See
"Transfer Fee" page 38.
Charges for premium taxes (including retaliatory premium taxes) are not
currently deducted, except for annuitizations, but such charges could be imposed
in some jurisdictions. Depending on the applicability of such taxes, the charges
could be deducted from purchase payments, from amounts withdrawn, and/or upon
annuitization. See "Premium Tax Charges" page 38.
In addition, amounts withdrawn or transferred out of a guarantee period
prior to the end of its term may be subject to an interest adjustment. See
"Guaranteed Period Account" in Appendix A.
If the owner elects the Living Benefits Rider a fee of 0.05%
(annually) of the account value will be
deducted at the end of each contract month at the rate of 1/12 times 0.05%
times the account value. The Living
Benefit Rider is not available in all states.
Currently, no fees are deducted for any other services or options under
the contract. However, Transamerica does reserve the right to impose fees to
cover processing for certain services and options in the future, including
dollar cost averaging, systematic withdrawals, automatic payouts, asset
allocation and asset rebalancing.
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. The information below should be considered together with the narrative
provided under the heading "Charges, Fees and Deductions" on page 35 of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Sales Load(1)
Sales Load Imposed on Purchase Payments 0
Maximum Contingent Deferred Sales Load(2) 6%
Range of Contingent Deferred Sales Load Over Time
Years Since Contingent Deferred Sales Load
Purchase Payment Receipt (as a percentage of purchase payment)
Less than 1 year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less 7 years 2%
7 or more years 0%
Other Contract Expenses
Transfer Fee (first 18 per contract year)(3) 0
Fees For Other Services and Options(4) 0
Account Fee(5) $30
Living Benefits Rider Fee (if elected)(6) 0.05%
Variable Account Annual Expenses(7)
(as a percentage of the variable accumulated value)
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge(8) 0.15%
Total Variable Account Annual Expenses 1.35%
Portfolio Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(9)
<TABLE>
<CAPTION>
Total
Portfolio
Management Other Annual
Portfolio Fees Expenses Expenses
<S> <C> <C> <C>
Alger American Income & Growth 0.625 0.115 0.74
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 0.85 0.10 0.95
Dreyfus VIF Capital Appreciation 0.75 0.05 0.80
Dreyfus VIF Small Cap 0.75 0.03 0.78
Janus Aspen Balanced 0.76 0.07 0.83
Janus Aspen Worldwide Growth 0.66 0.08 0.74
MFS VIT Emerging Growth 0.75 0.12 0.87
MFS VIT Growth with Income 0.75 0.25 1.00
MFS VIT Research 0.75 0.13 0.88
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF International Magnum 0.00 1.15 1.15
OCC Accumulation Trust Managed 0.80 0.07 0.87
OCC Accumulation Trust Small Cap 0.80 0.17 0.97
Transamerica VIF Growth 0.62 0.23 0.85
Transamerica VIF Money Market 0.35 0.25 0.60
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. In preparing the tables above and below and the examples that
follow, Transamerica has relied on the figures provided by the portfolios.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. These figures are for the year
ended December 31, 1997, except for the Transamerica VIF Money Market Portfolio
which are estimates for the year 1998, its first year of operation. Actual
expenses in future years may be higher or lower than these figures.
Notes to Fee Table:
(1) The contingent deferred sales load applies to each contract, regardless
of how the account value is allocated between the variable account and
the general account options.
(2) A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after
seven years, a purchase payment may be withdrawn free of any contingent
deferred sales load. See "Charges, Fees and Deductions" page 35.
(3) A transfer fee of $10 will be imposed for each transfer
in excess of 18 in a contract year. See
"Charges, Fees and Deductions" page 35.
(4) Transamerica currently does not impose fees for any other services, or
options. However, Transamerica reserves the right to impose a fee for
various services and options including dollar cost averaging,
systematic withdrawals, automatic payouts, asset allocation and asset
rebalancing.
(5) The current account fee is $30 (or 2% of the account value, if less)
per contract year. This fee will be waived for account values over
$50,000. This limit may be changed in the future. The fee may be
changed, but it may not exceed $60 (or 2% of the account value, if
less). See "Charges, Fees and Deductions" page 35.
(6) If the owner elects the Living Benefits Rider, the rider fee will be
deducted at the rate of 1/12 of 0.05% at the end of each contract month
based on the account value at that time. See "Living Benefits Rider"
page 36.
(7) The variable account annual expenses do not apply to the general account
options.
(8) The current annual administrative expense charge of 0.15% may be
increased to 0.35%. See "Charges, Fees
and Deductions" page 35.
(9) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in
the Portfolio Expenses table are the expenses paid for 1997 (except for
the Transamerica VIF Money Market Portfolio, which are estimates). The
expenses shown in that table reflect a portfolio's adviser's waivers of
fees or reimbursement of expenses, if applicable. It is anticipated
that such waivers or reimbursements will continue for calendar year
1998, except for Alliance VPF Premier Growth for which the management
fee, other expenses and total portfolios annual expenses for 1998
without waivers or reimbursements are estimated to be 1.00%, 0.08% and
1.08%, respectively. Without such waivers or reimbursements, the annual
expenses for 1997 for certain portfolios would have been, as a
percentage of assets, as follows:
<PAGE>
<TABLE>
<CAPTION>
Total Portfolio
Annual Expenses
Management Other Expenses
Fee
<S> <C> <C> <C>
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 1.00 0.10 1.10
Janus Aspen Balanced 0.77 0.06 0.83
Janus Aspen Worldwide Growth 0.72 0.09 0.81
MFS VIT Growth with Income 0.75 0.35 1.10
Morgan Stanley UF Fixed Income 0.40 1.31 1.71
Morgan Stanley UF High Yield 0.80 0.88 1.68
Morgan Stanley UF International Magnum 0.80 1.98 2.78
Transamerica VIF Growth 0.75 0.23 0.98
</TABLE>
Without expense reimbursements, the management fee, other expenses and
total portfolios expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.35%, 0.45%
and 0.80%, respectively. There were no fee waivers or expense
reimbursements during 1997 for the Alger American Income and Growth
Portfolio, Dreyfus VIF Capital Appreciation Portfolio, Dreyfus VIF
Small Cap Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Research Portfolio, OCC Accumulation Trust Managed Portfolio or OCC
Accumulation Trust Small Cap Portfolio.
EXAMPLES
The following tables show the total expenses an owner would incur in
various situations assuming a $1,000 investment and a 5% annual return on
assets.
These examples assume an average account value of $40,000 and,
therefore, a deduction of 0.075% has been made to reflect the $30 account fee.
These examples also assume that all amounts were allocated to the variable
sub-account indicated. These examples also assume that no transfer fees or other
option or service fees or premium tax charges have been assessed. Premium tax
charges may be applicable. See "Premium Tax Charges" page 38.
Examples 1 through 3 show expenses for contracts without the optional
Living Benefits Rider based on fee waivers and reimbursements for the portfolios
for 1997. There is no guarantee that any fee waivers or expense reimbursements
will continue in the future. For annuitizations before the first contract
anniversary, and for annuitizations under a form that does not include life
contingencies, the contingent deferred sales load may apply (see expense
examples in column 1).
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<PAGE>
<TABLE>
<CAPTION>
Example 1: If the owner surrenders the contract at the end of the applicable time period:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $72.96 $110.26 $150.19 $249.81
Alliance VPF Growth & Income $72.76 $109.65 $149.17 $247.75
Alliance VPF Premier Growth $75.06 $116.60 $160.79 $271.12
Dreyfus VIF Capital Appreciation Growth $73.56 $112.07 $153.23 $255.95
Dreyfus VIF Small Cap $73.36 $111.47 $152.22 $253.90
Janus Aspen Balanced $73.86 $112.98 $154.75 $259.00
Janus Aspen Worldwide Growth $72.96 $110.26 $150.19 $249.81
MFS Emerging Growth $74.26 $114.19 $156.77 $263.06
MFS Growth & Income $75.56 $118.10 $163.30 $276.13
MFS Research $74.36 $114.49 $157.27 $264.07
Morgan Stanley UF Fixed Income $72.56 $109.04 $148.16 $245.69
Morgan Stanley UF High Yield $73.56 $112.07 $153.23 $255.95
Morgan Stanley UF International Magnum $77.06 $122.60 $170.79 $290.98
OCC Accumulation Trust Managed $74.23 $113.89 $155.91 $259.34
OCC Accumulation Trust Small Cap $75.24 $117.00 $161.22 $270.64
Transamerica VIF Growth $74.06 $113.58 $155.76 $261.03
Transamerica VIF Money Market $71.55 $106.01 $143.05 $235.33
- ----------------------------------------------------------------------------------------------------------------------------
Example 2: If the owner does not surrender and does not annuitize the contract:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $21.96 $67.76 $116.19 $249.81
Alliance VPF Growth & Income $21.76 $67.15 $115.17 $247.75
Alliance VPF Premier Growth $24.06 $74.10 $126.79 $271.12
Dreyfus VIF Capital Appreciation Growth $22.56 $69.57 $119.23 $255.95
Dreyfus VIF Small Cap $22.36 $68.97 $118.22 $253.90
Janus Aspen Balanced $22.86 $70.48 $120.75 $259.00
Janus Aspen Worldwide Growth $21.96 $67.76 $116.19 $249.81
MFS Emerging Growth $23.26 $71.69 $122.77 $263.06
MFS Growth & Income $24.56 $75.60 $129.30 $276.13
MFS Research $23.36 $71.99 $123.27 $264.07
Morgan Stanley UF Fixed Income $21.56 $66.54 $114.16 $245.69
Morgan Stanley UF High Yield $22.56 $69.57 $119.23 $255.95
Morgan Stanley UF International Magnum $26.06 $80.10 $136.79 $290.98
OCC Accumulation Trust Managed $23.23 $71.39 $121.91 $259.34
OCC Accumulation Trust Small Cap $24.24 $74.50 $127.22 $270.64
Transamerica VIF Growth $23.06 $71.08 $121.76 $261.03
Transamerica VIF Money Market $20.55 $63.51 $109.05 $235.33
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Example 3: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $21.96 $67.76 $116.19 $249.81
Alliance VPF Growth & Income $21.76 $67.15 $115.17 $247.75
Alliance VPF Premier Growth $24.06 $74.10 $126.79 $271.12
Dreyfus VIF Capital Appreciation Growth $22.56 $69.57 $119.23 $255.95
Dreyfus VIF Small Cap $22.36 $68.97 $118.22 $253.90
Janus Aspen Balanced $22.86 $70.48 $120.75 $259.00
Janus Aspen Worldwide Growth $21.96 $67.76 $116.19 $249.81
MFS Emerging Growth $23.26 $71.69 $122.77 $263.06
MFS Growth & Income $24.56 $75.60 $129.30 $276.13
MFS Research $23.36 $71.99 $123.27 $264.07
Morgan Stanley UF Fixed Income $21.56 $66.54 $114.16 $245.69
Morgan Stanley UF High Yield $22.56 $69.57 $119.23 $255.95
Morgan Stanley UF International Magnum $26.06 $80.10 $136.79 $290.98
OCC Accumulation Trust Managed $23.23 $71.39 $121.91 $259.34
OCC Accumulation Trust Small Cap $24.24 $74.50 $127.22 $270.64
Transamerica VIF Growth $23.06 $71.08 $121.76 $261.03
Transamerica VIF Money Market $20.55 $63.51 $109.05 $235.33
- ----------------------------------------------------------------------------------------------------------------------------
Examples 4 through 6 show expenses for contracts with the optional
Living Benefits Rider, based on the fee waivers and reimbursements for the
portfolios for 1997. There is no guarantee that fee waivers or expense
reimbursements will continue in the future. For annuitizations before the first
contract anniversary and for annuitizations under a form that does not include
life contingencies, a contingent deferred sales load may apply (see examples in
column 4).
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
Example 4: If the owner surrenders the contract at the end of the applicable time period:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $73.46 $111.77 $152.72 $254.93
Alliance VPF Growth & Income $73.26 $111.16 $151.71 $252.88
Alliance VPF Premier Growth $75.56 $118.10 $163.30 $276.13
Dreyfus VIF Capital Appreciation Growth $74.06 $113.58 $155.76 $261.03
Dreyfus VIF Small Cap $73.86 $112.98 $154.75 $259.00
Janus Aspen Balanced $74.36 $114.49 $157.27 $264.07
Janus Aspen Worldwide Growth $73.46 $111.77 $152.72 $254.93
MFS Emerging Growth $74.76 $115.69 $159.28 $268.11
MFS Growth & Income $76.06 $119.60 $165.80 $281.11
MFS Research $74.86 $115.99 $159.79 $269.11
Morgan Stanley UF Fixed Income $73.06 $110.56 $150.70 $250.83
Morgan Stanley UF High Yield $74.06 $113.58 $155.76 $261.03
Morgan Stanley UF International Magnum $77.56 $124.09 $173.27 $295.88
OCC Accumulation Trust Managed $74.73 $115.39 $158.41 $264.32
OCC Accumulation Trust Small Cap $75.74 $118.50 $163.72 $275.59
Transamerica VIF Growth $74.56 $115.09 $158.28 $266.09
Transamerica VIF Money Market $72.05 $107.53 $145.61 $240.52
- ----------------------------------------------------------------------------------------------------------------------------
Example 5: If the owner does not surrender and does not annuitize the contract:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $22.46 $69.27 $118.72 $254.93
Alliance VPF Growth & Income $22.26 $68.66 $117.71 $252.88
Alliance VPF Premier Growth $24.56 $75.60 $129.30 $276.13
Dreyfus VIF Capital Appreciation Growth $23.06 $71.08 $121.76 $261.03
Dreyfus VIF Small Cap $22.86 $70.48 $120.75 $259.00
Janus Aspen Balanced $23.36 $71.99 $123.27 $264.07
Janus Aspen Worldwide Growth $22.46 $69.27 $118.72 $254.93
MFS Emerging Growth $23.76 $73.19 $125.28 $268.11
MFS Growth & Income $25.06 $77.10 $131.80 $281.11
MFS Research $23.86 $73.49 $125.79 $269.11
Morgan Stanley UF Fixed Income $22.06 $68.06 $116.70 $250.83
Morgan Stanley UF High Yield $23.06 $71.08 $121.76 $261.03
Morgan Stanley UF International Magnum $26.56 $81.59 $139.27 $295.88
OCC Accumulation Trust Managed $23.73 $72.89 $124.41 $264.32
OCC Accumulation Trust Small Cap $24.74 $76.00 $129.72 $275.59
Transamerica VIF Growth $23.56 $72.59 $124.28 $266.09
Transamerica VIF Money Market $21.05 $65.03 $111.61 $240.52
- ----------------------------------------------------------------------------------------------------------------------------
Example 6: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $22.46 $69.27 $118.72 $254.93
Alliance VPF Growth & Income $22.26 $68.66 $117.71 $252.88
Alliance VPF Premier Growth $24.56 $75.60 $129.30 $276.13
Dreyfus VIF Capital Appreciation Growth $23.06 $71.08 $121.76 $261.03
Dreyfus VIF Small Cap $22.86 $70.48 $120.75 $259.00
Janus Aspen Balanced $23.36 $71.99 $123.27 $264.07
Janus Aspen Worldwide Growth $22.46 $69.27 $118.72 $254.93
MFS Emerging Growth $23.76 $73.19 $125.28 $268.11
MFS Growth & Income $25.06 $77.10 $131.80 $281.11
MFS Research $23.86 $73.49 $125.79 $269.11
Morgan Stanley UF Fixed Income $22.06 $68.06 $116.70 $250.83
Morgan Stanley UF High Yield $23.06 $71.08 $121.76 $261.03
Morgan Stanley UF International Magnum $26.56 $81.59 $139.27 $295.88
OCC Accumulation Trust Managed $23.73 $72.89 $124.41 $264.32
OCC Accumulation Trust Small Cap $24.74 $76.00 $129.72 $275.59
Transamerica VIF Growth $23.56 $72.59 $124.28 $266.09
Transamerica VIF Money Market $21.05 $65.03 $111.61 $240.52
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT
TO THE GUARANTEES IN THE CONTRACT. THE ASSUMED 5% ANNUAL RATE OF RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS ASSUMED RATE.
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a
variable basis or a combination of a fixed and variable basis, as you select.
You have flexibility in choosing the annuity date, but it may generally not be a
date later than the annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last, but never later than the annuitant's 97th birthday.
Certain qualified contracts may have restrictions as to the annuity date and the
types of settlement options available. See "Settlement Option Payments" page 39.
Four settlement options are available under the contract:
(1) life annuity; (2) life and contingent
annuity; (3) life annuity with period certain; and (4) joint and survivor
annuity. See "Settlement Option Forms"
page 41.
Death of Owner Before the Annuity Date
If an owner dies prior to the annuity date and before either the
owner's or any joint owner's 85th birthday, the death benefit for the contract
will be the greatest of (a) the account value or (b) the sum of all purchase
payments made to the contract, less withdrawals and applicable premium tax
charges, or (c) the highest account value on any contract anniversary prior to
the earlier of the owner's or joint owner's 85th birthday, plus purchase
payments made and less withdrawals and applicable premium tax charges since that
contract anniversary. If death occurs after the earlier of the owner's or joint
owner's 85th birthday, the death benefit will be the account value. If the owner
is not a natural person, the annuitant will be treated as the owner(s) for
purposes of the death benefit.
The death benefit will generally be paid within seven days of receipt
of the required proof of death of the owner and election of the method of
settlement or as soon thereafter as Transamerica has sufficient information to
make the payment. If no settlement method is elected the death benefit will be
distributed within five years after the owner's death. No contingent deferred
sales load is imposed. The death benefit may be paid as either a lump sum or as
a settlement option. See "Death Benefit" page 32. Amounts in the guarantee
period account will not be subject to interest adjustments in calculating the
death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on
increases in the account value until a distribution under the contract occurs
(e.g., a withdrawal or settlement option payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of a contract). Generally, a portion (up to 100%) of
any distribution or deemed distribution is taxable as ordinary income. The
taxable portion of distributions is generally subject to income tax withholding
unless the recipient elects otherwise (although withholding is mandatory for
certain qualified contracts). In addition, a federal penalty tax may apply to
certain distributions. See "Federal Tax Matters" page 42.
Right to Cancel
The owner has the right to examine the contract for a limited period,
known as a "free look period." The owner can cancel the contract during this
period by delivering a written notice of cancellation and returning the contract
to the Service Center before midnight of the tenth day after receipt of the
contract (or longer if required by state law). Notice given by mail and the
return of the contract by mail will be effective on the date received by
Transamerica. Unless otherwise required by law, Transamerica will refund the
purchase payment(s) allocated to any general account option (less any
withdrawals) plus the variable accumulated value as of the date the written
notice and the contract are received by Transamerica. See "Purchase Payments"
page 25 and "Account Value" page 27.
Questions
Questions about procedures or the contract can be answered by the
Transamerica Annuity Service Center ("Service Center"), at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, 800-258-4260. All inquiries should include
the contract number and the owner's name.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this prospectus and in the prospectuses
for the portfolios which should be referred to for more detailed information.
With respect to qualified contracts, it should be noted that the requirements of
a particular retirement plan, an endorsement to the contract, or limitations or
penalties imposed by the Code or the Employee Retirement Income Security Act of
1974, as amended, may impose additional limits or restrictions on purchase
payments, withdrawals, distributions, or benefits, or on other provisions of the
contract. This prospectus does not describe such limitations or restrictions.
See "Federal Tax Matters" page 42.
CONDENSED FINANCIAL INFORMATION
Because the variable account had not yet commenced operations as of
December 31, 1997, no financial statements available.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company ("Transamerica") is a
stock life insurance company incorporated under the laws of the State of
California in 1966 and redomesticated to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies.
Transamerica is a wholly-owned indirect subsidiary of Transamerica Corporation.
The address of Transamerica is 401 North Tryon Street, Charlotte, North Carolina
28202.
Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial
strength and/or claims-paying ability of Transamerica and should not be
considered as bearing on the investment performance of the variable account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of
Transamerica as measured by Standard & Poor's Insurance Ratings Services,
Moody's, or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to owners. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms, including its obligations
under the general account options of this contract. Such ratings do not reflect
the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
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The Variable Account
Separate Account VA-6 of Transamerica (the "variable account") was
established by Transamerica as a separate account under the laws of the State of
North Carolina pursuant to June 11, 1996, resolutions of Transamerica's Board of
Directors. The variable account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the variable account.
The assets of the variable account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 58-7-95 of
the North Carolina Insurance Law provides that the assets of a separate account
are not chargeable with liabilities incurred in any other business operation of
the insurance company (except to the extent that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the variable account, whether or not
realized, are credited to or charged against the variable account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the variable account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica.
The variable account currently has seventeen variable sub-accounts
available under the contract, each of which invests solely in a specific
corresponding portfolio. Changes to the variable sub-accounts may be made at the
discretion of Transamerica. See "Addition, Deletion, or Substitution" page 24.
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests
exclusively in one of the portfolios. Descriptions of each portfolio's
investment objectives follow. The management fees listed below are fees
specified in the applicable advisory contract (i.e., before any fee waivers).
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. Except during temporary defensive periods, the portfolio attempts
to invest 100%, and it is a fundamental policy of the portfolio to invest at
least 65%, of its total assets in dividend paying equity securities. Alger
Management will favor securities it believes also offer opportunities for
capital appreciation. The portfolio may invest up to 35% of its total assets in
money market instruments and repurchase agreements and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks may be made
by the portfolio. Purchases and sales of portfolio securities are made at such
times and in such amounts as are deemed advisable in light of market, economic
and other conditions.
Adviser: Alliance Capital Management L.P. Management Fee: 0.625%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since
investments will be made based upon their potential for capital appreciation,
current income will be incidental to the objective of capital growth. The
portfolio will invest predominantly in the equity securities (common stocks,
securities convertible into commons stocks and rights and warrants to subscribe
for or purchase common stocks) of a limited number of large, carefully selected,
high-quality U.S. companies that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. The portfolio investments in the 25 such
companies most highly regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets. The portfolio thus
differs from more typical equity mutual funds by investing most of its assets in
a relatively small number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the value of its total
assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P. Management Fee: 1%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio, the primary investment objective of which is to provide
long-term capital growth consistent with the preservation of capital; current
income is a secondary investment objective. During periods which the Sub-Adviser
determines to be of market strength, the portfolio acts aggressively to increase
shareholders' capital by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt securities of
foreign governments. The portfolio will seek investment opportunities generally
in large capitalization companies (those with market capitalizations exceeding
$500 million) which the Sub-Adviser believes have the potential to experience
above average and predictable earnings growth.
Adviser: The Dreyfus Corporation. Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation. It seeks to achieve its objective by investing
principally in common stocks. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase which The Dreyfus Corporation
believes to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
Adviser: The Dreyfus Corporation. Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. The portfolio normally invests in issuers from at least five
different countries, including the United States. The portfolio may at times
invest in fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the investment objective of long-term
growth of capital. The policy is to invest primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks of companies that the
Adviser believes are early in their life cycle but which have the potential to
become major enterprises (emerging growth companies). While the portfolio will
invest primarily in common stocks, the portfolio may, to a limited extent, seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment grade"
(commonly known as "junk bonds") or in comparable unrated securities, when, in
the opinion of the Adviser, such an investment presents a greater opportunity
for appreciation with comparable risk to an investment in "investment grade"
securities. Under normal market conditions the portfolio will invest not more
than 5% of its nets assets in these securities. Consistent with its investment
objective and policies described above, the portfolio may also invest up to 25%
(and generally expects to invest not more than 15%) of its net assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the portfolio will invest at least 65% of its assets
in equity securities of companies that are believed to have long-term prospects
for growth and income. Equity securities in which the portfolio may invest
include the following: common stocks, preferred stocks and preference stock;
securities such as bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized markets. Consistent with its investment objective and policies
described above, the portfolio may also invest up to 75% (and generally expects
to invest no more than 15%) of its net assets in foreign securities (including
emerging market securities and Brady Bonds) which are not traded on a U.S.
exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The policy is to invest a substantial proportion
of its assets in equity securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in which the portfolio
may invest include the following: common stocks, preferred stocks and preference
stocks, securities such as bonds, warrants or rights that are convertible into
stocks and depository receipts for those securities. These securities may be
listed on securities exchanges, traded in various over-the-counter markets or
have no organized markets. A smaller proportion of the assets may be invested in
bonds, short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's non-convertible debt
investments, if any, may consist of "investment grade" securities, and, with
respect to no more than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser believes to be a similar
quality to these lower rated securities (commonly know as "junk bonds").
Consistent with its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Fixed Income Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of U.S. government and agencies,
corporate bonds, mortgage backed securities, foreign bonds and other fixed
income securities and derivatives. The portfolio's average weighted maturity
will ordinarily exceed five years and will usually be between five and fifteen
years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the
first $500 million plus 0.35% of the next
$500 million plus 0.30% of the assets over $1 billion.
The High Yield Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities of U. S. and foreign issuers,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds." The portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first
$500 million plus 0.45% of next $500
million plus 0.40% of the assets over $1 billion.
The International Magnum Portfolio of the Morgan Stanley Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The countries in which the
portfolio will invest are those comprising the Morgan Stanley Capital
International EAFE Index, which includes Australia, Japan, New Zealand, most
nations located in Western Europe and certain developed countries in Asia, such
as Hong Kong and Singapore (collectively the "EAFE countries"). The portfolio
may invest up to 5% of its total assets in securities of issuers domiciled in
non-EAFE countries. Under normal circumstances, at least 65% of the total assets
of the portfolio will be invested in equity securities of issuers in at least
three different EAFE countries.
Adviser: Morgan Stanley Asset Management Inc. Management Fee: 0.80% of the
first $500 million plus 0.75% of the
next $500 million plus 0.70% of the assets over $1 billion.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the portfolio will also invest in high
quality short term money market and cash equivalent securities and may invest
almost all of its assets in such securities when the Adviser deems it advisable
in order to preserve capital. In addition, the portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the-counter
markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of first $400 million
plus 0.75% of next $400 million plus
0.70% of the assets over $800 million.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations of under $1 billion. Under
normal circumstances at least 65% of the portfolio's assets will be invested in
equity securities. The majority of securities purchased by the portfolio will be
traded on the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options, warrants, bonds, notes
and debentures which are convertible into or exchangeable for, or which grant a
right to purchase or sell, such securities. In addition, the portfolio may also
purchase foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by American depository receipts
listed on a domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million
plus 0.75% of the next $400 million
plus 0.70% of assets over $800 million.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth. Common stock (listed and unlisted) is the basic form
of investment. The Growth Portfolio invests primarily in common stocks of growth
companies that are considered by the manager to be premier companies. In the
manager's view, characteristics of premier companies include one or more of the
following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements. When in the judgment of the
Sub-Adviser market conditions warrant, the portfolio may, for temporary
defensive purposes, hold part or all of its assets in cash, debt or money market
instruments. The portfolio may invest up to 10% of its assets in debt securities
having a call on common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Money Market Portfolio of the Transamerica Variable Insurance Fund,
Inc., seeks to maximize current income
from money market securities consistent with liquidity and the preservation
of principal. The portfolio invests
primarily in high quality U. S. dollar-denominated money market instruments
with remaining maturities of 13
months or less, including: obligations issued or guaranteed by the U. S.
and foreign governments and their
agencies and instrumentalities; obligations of U. S. and foreign banks,
or their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial
paper, notes and bonds; other short-term
debt obligations with remaining maturities of 397 days or less; and
repurchase agreements involving any of the
securities mentioned above. The portfolio may also purchase other
marketable, non-convertible corporate debt
securities of U. S. issuers. These investments include bonds, debentures,
floating rate obligations, and issues
with optional maturities.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.35%.
Meeting investment objectives depends on various factors,
including, but not limited to, how well the
portfolio managers anticipate changing economic and market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE
PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
An investment in the contract is not a deposit or obligation of, or
guaranteed or endorsed, by any bank, nor is the contract federally insured by
the Federal Deposit Insurance Corporation or any other government agency.
Investing in the contract involves certain investment risks, including possible
loss of principal.
Since all of the portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the variable account and one or more
other separate accounts investing in the portfolios. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate accounts from investing in
the portfolios. See the portfolios' prospectuses for greater details.
Additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the portfolios which accompany this prospectus. The portfolios' prospectuses
should be read carefully before any decision is made concerning the allocation
of purchase payments to, or transfers among, the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or
their advisers, in varying amounts, that may be based on the amount of assets
allocated to the portfolios. The payments are for administrative or distribution
services.
Addition, Deletion, or Substitution
Transamerica does not control the portfolios and cannot guarantee that
any of the variable sub-accounts offered under this contract or any of the
portfolios will always be available for allocation of purchase payments or
transfers. Transamerica retains the right to make changes in the variable
account and in its investments.
Transamerica reserves the right to eliminate the shares of any
portfolio held by a variable sub-account and to substitute shares of another
portfolio or of another investment company for the shares of any portfolio, if
the shares of the portfolio are no longer available for investment or if, in
Transamerica's judgment, investment in any portfolio would be inappropriate in
view of the purposes of the variable account. To the extent required by the 1940
Act, a substitution of shares attributable to the owner's interest in a variable
sub-account will not be made without prior notice to the owner and the prior
approval of the Commission. Nothing contained herein shall prevent the variable
account from purchasing other securities for other series or classes of variable
annuity contracts, or from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
New variable sub-accounts for the contracts may be established when, in
the sole discretion of Transamerica, marketing, tax, investment or other
conditions so warrant. Any new variable sub-accounts will be made available to
existing owners on a basis to be determined by Transamerica. Each additional
variable sub-account will purchase shares in a mutual fund portfolio or other
investment vehicle. Transamerica may also eliminate one or more variable
sub-accounts if, in its sole discretion, marketing, tax, investment or other
conditions so warrant. In the event any variable sub-account is eliminated,
Transamerica will notify owners and request a re-allocation of the amounts
invested in the eliminated variable sub-account.
In the event of any substitution or change, Transamerica may make such
changes in the contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the contracts, the variable account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred annuity contract.
The rights and benefits are described below and in the individual contract or in
the certificate and group contract; however, Transamerica reserves the right to
make any modification to conform the individual contract and the group contract
and certificates thereunder to, or give the owner the benefit of, any federal or
state statute or rule or regulation. The obligations under the contract are
obligations of Transamerica. The contracts are available on a non-qualified
basis and on a qualified basis. Contracts available on a qualified basis are as
follows: (1) rollover and contributory individual retirement annuities (IRAs)
under Code Sections 408(a) and 408(b); (2) conversion; rollover and contributory
Roth IRAs under Code Section 408A; (3) simplified employee pension plans
(SEP/IRAs) that qualify for special federal income tax treatment under Code
Section 408(k); (4) rollover Code Section 403(b) annuities (including Rev. Rul.
90-24 transfers); and (5) qualified pension and profit sharing plans intended to
qualify under Code Section 401. Generally, qualified contracts contain certain
restrictive provisions limiting the timing and amount of purchase payments to,
and distributions from, the qualified contract. For further discussion
concerning qualified contracts, see "Federal Tax Matters" page 42.
Ownership
The owner is entitled to the rights granted by the contract. If the
owner dies, the rights of the owner belong to the joint owner, if any, and then
to the owner's beneficiary. If there are joint owners, the one designated as the
primary owner will receive all mail and any tax reporting information.
For non-qualified contracts, the owner is entitled to designate the
annuitant(s) and, if the owner is an individual, the owner can change the
annuitant(s) at any time before the annuity date. Any such change will be
subject to our then current underwriting requirements. Transamerica reserves the
right to reject any change of annuitant(s) which has been made without our prior
written consent.
If the owner is not an individual, the annuitant(s) may not be changed
once the contract is issued. Different rules apply to qualified contracts. See
"Federal Tax Matters," page 42.
For each contract, a different account will be established and values,
benefits and charges will be calculated separately. The various administrative
rules described below will apply separately to each contract, unless otherwise
noted.
PURCHASE PAYMENTS
Purchase Payments
All purchase payments must be paid to the Service Center. A
confirmation will be issued to the owner upon the acceptance of each purchase
payment.
The initial purchase payment must be at least $5,000 ($2,000 for
contributory IRAs, SEP/IRAs and Roth
IRAs).
The contract will be issued and the initial purchase payment generally
will be credited within two business days after the receipt of both sufficient
information to issue a contract and the initial purchase payment at the Service
Center. Acceptance is subject to sufficient information being provided in a form
acceptable to Transamerica, and Transamerica reserves the right to reject any
request for issuance of a contract or purchase payment. Contracts normally will
not be issued with respect to owners, joint owners, or annuitants more than 90
years old, although Transamerica in its discretion may waive this restriction in
appropriate cases. Transamerica further reserves the right to not accept
purchase payments after the owners' (or annuitants' if non-individual owner)
91st birthday.
If the initial purchase payment allocated to the variable
sub-account(s) cannot be credited within two days of receipt of the purchase
payment and information requesting issuance of a contract because the
information is incomplete or for any other reason, then Transamerica will
contact the owner, explain the reason for the delay and will refund the initial
purchase payment within five business days, unless the owner consents to
Transamerica retaining the initial purchase payment and crediting it as soon as
the requirements are fulfilled.
<PAGE>
Additional purchase payments may be made at any time prior to the
annuity date. Additional purchase payments must be at least $1,000 or at least
$100 if made pursuant to an automatic purchase payment plan under which the
additional purchase payments are automatically deducted from a bank account and
allocated to the contract. In addition, minimum allocation amounts apply (see
"Allocation of Purchase Payments" below). Additional purchase payments are
credited to the contract as of the date the payment is received.
Total purchase payments for any contract may not exceed $1,000,000
without prior approval of Transamerica.
In no event may the sum of all purchase payments for a contract during
any taxable year exceed the limits imposed by any applicable federal or state
law, rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract.
You may allocate purchase payments between and among one or more of the variable
sub-accounts and the general account options as long as the portions are whole
number percentages and any allocation percentage for a variable sub-account is
at least 10%. In addition, there is a minimum allocation of $100 to any variable
sub-account and the fixed account, and $1,000 to each guarantee period.
Transamerica may waive this minimum allocation amount under certain options and
circumstances.
Each purchase payment will be subject to the allocation percentages in
effect at the time of receipt of such purchase payment. The allocation
percentages for additional purchase payments may be changed by the owner at any
time by submitting a request for such change, in a form and manner acceptable to
Transamerica, to the Service Center. Any changes to the allocation percentages
are subject to the limitation(s) above. Any change will take effect with the
first purchase payment received with or after receipt by the Service Center of
the request for such change and will continue in effect until subsequently
changed.
In certain jurisdictions and under certain conditions where by law
Transamerica is required to return upon the exercise of the free look option,
either (1) the purchase payment or (2) the greater of the purchase payment or
account value, any initial allocation to the variable account may be held in the
money market variable sub-account during the applicable free look period plus 5
days for delivery. Any such allocations to the money market variable sub-account
will automatically be transferred at the end of the free-look period plus 5 days
according to the owner's requested allocation. Such transfer will not count
against the 18 transfers allowed without charge during the first contract year.
Investment Option Limit
Currently, the owner may not allocate amounts to more than 18
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. Each variable sub-account,
each duration of guarantee period under the guarantee period account and the
fixed account that ever received a transfer or purchase payment allocation count
as one towards this total of eighteen limit. Transamerica may waive this limit
in the future.
For example, if the owner makes an allocation to the money market
variable sub-account and later transfers all amounts out of this money market
variable sub-account, it would still count as one for the purposes of the
limitation even if it held no value. If the owner transfers from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If the owner selects a
guarantee period and renews for the same term, the count will be one; but if the
owner renews to a guarantee period with a different term, the count will be two.
ACCOUNT VALUE
Before the annuity date, the account value is equal to: (a) the general
account options accumulated value plus (b) the variable accumulated value.
The variable accumulated value is determined at the end of each
valuation day. To determine the variable accumulated value on a day that is not
a valuation day, the value as of the end of the next valuation day will be used.
The variable accumulated value is expected to change from valuation period to
valuation period, reflecting the investment experience of the selected
portfolios as well as the deductions for charges and fees. A valuation period is
the period between successive valuation days. It begins at the close of the New
York Stock Exchange (generally 4:00 p.m. ET) on each valuation day and ends at
the close of the New York Stock Exchange on the next succeeding valuation day. A
valuation day is each day that the New York Stock Exchange is open for regular
business.
Purchase payments allocated to a variable sub-account are credited to
the variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of: (a) the date sufficient information, in an
acceptable manner and form, is received at our Service Center; or (b) the date
our Service Center receives the initial purchase payment. In the case of any
additional purchase payment, variable accumulation units for that payment will
be credited at the end of the valuation period during which Transamerica
receives the payment. The value of a variable accumulation unit for each
variable sub-account is established at the end of each valuation period and is
calculated by multiplying the value of that unit at the end of the prior
valuation period by the variable sub-account's net investment factor for the
valuation period. The value of a variable accumulation unit may go up or down.
The net investment factor is used to determine the value of
accumulation and annuity unit values for the end of a valuation period. The
applicable formula can be found in the Statement of Additional Information.
Transfers involving variable sub-accounts will result in the crediting
and/or cancellation of variable accumulation units having a total value equal to
the dollar amount being transferred to or from a particular variable
sub-account. The crediting and cancellation of such units is made using the
variable accumulation unit value of the applicable variable sub-account as of
the end of the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the
account value among the variable sub-accounts and the guarantee periods.
Transfers are restricted into or out of the fixed account. See "General Account
Options" in Appendix A.
Transfers among the variable sub-accounts and the general account
options may be made by submitting a request, in a form and manner acceptable to
Transamerica, to the Service Center. The transfer request must specify: (1) the
variable sub-account(s) and/or the general account option(s) from which the
transfer is to be made; (2) the amount of the transfer; and (3) the variable
sub-account(s) and/or general account option(s) to receive the transferred
amount. The minimum amount which may be transferred from the variable
sub-accounts and the general account options is $1,000. Transfers among the
variable sub-accounts are also subject to such terms and conditions as may be
imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its
term, the amount transferred may be subject to an interest adjustment. See "The
General Account Options" in Appendix A. A transfer from a guarantee period made
within 30 days before the last day of its term will not be subject to any
interest adjustment.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 18 made during the same contract year. Transamerica reserves the
right to waive the transfer fee or vary the number of transfers without charge
or not count transfers under certain options or services for purposes of the
allowed number without charge. A transfer generally will be effective on the
date the request for transfer is received by the Service Center.
If a transfer reduces the value in a variable sub-account or guarantee
period or in the fixed account to less than $1,000, then Transamerica reserves
the right to transfer the remaining amount along with the amount requested to be
transferred in accordance with the transfer instructions provided by the owner.
Under current law, there will not be any tax liability for transfers within the
contract.
Other Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect owners from adverse impacts on portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant variable sub-account values from one
variable sub-account to another may prevent the underlying portfolio from taking
advantage of investment opportunities because the portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in portfolio transaction costs which must be
indirectly borne by owners. Therefore, Transamerica reserves the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney and to require that each transfer request be made by
a separate communication to Transamerica. Transamerica also reserves the right
to require that each transfer request be submitted in writing and be manually
signed by the owner(s); telephone or facsimile transfer requests may not be
allowed.
Telephone Transfers
Transamerica will allow telephone transfers if the owner has provided
proper authorization for such transfers in a form and manner acceptable to
Transamerica. Transamerica reserves the right to suspend telephone transfer
privileges at any time, for some or all contracts, for any reason. Withdrawals
are not permitted by telephone.
Transamerica will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to unauthorized or
fraudulent instructions. In the opinion of certain government regulators,
Transamerica may be liable for such losses if it does not follow those
procedures. The procedures Transamerica will follow for telephone transfers may
include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Prior to the annuity date, the owner may request that amounts be
automatically transferred on a monthly basis from a "source account," which is
currently either the money market sub-account or the fixed account, to any of
the variable sub-accounts by submitting a request to the Service Center in a
form and manner acceptable to Transamerica. Other source accounts may be
available; call the Service Center for availability.
Only one source account can be elected at a time. The transfers will
begin when the owner requests, but no sooner than one week following, receipt of
such request, provided that dollar cost averaging transfers will not commence
until the later of (a) 30 days after the contract effective date, or (b) the
estimated end of the free look period (allowing 5 days for delivery). Transfers
will continue for the number of consecutive months selected by the owner unless
(1) terminated by the owner, (2) automatically terminated by Transamerica
because there are insufficient amounts in the source account, or (3) for other
reasons as described in the election form. The owner may request that monthly
transfers be continued for a term then available by giving notice to the Service
Center in a form and manner acceptable to Transamerica within 30 days prior to
the last monthly transfer. If no request to continue the monthly transfers is
made by the owner, this option will terminate automatically with the last
transfer at the end of the term.
In order to be eligible for dollar cost averaging, the following
conditions must be met: (1) the value of the source account must be at least
$5,000; (2) the minimum amount that can be transferred out of the source account
is $250 per month; and (3) the minimum amount transferred into any other
variable sub-account is the greater of $250 or 10% of the amount being
transferred. These limits may be changed for new elections of this service.
Dollar cost averaging transfers can not be made from a source account from which
systematic withdrawals or automatic payouts are also being made. Dollar cost
averaging may not be elected at the same time automatic asset rebalancing is in
effect.
There is currently no charge for the dollar cost averaging option and
transfers due to dollar cost averaging currently will not count toward the
number of transfers allowed without charge per contract year. Transamerica may
charge in the future for dollar cost averaging.
Dollar cost averaging transfers may not be made to or from the
guarantee period account or to the fixed account.
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable
sub-accounts, the performance of each variable sub-account may cause proportions
of the values in the variable sub-accounts to vary from the allocation
percentages. The owner may instruct Transamerica to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in the owner
instructions to Transamerica and accepted by Transamerica. The owner may elect
to have the rebalancing done on an annual, semi-annual or quarterly basis. The
owner may elect to have amounts allocated among the variable sub-accounts using
whole percentages, with a minimum of 10% allocated to each variable sub-account.
The owner may elect to establish, change or terminate the automatic
asset rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. Automatic asset rebalancing currently will
not count towards the number of transfers without charge in a contract year.
Transamerica reserves the right to discontinue the automatic asset rebalancing
service at any time for any reason. There is currently no charge for the
automatic asset rebalancing service. Transamerica may in the future charge for
this service and may count the transfers toward those allowed without charge.
Automatic asset rebalancing may not be elected at the same time that
dollar cost averaging is in effect.
After the Annuity Date
If a variable payment option is elected, the owner may make transfers
among variable sub-accounts after the annuity date by giving a written request
to the Service Center, subject to the following provisions: (1) transfers after
the annuity date may be made no more than four times during any contract year;
and (2) the minimum amount transferred from one variable sub-account to another
is the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be
processed based on the formula outlined in the appendix in the Statement of
Additional Information.
CASH WITHDRAWALS
The owner of a non-qualified contract may withdraw all or part of the
cash surrender value at any time prior to the annuity date by giving a written
request to the Service Center. For qualified contracts, reference should be made
to the terms of the particular retirement plan or arrangement for any additional
limitations or restrictions, including prohibitions, on cash withdrawals. See
"Federal Tax Matters," page 42. The cash surrender value is equal to the account
value, less any account fee, interest adjustment, contingent deferred sales load
and premium tax charges. A full surrender will result in a cash withdrawal
payment equal to the cash surrender value at the end of the valuation period
during which the election is received along with all completed forms then
required by Transamerica. No surrenders or withdrawals may be made after the
annuity date. Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct the Service Center
to withdraw amounts from specific variable sub-account(s) and/or from the
general account options. If the owner does not specify, the withdrawal will be
taken pro rata from account value.
A partial withdrawal request cannot be made if it would reduce the
account value to less than $2,000. In that case, the owner will be notified.
Withdrawal (including surrender) requests generally will be processed
as of the end of the valuation period during which the request, including all
completed forms, is received. Payment of any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and processing
of any transfers will occur within seven days from the date the election is
received, except that Transamerica may postpone such payment if: (1) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; or (2) an emergency exists as
defined by the Commission, or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when all required withdrawal request
forms are received. Payments of any amounts derived from a purchase payment paid
by check may be delayed until the check has cleared the owner's bank.
When a withdrawal is made from a guarantee period before the end of its
term, the amount withdrawn may be subject to an interest adjustment. See "The
General Account Options" in Appendix A.
Transamerica may delay payment of any withdrawal from the general
account options for up to six months after Transamerica receives the request for
such withdrawal. If Transamerica delays payment for more than 30 days,
Transamerica will pay interest on the withdrawal amount up to the date of
payment.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK FOR ALL AMOUNTS IN THE
VARIABLE ACCOUNT AND BECAUSE CERTAIN WITHDRAWALS ARE SUBJECT TO A CONTINGENT
DEFERRED SALES LOAD AND OTHER CHARGES, THE TOTAL AMOUNT PAID UPON SURRENDER OF
THE CONTRACT MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
An owner may elect, under the systematic withdrawal option or automatic
payout option (but not both), to withdraw certain amounts on a periodic basis
from the variable sub-accounts prior to the annuity date.
The tax consequences of a withdrawal or surrender are discussed later
in this prospectus. See "Federal Tax Matters" page 42.
Systematic Withdrawal Option
Prior to the annuity date, you may elect to have withdrawals
automatically made from one or more variable sub-account(s) on a monthly basis.
Other distribution modes may be permitted. The withdrawals will not begin until
the later of (a) 30 days after the contract effective date or (b) the end of the
free look period. Withdrawals will be from the variable sub-account(s) and in
the percentage allocations that you specify. If no specifications are made,
withdrawals will be pro rata based on value from all variable sub-account(s) and
general account options with value and any applicable interest adjustment will
apply to withdrawals from the guarantee periods. Systematic withdrawals cannot
be made from a variable sub-account from which dollar cost averaging transfers
are being made and cannot be elected concurrently with the automatic payout
option. The systematic withdrawal option is currently not available with respect
to the general account options.
To be eligible for the systematic withdrawal option, the account value
must be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. Currently, the owner can elect any amount over
$100 to be withdrawn systematically. The owner may also make partial withdrawals
while receiving systematic withdrawals. If the total withdrawals (systematic,
automatic, or partial) in a contract year exceed the allowed amount to be
withdrawn without charge for that year, any applicable contingent deferred sales
load will then apply.
The withdrawals will continue indefinitely unless terminated. If this
option is terminated it may not be elected again until the end of the next 12
full months.
Transamerica reserves the right to impose an annual fee of up to $25
for processing payments under this option. This fee, which is currently waived,
will be deducted in equal installments from each systematic withdrawal during a
contract year.
Systematic withdrawals may be taxable and, prior to age 59 1/2,
subject to a 10% federal tax penalty. See
"Federal Tax Matters," page 42.
Automatic Payout Option ("APO")
Prior to the annuity date, for qualified contracts, the owner may elect
the automatic payout option (APO) to satisfy minimum distribution requirements
under Sections 401(a)(9), 403(b), and 408(b)(3) of the Code. See "Federal Tax
Matters" page 38. For IRAs and SEP/IRAs this may be elected no earlier than six
months prior to the calendar year in which the owner attains age 701?2, but
payments may not begin earlier than January of such calendar year. For other
qualified contracts, APO can be elected no earlier than six months prior to the
later of when the owner (a) attains age 70 1/2; and (b) retires from employment.
Additionally, APO withdrawals may not begin before the later of (a) 30 days
after the contract effective date or (b) the end of the free look period. APO
may be elected in any calendar month, but no later than the month of the owner's
84th birthday.
Withdrawals will be from the variable sub-account(s) and in the
percentage allocations you specify. If no specifications are made, withdrawals
will be pro rata based on account value. Withdrawals can not be made from a
variable sub-account from which dollar cost averaging transfers are being made.
The APO is not currently available with respect to the general account options.
The calculation of the APO amount will reflect the total account value although
the withdrawals are only from the variable sub-accounts. This calculation and
APO are based solely on value in this contract.
To be eligible for this option, the following conditions must be met:
(1) the account value must be at least $12,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500. These conditions may change.
Currently, withdrawals under this option are only paid annually.
The withdrawals will continue indefinitely unless terminated. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If an owner dies before the annuity date, a death benefit is payable.
If death occurs prior to any owner's or joint owner's 85th birthday, the death
benefit will be equal to the greatest of (a) the account value, or (b) the sum
of all purchase payments made to the contract less withdrawals and applicable
premium tax charges, or (c) the highest account value on any contract
anniversary prior to the earlier of the owner's or joint owner's 85th birthday,
plus purchase payments made less withdrawals and applicable premium tax charges
since that contract anniversary. If the owner or joint owner dies before the
annuity date and after either the deceased owner's or joint owner's 85th
birthday, the death benefit is equal to the account value. For purposes of
calculating such death benefit, the account value is determined as of the date
the benefit is paid. If the owner is not a natural person, the annuitant(s) will
be treated as the owner(s) for purposes of the death benefit. For example, if
the owner is a trust that allows a person(s) other than the trustee to exercise
the ownership rights under this certificate, such person(s) must be named
annuitant(s) and will be treated as the owner(s) so the death benefit will be
determined based on the age of the annuitant(s).
An ownership change will be subject to our then current underwriting
rules and may decrease the death benefit. However, such reduction will never
decrease the death benefit below the account value.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death
of the owner. Upon receipt of this proof and an election of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as Transamerica has sufficient information about the beneficiary
to make the payment.
The death benefit will be determined as of the end of the valuation
period during which our Service Center receives both proof of death of the owner
or joint owner and the written notice of the settlement option elected by the
person to whom the death benefit is payable. If no settlement method is elected,
the death benefit will be a lump sum distributed within five years after the
owner's death. No contingent deferred sales load nor interest adjustment will
apply.
Until the death benefit is paid, the account value allocated to the
variable account remains in the variable account, and fluctuates with investment
performance of the applicable portfolio(s). Accordingly, the amount of the death
benefit depends on the account value at the time the death benefit is paid, not
at the time of death.
<PAGE>
Designation of Beneficiaries
The owner may select one or more beneficiaries by designating the
person(s) to receive the amounts payable under this contract if: the owner dies
before the annuity date and there is no joint owner, or the owner dies after the
annuity date and settlement option payments have begun under a selected
settlement option that guarantees payments for a certain period of time. The
interest of any beneficiary who dies before the owner will terminate at time of
death of such beneficiary.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as otherwise required by
law.
If more than one beneficiary is named, each named beneficiary will
share equally in any benefits or rights granted by this contract unless the
owner gives us other instructions at the time the beneficiaries are named.
Transamerica may rely on any affidavit by any responsible person
in determining the identity or
non-existence of any beneficiary not identified by name
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay
the death benefit as specified in this section. The entire death benefit will be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, the contract will remain in
force with the annuitant's surviving spouse as the new annuitant if:
o This contract is owned by a trust; and
o The beneficiary is either the annuitant's surviving spouse or
a trust holding the contract solely for the benefit of such
spouse.
The manner in which we will pay the death benefit depends on the status
of the person(s) involved in the contract. The death benefit will be payable to
the first person from the applicable list below:
If the owner is the annuitant:
o The joint owner, if any,
o The beneficiary, if any.
If the owner is not the annuitant:
o The joint owner, if any,
o The beneficiary, if any,
o The annuitant,
o The joint annuitant; if any.
If the death benefit is payable to the owner's surviving spouse (or to a trust
for the sole benefit of such surviving spouse),
We will continue this contract with the owner's spouse as the new
annuitant (if the owner was the annuitant) and the new owner (if applicable),
unless such spouse selects another option as provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse,
We will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above,
The person(s) to whom the death benefit is payable may elect to receive
it:
o In a lump sum; or
o As settlement option payments, provided the person making the
election is an individual. Such payments must begin within one
year after the owner's death and must be in equal amounts over
a period of time not extending beyond the individual's life or
life expectancy.
Election of either option must be made no later than 60 days prior to
the one-year anniversary of the owner's death. Otherwise, the death benefit will
be settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid,
We will pay the remaining death benefit in a lump sum to the payee
named by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse),
We will pay the death benefit in a lump sum within one year after the
owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the
annuitant (or the last of joint annuitants) dies before the annuity date, the
owner will become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts
payable will continue to be distributed at least as rapidly as under the
settlement and payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership
rights granted under this contract will pass to the person to whom the death
benefit would have been paid if the owner had died before the annuity date, as
specified above.
<PAGE>
Survival Provision
The interest of any person to whom the death benefit is payable who
dies at the time of, or within 30 days after, the death of the owner will also
terminate if no benefits have been paid to such beneficiary, unless the owner
had given us written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments (although we
reserve the right to charge for any applicable premium tax charges). Therefore,
the full amount of the purchase payments are invested in one or more of the
variable sub-accounts and/or the general account options.
Contingent Deferred Sales Load
No deduction for sales charges is made from purchase payments at the
time they are made. However, a contingent deferred sales load of up to 6% of
purchase payments may be imposed on certain withdrawals or surrenders to
partially cover certain expenses incurred by Transamerica relating to the sale
of the contract, including commissions paid to salespersons, the costs of
preparation of sales literature and other promotional costs and acquisition
expenses.
The contingent deferred sales load percentage varies according to the
number of years between when a purchase payment was credited to the contract and
when the withdrawal is made. The amount of the contingent deferred sales load is
determined by multiplying the amount withdrawn subject to the contingent
deferred sales load by the contingent deferred sales load percentage in
accordance with the following table. In no event shall the aggregate contingent
deferred sales load assessed against the contract exceed 6% of the aggregate
purchase payments.
<TABLE>
<CAPTION>
Number of Years Since Contingent Deferred Sales Load
contingent deferred sales load
Receipt of Purchase Payment As a Percentage of Purchase Payment
<S> <C>
Less than one year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more years 0%
</TABLE>
Free Withdrawals - Allowed Amount
Beginning 30 days after the contract effective date (or the end of the
free look period, if later), the owner may make a withdrawal up to the "allowed
amount" without incurring a contingent deferred sales load each contract year
before the annuity date.
The allowed amount each contract year is equal to 15% of the total
purchase payments received during the last seven years determined as of the last
contract anniversary less any withdrawals during the present contract year. In
the first contract year, the 15% will be applied to the total purchase payments
at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without
charge.
Withdrawals will be made first from purchase payments on a
first-in/first-out basis and then from earnings. The allowed amount may vary
depending on the state of issuance. If the allowed amount is not fully withdrawn
or paid out during a contract year, it does not carry over to the next contract
year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, the owner may also elect, in certain
states, a Living Benefits Rider for an additional fee, that provides that the
contingent deferred sales load will be waived in any of the three following
instances:
(1) if the owner receives extended medical care in a licensed hospital or
nursing care facility (as defined in the contract) for at least 60 consecutive
days, and the request for the withdrawal or surrender, together with proof of
such extended care, is received at the Service Center during the term of such
care or within 90 days after the last day upon which the owner received such
extended care; or
(2) if the owner receives medically required in-home care for at least 60 days
and such extended in-home medical care is certified by a qualified medical
professional and the owner may also be required to submit other evidence as
required by Transamerica such as evidence of medicare eligibility; or
(3) if the owner becomes terminally ill after the first contract year and the
terminal illness is diagnosed by a qualified medical professional and is
reasonably expected to result in death within 12 months.
Neither (1) nor (2) apply if the owner is receiving extended medical care in a
licensed hospital or nursing care facility or in-home medical care at the time
the contract is purchased.
Transamerica reserves the right to not accept purchase payments after
the owner has qualified for any of these waivers. Owner under this rider means
either the owner or the joint owner or annuitant(s) if the contract is not owned
by an individual. Any withdrawals under this rider on which the contingent
deferred sales load is waived will not reduce the allowed amount for the
contract year.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed: upon
annuitization after the first contract year to an option involving life
contingencies; upon payment of the death benefit; or upon transfers of account
value. Any applicable contingent deferred sales load will be deducted from the
amount requested for both partial withdrawals (including withdrawals under the
systematic withdrawal option or the APO) and full surrenders unless the owner
elects to "gross-up" the amount for a partial withdrawal to cover the applicable
contingent deferred sales load. The contingent deferred sales load and any
premium tax charge applicable to a withdrawal from the guarantee period account
will be deducted from the amount withdrawn after the interest adjustment, if
any, is applied and before payment is made.
Administrative Charges
Account Fee
At the end of each contract year before the annuity date, Transamerica
deducts an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60 (or 2% of the account value, if less) per contract year.
If the contract is surrendered, the account fee, unless waived, will be deducted
from a full surrender before the application of any continent deferred sales
load. The account fee will be deducted on a pro rata basis (based on values)
from the account value including both the variable sub-accounts and the general
account options. No interest adjustment will be assessed on any deduction for
the account fee taken from the guarantee period account. The account fee for a
contract year will be waived if the account value exceeds $50,000 on the last
business day of that contract year or as of the date the contract is
surrendered.
Annuity Fee
After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year ($2.50 each month if monthly payments). This fee will not
be changed but may be waived. No annuity fee will be deducted from fixed
payments.
Administrative Expense Charge
Transamerica also makes a daily deduction (the administrative expense
charge) from the variable account (both before and after the contract date) at
an effective current annual rate of 0.15% of assets held in each variable
sub-account to reimburse Transamerica for administrative expenses. Transamerica
has the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. Transamerica will provide 30 days
written notice of any change in fees. The administrative charges do not bear any
relationship to the actual administrative costs of a particular contract. The
administrative expense charge is reflected in the variable accumulation or
variable annuity unit values for each variable sub-account.
Mortality and Expense Risk Charge
Transamerica deducts a charge for bearing certain mortality and expense
risks under the contracts. This is a daily charge at an effective annual rate of
1.20% of the assets in the variable account. Transamerica guarantees that this
charge of 1.20% will never increase. The mortality and expense risk charge is
reflected in the variable accumulation and variable annuity unit values for each
variable sub-account.
Variable accumulated values and variable settlement option payments are
not affected by changes in actual mortality experience incurred by Transamerica.
The mortality risks assumed by Transamerica arise from its contractual
obligations to make settlement option payments determined in accordance with the
settlement option tables and other provisions contained in the contract and to
pay death benefits prior to the annuity date.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the contracts and the variable
account will exceed the amount recovered through the administrative expense
charge, account fees, transfer fees and any fees imposed for certain options and
services.
If the mortality and expense risk charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the contingent deferred sales load will
not generate sufficient funds to pay the cost of distributing the contracts. To
the extent that the contingent deferred sales load is insufficient to cover the
actual cost of contract distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the mortality and expense risk charge.
Living Benefits Rider Fee
If the owner elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of 0.05% of the
account value at that time. The fee is deducted from each variable sub-account
pro rata based on the value in each variable sub-account through the
cancellation of variable accumulation units. If there is insufficient variable
accumulated value, the fee will be deducted pro rata from the values in the
general account options (any interest adjustment will apply.) Transamerica
reserves the right to waive the interest adjustment for deductions from the
guarantee period account for this rider fee.
Premium Tax Charges
Currently there is no charge for premium taxes except upon
annuitization. However, Transamerica may be required to pay premium or
retaliatory taxes currently ranging from 0% to 5%. Transamerica reserves the
right to deduct a charge for these premium taxes from premium payments, from
amounts withdrawn, or from amounts applied on the annuity date. In some states
and jurisdictions, charges for both direct premium taxes and retaliatory premium
taxes may be imposed at the same or different times with respect to the same
purchase payment, depending upon applicable law.
Transfer Fee
Transamerica currently imposes a fee for each transfer in excess of the
first 18 in a single contract year. Transamerica will deduct the charge from the
amount transferred. This fee is $10 and will be used to help cover
Transamerica's costs of processing transfers. Transamerica reserves the right to
waive this fee or to not count transfers under certain options and services as
part of the number of allowed annual transfers without charge.
Option and Service Fees
Transamerica reserves the right to impose reasonable fees for
administrative expenses associated with processing certain options and services.
These fees would be deducted from each use of the option or service during a
contract year.
Taxes
No charges are currently made for taxes. However, Transamerica reserves
the right to deduct charges in the future for federal, state, and local taxes or
the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of
portfolio shares and therefore the fees and expenses paid by each portfolio. A
complete description of the fees, expenses, and deductions from the portfolios
are found in the portfolios' prospectuses. See "The Portfolios" page 19.
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from the guaranteed period account, see "The General
Account Options -- the Guarantee Period Account" in Appendix A.
Sales in Special Situations
Transamerica may sell the contracts in special situations that are
expected to involve reduced expenses for Transamerica. These instances may
include: 1) sales in certain group arrangements, such as employee savings plans;
2) sales to current or former officers, directors and employees (and their
families) of Transamerica and its affiliates; 3) sales to officers, directors,
and employees (and their families) of the portfolios' investment advisers and
their affiliates; and 4) sales to officers, directors, employees and sales
agents (registered representatives) (and their families) of broker-dealers and
other financial institutions that have sales agreements with Transamerica to
sell the contracts. In these situations, 1) the contingent deferred sales load
may be reduced or waived, 2) the mortality and expense risk charge or
administration charges may be reduced or waived; and/or 3) certain amounts may
be credited to the contract account value (for examples, amounts related to
commissions or sales compensation otherwise payable to a broker-dealer may be
credited to the contract account value. These reductions in fees or charges or
credits to account value will not unfairly discriminate against any contract
owner. These reductions in fees or charges or credits to account value are
generally taxable and treated as purchase payments for purposes of income tax
and any possible premium tax charge.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the
contract begins. On the annuity date, we will apply the annuity amount (defined
below) to provide payments under the settlement option selected by the owner.
The annuity date is selected by the owner and may be changed from time to time
by the owner by giving notice, in a form and manner acceptable to Transamerica,
to the Service Center, provided that notice of each change is received by the
Service Center at least thirty (30) days prior to the then-current annuity date.
The annuity date cannot be earlier than the first contract anniversary except
for certain qualified contracts. The latest annuity date which may be elected is
the later of (a) the first day of the calendar month immediately preceding the
month of the annuitant's or joint annuitants' 85th birthday, or (b) the first
day of the month coinciding with or next following the tenth contract
anniversary (but in no event later than the annuitants' or joint annuitants'
97th birthday). The latest allowed annuity date may vary in certain
jurisdictions.
The annuity date must be the first day of a calendar month. The first
settlement option payment will be on the first day of the month immediately
following the annuity date. Certain qualified contracts may have restrictions as
to the annuity date and the types of settlement options available. See "Federal
Tax Matters," page 42.
Settlement Option Payments
The annuity amount is the account value, less any interest adjustment,
less any applicable contingent deferred sales load, and less any applicable
premium tax charges. Any contingent deferred sales load will be waived if the
settlement option payments involve life contingencies and begin on or after the
first contract anniversary.
If the amount of the monthly payment from the settlement option
selected by the owner would result in a monthly settlement option payment of
less than $150, or if the annuity amount is less than $5,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the cash
surrender value in a cash payment. Monthly settlement option payments from the
variable payment option will further be subject to a minimum monthly payment of
$75 from each variable sub-account from which such payments are made.
The owner may choose from the settlement options below. Transamerica
may consent to other plans of payment before the annuity date. For settlement
options involving life contingencies, the actual age and/or sex of the
annuitant, or a joint annuitant will affect the amount of each payment.
Sex-distinct rates generally are not allowed under certain qualified contracts.
Transamerica reserves the right to ask for satisfactory proof of the annuitant's
(or joint annuitant's) age. Transamerica may delay settlement option payments
until satisfactory proof is received. Since payments to older annuitants are
expected to be fewer in number, the amount of each annuity payment shall be
greater for older annuitants than for younger annuitants.
The owner may choose from the two payment options described below. The
annuity date and settlement options available for qualified contracts may also
be controlled by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, the owner
may, by written request, change the settlement option or payment option. The
request for change must be received by the Service Center at least 30 days prior
to the annuity date.
In the event that a settlement option form and payment option is not
selected at least 30 days before the annuity date, Transamerica will make
settlement option payments in accordance with the 120 month period certain and
life settlement option and the applicable provisions of the contract.
Payment Options
Owners may elect a fixed or a variable payment option, or a
combination of both (in 25% increments of
the annuity amount).
Unless specified otherwise, the annuity amount in the variable account
will be used to provide a variable payment option and the amount in the general
account options will be used to provide a fixed payment option. In this event,
the initial allocation of variable annuity units for the variable sub-accounts
will be in proportion to the account value in the variable sub-accounts on the
annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
pursuant to the terms of the settlement option elected. If a fixed payment
option is selected, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica, and the amount of payments will be established by the fixed
settlement option selected and the age and sex (if sex-distinct rates are
allowed by law) of the annuitant(s) and will not reflect investment experience
after the annuity date. The fixed payment amounts are determined by applying the
fixed settlement option purchase rate specified in the contract to the portion
of the annuity amount applied to the payment option. Payments may vary after the
death of an annuitant under some options; the amounts of variances are fixed on
the annuity date.
Variable Payment Option
A variable payment option provides for payments that vary in dollar
amount, based on the investment performance of the selected variable
sub-account(s). The variable settlement option purchase rate tables in the
contract reflect an assumed annual interest rate of 4%, so if the actual net
investment performance of the variable sub-account(s) is less than 4%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-account(s) is higher than 4%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 4% rate, then the dollar amount of the actual payments will
remain constant. Transamerica may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts selected
by the owner, and on the allocations among the variable sub-accounts.
For further details as to the determination of variable payments, see
the Statement of Additional Information.
Settlement Option Forms
The owner may choose any of the settlement option forms described
below. Subject to approval by Transamerica, the owner may select any other
settlement option form then being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments end
with the payment due just before the annuitant's death. There is no death
benefit. It is possible that no payment will be made if the annuitant dies after
the annuity date but before the first payment is due; only one payment will be
made if the annuitant dies before the second payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will continue for as long as the annuitant lives. After the annuitant
dies, payments will be made to the contingent annuitant, for as long as the
contingent annuitant lives. The continued payments can be in the same amount as
the original payments, or in an amount equal to one-half or two-thirds thereof.
Payments will end with the payment due just before the death of the contingent
annuitant. There is no death benefit after both die. If the contingent annuitant
does not survive the annuitant, payments will end with the payment due just
before the death of the annuitant. It is possible that no payments or very few
payments will be made, if the annuitant and contingent annuitant die shortly
after the annuity date.
The written request for this form must: (a) name the contingent
annuitant; and (b) state the percentage of payments to be made after the
annuitant dies. Once payments start under this settlement option form, the
person named as contingent annuitant for purposes of being the measuring life,
may not be changed. Transamerica will require proof of age for the annuitant and
for the contingent annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the first day
of the month immediately following the annuity date, if the annuitant is living.
Payments will be made for the longer of: (a) the annuitant's life; or (b) the
period certain. The period certain may be 120 or 180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the annuitant's
death. No benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless the owner provides
otherwise.
The written request for this form must: (a) state the length of the
period certain; and (b) name the
beneficiary.
(4) Joint and Survivor Annuity. Payments will be made starting on the
first day of the month immediately following the annuity date, if and for as
long as the annuitant and joint annuitant are living. After the annuitant or
joint annuitant dies, payments will continue for so long as the survivor lives.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that no payments
or very few payments will be made under this form if the annuitant and joint
annuitant both die shortly after the annuity date.
The written request for this form must: (a) name the joint annuitant;
and (b) state the percentage of continued payments to be made after the first
death. Once payments start under this settlement option form, the person named
as joint annuitant, for the purpose of being the measuring life, may not be
changed. Transamerica will need proof of age for the annuitant and joint
annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under other
settlement options not described in this section subject to Transamerica's
agreement and any applicable state or federal law or regulation. Requests for
any other settlement option must be made in writing to the Service Center at
least 30 days before the annuity date.
After the annuity date, (a) no changes can be made in the settlement
option and payment option; (b) no additional purchase payment will be accepted
under the contract; and (c) no further withdrawals will be allowed.
The owner of a non-qualified contract may, at any time after the
annuity date by written notice to us at the Service Center, change the payee of
benefits being provided under the contract. The effective date of change in
payee will be the latter of: (a) the date we receive the written request for
such change; or (b) the date specified by the owner. The owner of a qualified
contract may not change payees, except as permitted by the plan, arrangement or
federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the likelihood
of the continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis
("non-qualified contract") or purchased and used in connection with plans or
arrangements qualifying for special tax treatment ("qualified contract").
Qualified contracts are designed for use in connection with plans or
arrangements entitled to special income tax treatment under Sections 401,
403(b), 408 and 408A of the Code. The ultimate effect of federal income taxes on
the amounts held under a contract, on settlement option payments, and on the
economic benefit to the owner, the annuitant, or the beneficiary may depend on
the type of retirement plan or arrangement for which the contract is purchased,
on the tax and employment status of the individual concerned, and on
Transamerica's tax status. In addition, certain requirements must be satisfied
in purchasing a qualified contract with proceeds from a tax qualified retirement
plan or arrangement and receiving distributions from a qualified contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
qualified contracts should seek competent legal and tax advice regarding the
suitability of the contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the contract. The following
discussion is based on the assumption that the contract qualifies as an annuity
for federal income tax purposes and that all purchase payments made to qualified
contracts are in compliance with all requirements under the Code and the
specific retirement plan or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, a prospective
purchaser must specify whether he or she is purchasing a non-qualified contract
or a qualified contract. If the initial purchase payment is derived from an
exchange, transfer, conversion or surrender of another annuity contract,
Transamerica may require that the prospective purchaser provide information with
regard to the federal income tax status of the previous annuity contract.
Transamerica will require that persons purchase separate contracts if they
desire to invest monies qualifying for different annuity tax treatment under the
Code. Each such separate contract would require the minimum initial purchase
payment previously described. Additional purchase payments under a contract must
qualify for the same federal income tax treatment as the initial purchase
payment under the contract. Transamerica will not accept an additional purchase
payment under a contract if the federal income tax treatment of such purchase
payment would be different from that of the initial purchase payment.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value (e.g., withdrawals or settlement
option payments). For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the account value (and in the case of a
qualified contract, any portion of an interest in the plan) generally will be
treated as a distribution. The taxable portion of a distribution is taxable as
ordinary income.
The owner of any contract who is not a natural person generally must
include in income any increase in the excess of the account value over the
"investment in the contract" (discussed below) during the taxable year. There
are some exceptions to this rule and a prospective owner that is not a natural
person should discuss these with a competent tax adviser.
The following discussion generally applies to a contract owned by a
natural person.
Withdrawals
With respect to non-qualified contracts, partial withdrawals (including
withdrawals under the systematic withdrawal option) are generally treated as
taxable income to the extent that the account value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The
"investment in the contract" generally equals the amount of non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts (including
withdrawals under the systematic withdrawal option or the automatic payout
option), a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit under the retirement plan or arrangement. The "investment in the
contract" generally equals the amount of non-deductible purchase payments made
by or on behalf of any individual. For certain qualified contracts, the
"investment in the contract" can be zero. Special tax rules applicable to
certain distributions from qualified contracts are discussed below, under
"Qualified Contracts."
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If a partial withdrawal from the guarantee period account is subject to
an interest adjustment, the account value immediately before the withdrawal will
not be altered to take into account the interest adjustment. As a result, for
purposes of determining the taxable portion of a partial withdrawal, the account
value will be treated as including the amount deducted from the guarantee period
account due to the interest adjustment.
Full surrenders are treated as taxable income to the extent that the
amount received exceeds the "investment in the contract."
Settlement Option Payments
Although the tax consequences may vary depending on the settlement
option elected under the contract, in general a ratable portion of each payment
that represents the amount by which the account value exceeds the "investment in
the contract" will be taxed based on the ratio of the "investment in the
contract" to the total benefit payable; after the "investment in the contract"
is recovered, the full amount of any additional settlement option payments is
taxable.
For variable payments, the taxable portion is generally determined by
an equation that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract."
For fixed payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the payments for the term selected;
however, the remainder of each settlement option payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional settlement option payments is taxable. If settlement option payments
cease as a result of an annuitant's death before full recovery of the
"investment in the contract," consult a competent tax adviser regarding
deductibility of the unrecovered amount.
Withholding
The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
The withholding rate varies according to the type of distribution and
the Owner's tax status. "Eligible rollover distributions" from Section 401(a)
plans and Section 403(b) tax sheltered annuities are subject to mandatory
federal income tax withholding at the rate of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan, except
for certain distributions or settlement option payments made in a specified
form. The 20% mandatory withholding does not apply, however, if the Owner
chooses a "direct rollover" from the plan to another tax-qualified plan or to an
IRA.
The federal income tax withholding rate for a distribution that is not
an "eligible rollover distribution" is 10% of the taxable amount of the
distribution.
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Penalty Tax
There may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions: (1) made on or after the date on which the owner attains age
59 1/2; (2) made as a result of death or disability of the owner; or (3)
received in substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the life(ves) or life expectancy(ies) of the owner and
a "designated beneficiary." Other exceptions to the tax penalty may apply to
certain distributions from a qualified contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of an
owner. Generally such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under a settlement
option, they are taxed in the same manner as settlement option payments, as
described above. For these purposes, the investment in the contract is not
affected by the owner's death. That is, the investment in the contract remains
the amount of any purchase payments paid which are not excluded from gross
income.
Transfers, Assignments, or Exchanges of the Contract
For non-qualified contracts, a transfer of ownership of a contract, the
designation of an annuitant, payee, or other beneficiary who is not also the
owner, or the exchange of a contract may result in certain tax consequences to
the owner that are not discussed herein. An owner contemplating any such
designation, transfer, assignment, or exchange should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Qualified contracts may not be assigned or transferred, except as permitted by
the Code or the Employee Retirement Income Security Act of 1974 (ERISA).
Multiple Contracts
All deferred non-qualified contracts that are issued by Transamerica
(or its affiliates) to the same owner during any calendar year are treated as
one contract for purposes of determining the amount includible in gross income
under Section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Qualified Contracts
In General
The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.
We make no attempt to provide more than general information about use
of the contracts with the various types of retirement plans. Owners and
participants under retirement plans, as well as annuitants and beneficiaries,
are cautioned that the rights of any person to any benefits under qualified
contracts may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the contract (including any
endorsements) issued in connection with such a plan. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
administration of the contracts. Owners are responsible for determining that
contributions and other transactions with respect to the contracts satisfy
applicable law. Purchasers of contracts for use with any retirement plan should
consult their legal counsel and tax adviser regarding the suitability of the
contract.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reach age 70 1/2. For IRAs described in Section 408, distributions
generally must commence no later than the later of April 1 of the calendar year
following the calendar year in which the Owner (or plan participant) reaches age
70 1/2. Roth IRAs under Section 408A do not require distributions at any time
prior to the Owner's death.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the contract in order to provide retirement savings under the plans. Adverse
tax consequences to the plan, to the participant or to both may result if this
contract is assigned or transferred to any individual as a means to provide
benefits payments. Purchasers of a contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan documents and
the contract to their specific needs.
Individual Retirement Annuities, Simplified Employee Plans and Roth IRAs
The sale of a contract for use with any IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a
contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA or their purchase. Purchasers should
seek competent advice as to the suitability of the contract for use with IRAs.
The contract is also designed for use with IRA rollovers and
contributory IRA's. A contributory IRA is a contract to which initial and
subsequent purchase payments are subject to limitations imposed by the Code.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as an "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA.
Earnings in an IRA are not taxed until distribution. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's
compensation (including earned income as defined in Code Section 401(c)(2)) and
may be deductible in whole or in part depending on the individual's adjusted
gross income and whether or not the individual is considered an active
participant in a qualified plan. The limit on the amount contributed to an IRA
does not apply to distributions from certain other types of qualified plans that
are "rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA (other
than nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP/IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP/IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The contract may also be used for Roth IRA conversions and contributory Roth
IRAs. A contributory Roth IRA is a contract to which initial and subsequent
purchase payments are subject to limitations imposed by the Code. Section 408A
of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a non-Roth IRA may be converted to a Roth IRA. A non-Roth IRA
is an individual retirement account or annuity described in section 408(a) or
408(b), other than a Roth IRA. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA. Purchasers should seek competent advice as to the suitability of
the contract for use with Roth IRAs.
Tax Sheltered Annuities
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to Social Security
and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
qualified contract from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under qualified contracts or under the terms
of the plans in respect of which qualified contracts are issued. A qualified
contract will be amended as necessary to conform to the requirements of the
Code.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the variable account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the variable account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the variable
account, then Transamerica may impose a charge against the variable account
(with respect to some or all contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contract
Diversification Requirements
Section 817(h) of the Code requires that with respect to
non-qualified contracts, the investments of the portfolios be "adequately
diversified" in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control for the investments of a
segregated asset account may cause the investor (i.e., the owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner has additional flexibility in allocating premium payments and
account values. These differences could result in an owner being treated as the
owner of a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any non-qualified contract to
provide that (a) if any owner dies on or after the annuity date but prior to the
time the entire interest in the contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and (b)
if any owner dies prior to the annuity date, the entire interest in the contract
will be distributed within five years after the date of the owner's death. These
requirements will be considered satisfied as to any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary, provided
that such distributions begin within one year of the owner's death. The owner's
"designated beneficiary" refers to a natural person designated by such owner as
a beneficiary and to whom ownership of the contract passes by reason of death.
However, if the owner's "designated beneficiary" is the surviving spouse of the
deceased owner, the contract may be continued with the surviving spouse as the
new owner.
The non-qualified contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. All provisions
in the contract will be interpreted to maintain such tax qualification. We may
make changes in order to maintain this qualification or to conform the contract
to any applicable changes in the tax qualification requirements. We will provide
you with a copy of any changes made to the contract.
Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
"investment in the contract" under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
Contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Contract.
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the variable sub-accounts. In addition, Transamerica may
advertise the effective yield of the money market variable sub-account. These
figures will be based on historical information and are not intended to indicate
future performance.
The yield of the money market variable sub-account refers to the
annualized income generated by an investment in that variable sub-account over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in that variable sub-account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a variable sub-account (other than the money market
variable sub-account) refers to the annualized income generated by an investment
in the variable sub-account over a specified thirty-day period. The yield is
calculated by assuming that the income generated by the investment during that
thirty-day period is generated each thirty-day period over a twelve-month period
and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent
deferred sales load or premium taxes that may be applicable to a particular
contract. To the extent that the contingent deferred sales load or premium taxes
are applicable to a particular contract, the yield of that contract will be
reduced. For additional information regarding yields and total returns, please
refer to the Statement of Additional Information.
The average annual total return of a variable sub-account refers to
return quotations assuming an investment has been held in the variable
sub-account for various periods of time including, but not limited to, a period
measured from the date the variable sub-account commenced operations. When a
variable sub-account has been in operation for 1, 5, and 10 years, respectively,
the average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment (including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes) as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any variable sub-account derived from rankings of
variable annuity separate accounts or their investment products tracked by
Lipper Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and
Poor's Indices, Dow Jones Industrial Average, and other rating services,
companies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (2) the effect
of tax deferred compounding on variable sub-account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the contract, the effects of the contract's lifetime
payout options, and the operation of certain special investment features of the
contract -- such as the dollar cost averaging option. Transamerica may explain
and depict in charts, or other graphics, the effects of certain investment
strategies, such as allocating purchase payments between the general account
options and a variable sub-account. Transamerica may also discuss the Social
Security system and its projected payout levels and retirement plans generally,
using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the variable sub-accounts. The non-standard average annual total return and
cumulative total return will assume that no contingent deferred sales load is
applicable. Transamerica may from time to time also disclose yield, standard
total returns, and non-standard total returns for any or all variable
sub-accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the variable
sub-accounts based on the performance of a portfolio prior to the time the
variable account commenced operations.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the contracts under a Distribution Agreement with Transamerica.
TSSC may also serve as an underwriter and distributor of other contracts issued
through the variable account and certain other separate accounts of Transamerica
and affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products.
Under the Sales Agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. The percentage may be up to 6%
and in certain situations additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 12/31/00
as the year 1900 rather than the year 2000, disruptions of business activities
may occur with the year 2000. In response, Transamerica established in 1997 a
"Y2K" committee to address this issue. With regard to the systems and software
which administer and affect the contracts, Transamerica has determined that is
own internal systems will be Year 2000 compliant. Additionally, Transamerica
requires any third party vendor which supplies software or administrative
services to Transamerica in connection with the administration of the contracts,
to certify that the software or services will be Year 2000 compliant. In
determining the variable accumulation unit values for each variable sub-account,
Transamerica is reliant upon information received from the portfolios and is
confirming that Year 2000 issues will not interfere with this flow of
information. As of the date of this prospectus, it is not anticipated that
contract owners will experience negative affects on their investment, or on the
services received in connection with their contracts, as a result of Year 2000
issues. However, especially when taking into account interaction with other
systems, it is difficult to predict with precision that there will be no
disruption of service connection with the year 2000.
LEGAL PROCEEDINGS
There is no pending, material legal proceeding affecting the variable
account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the variable account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue
and sale of the contract has been provided by Sutherland, Asbill
& Brennan LLP. The organization of
Transamerica, its authority to issue the contract and the validity of the
form of the contract have been passed
upon by James W. Dederer, General Counsel and Secretary of Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica for each of the
three years in the period ended December 31, 1997, have been audited by Ernst &
Young LLP, Independent Auditors, as set forth in their reports appearing in the
Statement of Additional Information, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing. There are no audited financial statements for the variable account
since it had not commenced operations as of the date of this prospectus.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in
the variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio in accordance with instructions
received from persons having voting interests in the corresponding variable
sub-account. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, or if
Transamerica determines that it is allowed to vote all portfolio shares in its
own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes
which are available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date
coinciding with the date established by that portfolio for determining
shareholders eligible to vote at the meeting of the portfolios. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the respective portfolios.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
contracts participating in the variable sub-account. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis.
Each person or entity having a voting interest in a variable
sub-account will receive proxy material, reports and other material relating to
the appropriate portfolio.
It should be noted that generally the portfolios are not required, and
do not intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission under the 1933 Act
relating to the contract offered by this prospectus. This prospectus has been
filed as a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto, and
reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS Page
THE CONTRACT .....................................................3
NET INVESTMENT FACTOR.............................................3
SETTLEMENT OPTION PAYMENTS........................................3
Variable Annuity Units and Payments......................3
Variable Annuity Unit Value..............................3
Transfers After the Annuity Date ........................4
GENERAL PROVISIONS ...............................................4
IRS Required Distributions...............................4
Non-Participating........................................4
Misstatement of Age or Sex ..............................4
Proof of Existence and Age ..............................4
Annuity Data.............................................4
Assignment...............................................5
Annual Report............................................5
Incontestability.........................................5
Entire Contract..........................................5
Changes in the Contract..................................5
Protection of Benefits...................................5
Delay of Payments........................................5
Notices and Directions...................................6
CALCULATION OF YIELDS AND TOTAL RETURNS...........................6
Money Market Sub-Account Yield Calculation...............6
Other Sub-Account Yield Calculations.....................7
Standard Total Return Calculations.......................7
Adjusted Historical Portfolio Performance Data...........8
Other Performance Data...................................8
HISTORIC PERFORMANCE DATA.........................................8
General Limitations......................................8
Adjusted Historical Sub-Account Performance Data.........8
DISTRIBUTION OF THE CONTRACT.....................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................18
STATE REGULATION.................................................18
RECORDS AND REPORTS..............................................18
FINANCIAL STATEMENTS.............................................18
APPENDIX - Accumulation Transfer Formula.........................20
Appendix A
THE GENERAL ACCOUNT OPTIONS
.........This prospectus is generally intended to serve as a disclosure
document only for the contract and the
variable account. For complete details regarding the general account options,
see the contract itself.
.........The account value allocated to the general account options becomes part
of the general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act,
and Transamerica has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus which relate to
the general account options.
.........The general account options are part of the general account of
Transamerica. The general account of
Transamerica consists of all the general assets of Transamerica, other than
those in the variable account, or in
any other separate account. Transamerica has sole discretion to invest the
assets of its general account subject
to applicable law.
.........The allocation or transfer of funds to the general account
options does not entitle the owner to share
in the investment experience of Transamerica's general account.
.........There are two general account options: the fixed account and the
guarantee period account, as described
below.
THE FIXED ACCOUNT
.........Currently, Transamerica guarantees that it will credit interest at
a rate of not less than 3% per year,
compounded annually, to amounts allocated to the fixed account under the
contracts. However, Transamerica
reserves the right to change the minimum rate according to state insurance
law. Transamerica may credit interest
at a rate in excess of 3% per year. There is no specific formula for the
determination of excess interest
credits. Some of the factors that the company may consider in determining
whether to credit excess interest to
amounts allocated to the fixed account and the amount in that account
are general economic trends, rates of
return currently available and anticipated on the company's investments,
regulatory and tax requirements, and
competitive factors.
Any interest credited to amounts allocated to the fixed account in
excess of 3% per year will be determined in the sole discretion of Transamerica.
The owner assumes the risk that interest credited to the fixed account
allocations may not exceed the minimum guarantee of 3% for any given year.
.........Rates of interest credited to the fixed account will be guaranteed
for at least twelve months and will
vary by the timing and class of the allocation, transfer or renewal. At
any time after the end of the twelve
month period for a particular allocation, Transamerica may change the
annual rate of interest for that class;
this new annual rate of interest will remain in effect for at least twelve
months. New purchase payments made to
the contract which are allocated to the fixed account may receive different
rates of interest. These rates of
interest may differ from those interest rates credited to amounts transferred
from the variable sub-accounts or
guarantee period account and from those credited to amounts remaining in the
fixed account and receiving renewal
rates. These rates of interest may also differ from rates for allocations
applied under certain options and
services Transamerica may be offering.
Transfers
.........Each contract year the owner may transfer a percentage of the
value of the fixed account to variable
sub-accounts or to the guarantee period account. The maximum percentage
that may be transferred will be declared
annually by Transamerica. This percentage will be determined by Transamerica
at its sole discretion, but will
not be less than 10% of the value of the fixed account on the preceding
contract anniversary and will be
declared each year. Currently, this percentage is 25%. The owner is
limited to four transfers from the fixed
account each contract year, and
the total of all such transfers cannot exceed the current maximum. If
Transamerica permits dollar cost averaging
from the fixed account to the variable sub-accounts, the above restriction
are not applicable.
.........Generally, transfers may not be made from any variable
sub-account to the fixed account for the
six-month period following any transfer from the fixed account to one or
more of the variable sub-accounts.
Additionally, transfers may not be made from the fixed account to: 1) any
guarantee period; 2) the Transamerica
VIF Money Market Sub-Account; and 3) any variable sub-account identified
by Transamerica and investing in a
portfolio of fixed income investments. Transamerica reserves the right to
modify the limitations on transfers to
and from the fixed account and to defer transfers from the fixed account
for up to six months from the date of
request.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides a guaranteed fixed rates of
interest compounded annually for specific guarantee periods. Amounts allocated
to the guarantee period account will be credited with interest of no less than
3% per year. Amounts withdrawn from a guarantee period prior to the end of its
guarantee period will be subject to an interest adjustment, as explained below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently Transamerica is offering three, five and
seven year guarantee periods but these may change at any time.
The owner bears the risk that, after the initial guarantee period,
Transamerica will not credit interest in excess of 3% per year to amounts
allocated to the guarantee period account.
Each amount allocated or transferred to the guarantee period account
will establish a new guarantee period of a duration selected by the owner from
among those then being offered by Transamerica. Every guarantee period offered
by Transamerica will have a duration of at least one year. The minimum amount
that may be allocated or transferred to a guarantee period is $1,000. Purchase
payments allocated to a guarantee period will be credited on the date the
payment is received at the Service Center. Any amount transferred from another
guarantee period or from a variable sub-account to a guarantee period will
establish a new guarantee period as of the effective date of the transfer.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and
expiration date. The guaranteed interest rate applicable to a guarantee period
will depend on the date the guarantee period is established, the duration chosen
by the owner and the class of that guarantee period . A guarantee period chosen
may not extend beyond the annuity date.
Transamerica reserves the right to limit the maximum number of
guarantee periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
guarantee period. The effective annual rate of interest established by
Transamerica for a guarantee period will remain in effect for the duration of
the guarantee period.
Interest will be credited to a guarantee period based on its daily
balance at a daily rate which is equivalent to the guaranteed interest rate
applicable to that guarantee period for amounts held during the entire guarantee
period. Amounts withdrawn or transferred from a guarantee period prior to its
expiration date will be subject to an Interest Adjustment as described below. In
no event will the effective annual rate of interest applicable to a guarantee
period be less than 3% per year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period prior
to its expiration date (excluding withdrawals for the purpose of paying the
death benefit), the amounts withdrawn or transferred will be subject to an
interest adjustment. The interest adjustment reflects the impact that changing
interest rates have on the value of money invested at a fixed interest rate. The
interest adjustment is computed by multiplying the amount withdrawn or
transferred by the following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1
where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to
the number of years remaining in the guarantee period at the
time of withdrawal or transfer (fractional years are rounded
up to the next full year); and
N is the number of full months remaining in the term at the time
the withdrawal or transfer request is processed.
In general the interest adjustment will operate to decrease the value
upon withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate (as of the date of the
transaction) that would apply for a guarantee period equal to the number of full
years remaining in the guarantee period as of that date. (For purposes of
determining the interest adjustment, if the company does not offer a guarantee
period of that duration, the applicable current interest rate will be determined
by linear interpolation between current interest rates for two periods that are
available). If the current interest rate thus determined plus 1/2 of one percent
is greater than the guaranteed interest rate, the interest adjustment will be
negative and amount withdrawn or transferred will be decreased. However, the
value will never be decreased below the initial allocation plus daily interest
at 3% interest per year. There are no positive interest adjustments.
Expiration of a guarantee period
At least 45 days, but not more than 60 days, prior to the expiration
date of a guarantee period, Transamerica will notify the owner as to the options
available when a guarantee period expires. The owner may elect one of the
following:
(a) transfer the amount held in that guarantee period to a new
guarantee period from among those being offered by
Transamerica at such time.
(b) transfer the amount held in that guaranteed period to one or
more variable sub-accounts or to another general account
option then available.
Transamerica must receive the owner's notice electing one of these at
the Service Center by the expiration date of the guarantee period. If such
election has not been received by Transamerica at the Service Center, the amount
held in that guarantee period will remain in the guaranteed period account and a
new guarantee period of the same duration as the expiring guarantee period, if
offered, will automatically be established by Transamerica with a new guaranteed
interest rate declared by Transamerica for that guarantee period. The new
guarantee period will start on the day following the expiration date of the
previous guarantee period.
If Transamerica is not currently offering guarantee period having the
same duration as the expiring guarantee period, the new guarantee period will be
the next longer duration, or if Transamerica is not offering a guarantee period
longer than the duration of the expiring guarantee period, the next shorter
duration. However, no guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000,
Transamerica reserves the right to transfer such amount to the money market
variable sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the
current valuation period is $20.15; at the end of the immediately preceding
valuation period it was $20.10; the valuation period is one day; and no
dividends or distributions caused the portfolio to go "ex-dividend" during the
current valuation period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for mortality and expense risk charge and the administrative
expense charge of .00367% (the daily equivalent of the current charge of 1.35%
on an annual basis) gives a net investment factor of 1.00245. If the value of
the variable accumulation unit for the immediately preceding valuation period
had been 15.500000, the value for the current valuation period would be 15.53798
(15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a variable annuity unit for the immediately preceding valuation period had been
13.500000. If the first variable annuity payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the variable annuity unit for the current valuation period would be 13.53163
(13.5 x 1.00245 (the net investment factor) x 0.999893). 0.999893 is the factor,
for a one day valuation period, that neutralizes the assumed rate of four
percent (4%) per year used to establish the variable annuity rates found in the
contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000
variable accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable
annuity unit value for the particular variable sub-account for the valuation
period which ends immediately preceding the first day of the month is 15.500000
and 13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000. Then the first variable annuity payment would be:
3,200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit
value on the 10th day of the second month is 13.565712. Then the second variable
annuity payment would be $285.59 (21.052444 x 13.565712).
<PAGE>
Appendix C
Transamerica Life Insurance and Annuity Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the Owner, in
accordance with the requirements of the Internal Revenue Service (IRS). This
Disclosure Statement contains information about opening and maintaining an
Individual Retirement Annuity ("IRA") and summarizes some of the financial and
tax consequences of establishing an IRA. Part I of this Disclosure Statement
discusses Traditional IRAs, while Part II addresses Roth IRAs. Because the tax
consequences of the two categories of IRAs differ significantly, it is important
that you review the correct part of this Disclosure Statement to learn about
your particular IRA. This disclosure statement is intended to be read together
with, and be a part of, the prospectus and the terms used here will have the
same meaning as in the prospectus, unless otherwise stated.
We have filed the Transamerica Life Insurance and Annuity Company's
Individual Retirement Annuity ("Transamerica Life IRA") Contract with the IRS
for approval. Please note that IRS approval applies only to the form of the
contract and does not represent a determination of the merits of such IRA
contract.
It may be necessary for us to amend your Transamerica Life IRA Contract
in order for us to obtain or maintain IRS approval. In addition, laws and
regulations adopted in the future may require changes to your contract in order
to preserve its status as an IRA. We will send you a copy of any such amendment.
No contribution will be accepted under a SIMPLE plan established by any
employer pursuant to Internal Revenue Code Section 408(p). No funds attributable
to contributions made by an employer to your SIMPLE IRA under the employer's
SIMPLE plan may be transferred or rolled over to your Transamerica Life IRA
prior to the expiration of the two (2) year period beginning on the date you
first participated in the employer's SIMPLE plan. In addition, depending on the
annuity contract you purchased, contributory IRAs may or may not be available.
Please refer to your prospectus.
This Disclosure Statement includes the non-technical explanation of
some of the changes made by the Tax Reform Act of 1986 applicable to IRAs and
more recent changes made by the Small Business Job Protection Act of 1996
(SBA-96), the Health Insurance Portability and Accountability Act of 1996
(HIPAA) and the Tax Relief Act of 1997 (TRA-97). The information provided
applies to contributions made and distributions received after December 31,
1986, and reflects the relevant provisions of the Code as in effect on January
1, 1998. This Disclosure Statement is not intended to constitute tax advice, and
you should consult a tax professional if you have questions about your own
circumstances.
Definitions
Contributions - Purchase Payments or Premiums as applicable to your Contract.
Contract - Certificate or contract as applicable.
Compensation - For purposes of determining allowable contributions, the term
"Compensation" includes all earned-income, including net earnings from
self-employment and alimony or separate maintenance payments received and
includable in your gross income, but does not include deferred compensation or
any amount received as a pension or annuity.
Revocation of Your IRA or Roth IRA
You have the right to revoke your IRA or Roth IRA during the seven
calendar day period following its establishment. The establishment of your IRA
or Roth IRA will be the contract effective date for your contract. This seven
day calendar period may or may not coincide with the free look period of your
contract. In order to revoke your IRA or Roth IRA, you must notify us in writing
and you must mail or deliver your revocation to us postage prepaid, at: P.O. Box
31848, Charlotte, NC 28231-1848. The date of the postmark (or the date of
certification or registration if sent by certified or registered mail) will be
considered your revocation date. If you revoke your IRA or Roth IRA during the
seven day period, an amount equal to your purchase payment (without any
adjustments for items such as administrative expenses, fees, or fluctuation in
market value) will be returned to you.
The rules that apply to a Traditional Individual Retirement Annuity
(which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA") generally also apply to IRAs under Simplified Employee
Pension plans (SEP/IRAs), unless specific rules for SEP/IRAs are stated.
IRA PART I: TRADITIONAL IRAs
1. Contributions
(a) Regular IRA. You may make contributions to a regular IRA in any
amount up to the combined tax deductible and non-tax deductible contribution
limit described in Part I Section 2 of this Disclosure Statement. Such
contributions are also subject to the minimum amount under the contract. Such
contributions shall be in cash. Your contribution to a regular IRA for a tax
year must be made by the due date (not including extensions) for your federal
tax return for that tax year.
(b) Spousal IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in your gross income for the year, you and your spouse may each establish your
own individual IRA and may make contributions to those IRAs in accordance with
the rules and limits for tax deductible and non-tax deductible contributions
contained in Section 219(c) of the Code, which are summarized in Part I, Section
2 of this Disclosure Statement. Such contributions shall be in cash. Your
contribution to a Spousal IRA for a tax year must be made by the due date (not
including extensions) for your federal income tax return for that tax year.
(c) Rollover IRA. Rollover contributions are unlimited in dollar
amount. These consist of eligible distributions received by you from another IRA
or tax-qualified retirement plan. If you elect to make a direct rollover from
another IRA, your distribution will be directly deposited into your rollover
IRA. However, you may only rollover the amounts from one IRA into another IRA
once in any 365-day period. A direct rollover distribution is not taxable until
you withdraw the amounts from your rollover IRA, and no income tax will be
withheld from the direct rollover distribution. If a distribution is paid to you
and you want to roll over all or part of the distributed amount to this IRA, the
rollover must be accomplished within 60 days of the date you receive the amount
to be rolled over. Generally, any distribution from a tax-qualified retirement
plan, such as a pension plan, 401(k) plan, profit sharing or Keogh plan, can be
rolled over unless it is a "minimum required distribution" (see below). A direct
transfer from a tax-qualified retirement plan to an IRA is considered a
rollover. However, distributions of "after-tax" plan contributions (i.e. amounts
which are not subject to federal income tax when distributed from a
tax-qualified retirement plan) cannot be rolled over to an IRA. In addition, you
may not roll over any payment that is a minimum required distribution (as
discussed in Part I, Section 4(a)), or that is part of a series of payments that
are to be made to you from a tax-qualified retirement plan or IRA that is to be
paid to your over your life, life expectancy, or for a period of at least 10
years.
Strict limitations apply to rollovers, and you should seek competent
tax advice in order to comply with all the rules governing rollovers.
(d) Transfers. You may make an initial or subsequent contribution to
your Transamerica IRA hereunder by directing a Trustee of an existing individual
retirement account or IRA to transfer an amount in cash to this IRA.
(e) Simplified Employee Pension Plan (SEP/IRA). If an IRA is
established that meets the requirements of a SEP/IRA, your employer may
contribute an amount not to exceed the lesser of 15% of your includable
compensation ($160,000 for 1998, adjusted for inflation thereafter) or $30,000.
The amount of such contribution is not includable in your income as wages for
federal income tax purposes. Within that overall limit you may elect to defer up
to $10,000 of your compensation in 1998 (as adjusted for inflation in accordance
with the Code) if your employer's SEP/IRA plan permits and if the compensation
deferral feature was in effect prior to January 1, 1997. The amount of such
elective deferral is excludable from your income as wages for federal income tax
purposes.
Your employer is not required to make a SEP/IRA contribution in any
year nor make the same percentage contribution each year. But, if contributions
are made, they must be made to the SEP/IRA for all eligible employees and must
not discriminate in favor of highly compensated employees. If the rules are not
met, any SEP/IRA contributions by the employer will be treated as taxable to the
employees and could result in adverse tax consequences to the participating
employee. For further details, see your employer.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers
to this IRA must be made in accordance with the appropriate sections of the
Code. It is your full and sole responsibility to determine the tax deductibility
of any contribution, and to make such contributions in accordance with the Code.
Transamerica does not provide tax advice, and assumes no liability for the tax
consequences of any contribution to this IRA.
2. Deductibility of Contributions
(a) Eligibility. If neither you, nor your spouse, is an active
participant (see (b) below) and you file a joint income tax return, for each
taxable year you and your spouse may contribute up to $4,000 together (but no
more than $2,000 to each IRA) if your combined compensation is at least equal to
that amount. In this case you and your spouse may take a deduction for the
entire amount contributed. If you are an active participant but have an adjusted
gross income (AGI) below a certain level (see (c) below), you may make a
deductible contribution as under current law. If, however, you or your spouse is
an active participant and your combined AGI is above the specified level, the
amount of the deductible contribution you may make to an IRA is phased out and
eventually eliminated. Beginning in 1998, if you are not an active participant
(even though your spouse is), you may take a full $2,000 deduction for
contributions to an IRA. This deduction is subject to phase out at joint AGI
levels between $150,000 and $160,000, and is eliminated for AGI levels above
$160,000.
(b) Active Participant. You are an "active participant" for a year if
you participate in a retirement plan. For example, if you participate in a
pension plan, profit sharing plan, a 401 plan, certain government plans, a
tax-sheltered arrangement under Code Section 403, or a SEP/IRA plan, you are
considered to be an active participant. Your Form W-2 for the year should
indicate your participation status.
(c) Adjusted Gross Income (AGI). If you are an active participant, you
must look at your AGI for the year (or if you and your spouse file a joint tax
return, you use your combined AGI) to determine whether you can make a
deductible IRA contribution for that taxable year. The instructions for your tax
return will show you how to calculate your AGI for this purpose. If you are at
or below a certain AGI level, called the Threshold Level, you are treated as if
you were not an active participant and can make a deductible contribution under
the same rules as a person who is not an active participant.
Your Threshold Level depends upon whether you are a married taxpayer
filing a joint tax return, an unmarried taxpayer, or a married taxpayer filing a
separate tax return. If you are a married taxpayer but file a separate tax
return, the Threshold Level is $0. If you are a married taxpayer filing a joint
tax return, or an unmarried taxpayer, your Threshold Level depends upon the
taxable year, and can be determined using the appropriate table below:
<TABLE>
<CAPTION>
Married Filing Jointly Unmarried
Taxable Applicable Taxable Applicable
Year Dollar Limitation Year Dollar Limitation
<S><C> <C> <C> <C>
1997...........$40,000 1997................ $25,000
1998...........$50,000 1998................ $30,000
1999...........$51,000 1999................ $31,000
2000...........$52,000 2000................ $32,000
2001...........$53,000 2001.................$33,000
2002...........$54,000 2002.................$34,000
2003...........$60,000 2003.................$40,000
2004...........$65,000 2004.................$45,000
2005...........$70,000 2005 and
2006...........$75,000 thereafter...........$50,000
2007 and
thereafter.....$80,000
</TABLE>
If your AGI is less than $10,000 above your Threshold Level ($20,000
for married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007) you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000 (and an additional $2,000 for a Spousal IRA). You can calculate your
Deduction Limit as follows:
10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
-------------------
10,000
For taxable years beginning on or after January 1, 2007, married
taxpayers filing jointly should substitute 20,000 for 10,000 in the numerator
and denominator of the above equation.
If you are married, but you and your spouse lived apart during the
entire taxable year and file separate income tax returns, the deductibility of
your IRA contribution is calculated as if you were not married.
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot in any event exceed
100% of your earned income.
(d) Restrictions.No deduction is allowed for (i) contributions other
than in cash; (ii) contributions (other than those by an employer to a SEP/IRA)
made during the calendar year in which you attain age 70 1/2 or thereafter; or
(iii) for any amount you contribute which was a distribution from another
retirement plan ("rollover" contribution). However, the limitations in
paragraphs (a) and (c) of this section do not apply to rollover contributions.
3. Nondeductible Contributions to IRAs
Even if you are above the Threshold Level and, thus, may not make a
deductible contribution of $2,000 (and an additional $2,000 for a Spousal IRA),
you may still contribute up to the lesser of 100% of compensation or $2,000 to
an IRA (and an additional $2,000 for a Spousal IRA). The amount of your
contribution which is not deductible will be a nondeductible contribution to the
IRA. You may also choose to make a nondeductible contribution even if you could
have deducted part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible contributions,
will not be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
4. Distributions
(a) Required Minimum Distributions. Distribution of your IRA must be
made or begin no later than April 1 of the calendar year following the calendar
year in which you attain age 70 1/2 (the required beginning date). You may take
required minimum distributions from any IRA you maintain as long as: (i)
distributions begin when required; (ii) periodic payments are made at least once
a year; and (iii) the amount to be distributed is not less than the minimum
required under current federal law. If you own more than one IRA, you can choose
whether to take your minimum distribution from one IRA or a combination of your
IRAs. A distribution may be made at once in a lump sum, or it may be made in
installments. Installment payments must be made in equal or substantially equal
amounts over: (i) your life or the joint lives of you and your beneficiary; or
(ii) a period not exceeding your life expectancy (as redetermined annually under
IRS tables in the income tax regulations), or the joint life expectancy of you
and your beneficiary (as redetermined annually, if that beneficiary is your
spouse). Also, special rules may apply if the age difference between you and
your designated beneficiary (other than your spouse) is greater than ten year.
If settlement option payments start prior to the April 1 following the
year you turn age 70 1/2, then the annuity date of such settlement option
payments will be treated as the required beginning date for purposes of the
death benefit provisions below.
If you die before the entire interest in your IRA is distributed to
you, but after your required beginning date, the entire interest in the IRA must
be distributed to your beneficiary at least as rapidly as your IRA was being
distributed prior to your death. If you die before your required beginning date
and if you have no designated beneficiary, distribution must be completed by
December 31 of the calendar year that is five years after your death. If you die
before your required beginning date and if you have a designated beneficiary,
your designated beneficiary may elect to receive distributions in the form of
settlement option payments made in substantially equal installments over the
life of life expectancy of the designated beneficiary, beginning by December 31
of the calendar year that is one year after your death.
If the beneficiary is your surviving spouse, and you die before your
required beginning date your surviving spouse will become the new
owner/annuitant and can continue this IRA on the same basis as before your
death. If your surviving spouse does not wish to continue this contract as his
or her IRA, he or she may elect to receive the death benefit in the form of
settlement option payments. Such payments must be in equal amounts over your
spouse's life or a period not extending beyond his or her life expectancy. Your
surviving spouse must elect this option and begin receiving payments no later
than the earliest of the following dates: (i) December 31 of the year following
the year you died; or (ii) December 31 of the year in which you would have
reached the required beginning date if you had not died. Either you or, if
applicable, your beneficiary, is responsible for assuring that the required
minimum distribution is taken in a timely manner and that the correct amount is
distributed.
(b) Taxation of IRA Distributions.Because nondeductible IRA
contributions are made using income which has already been taxed (that is, they
are not deductible contributions), the portion of the IRA distributions
consisting of nondeductible contributions will not be taxed again when received
by you. If you make any nondeductible IRA contributions, each distribution from
your IRAs will consist of a nontaxable portion (return of nondeductible
contributions) and a taxable portion (return of deductible contributions, if
any, and earnings).
Thus, if you receive a distribution from your IRA and you previously
made deductible and nondeductible contributions, you may not take an IRA
distribution which is entirely tax-free. The following formula is used to
determine the nontaxable portion of your distributions for a taxable year.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Remaining Nondeductible contributions Total distributions Nontaxable distributions
Year-end total IRA balances X (for the year) = (for the year)
</TABLE>
To figure the year-end total IRA balance, you must treat all of your
IRAs as a single IRA. This includes all regular IRAs, as well as SEP/IRAs, and
Rollover IRAs. You also add back the distributions taken during the year. Please
refer to IRS Publication 590, Individual Retirement Arrangements, for
instructions, including worksheets that can assist you in these calculations.
Transamerica will report all distributions to the IRS as fully taxable income to
you.
Even if you withdrew all of the money in your IRA in a lump sum, you
will not be entitled to use any form of income averaging to reduce the federal
income tax on your distribution. Also, no portion of your distribution is
taxable as a capital gain.
(c) Withholding. Unless you elect not to have withholding apply,
federal income tax will be withheld from your IRA distributions if you received
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
(deductible and nondeductible) contributions for that year, the excess
contribution amount will be subject to a nondeductible 6% excise (penalty) tax.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return for the year
(including extensions) for the taxable year in which you made the excess
contribution, the excess contribution will not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to an additional 10% tax on early distributions. Alternatively,
excess contributions for one year maybe withdrawn in a later year or may be
carried forward as IRA contributions in the following year to the extent that
the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum allowable (deductible and
nondeductible) amount for that year. The 6% excise tax will be imposed on excess
contributions in each year they are neither returned to you, or applied as
contributions in subsequent years.
Excess contributions that were withdrawn will not be taxable income to
you if you did not take a deduction for the excess amount.
(b) Early Distributions. Since the purpose of an IRA is to accumulate
funds for retirement, your receipt or use of any portion of your IRA before you
attain age 59 1/2 constitutes an early distribution subject to a 10% penalty tax
unless the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRS tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. Effective for distribution made in 1998 or later, the 10%
penalty tax also will not apply to an early distribution made to pay for
first-time homebuyer expenses of you or certain family members, or for higher
education expenses for you or certain family members. First-time homebuyer
expenses must be paid within 120 days of the distribution from the IRA and
include up to $10,000 of the costs of acquiring, constructing, or reconstructing
a principal residence, including settlement, financing and closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution. The amount of an early distribution (excluding any
nondeductible contribution included therein) is includable in your gross income
and may be subject to the 10% penalty tax unless you transfer it to another IRA
as a qualifying rollover contribution.
(c) Required Minimum Distributions (RMD). If the RMD rules described in
Part I, Section 4 (a) of this Disclosure Statement apply to you and if the
amount distributed during a calendar year is less than the minimum amount
required to be distributed, you will be subject to a penalty tax equal to 50% of
the difference between the amount required to be distributed and the amount
actually distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the IRA, or any interference with the independent status of the
IRA), the IRA will lose its tax exemption and be treated as having been
distributed to you. The value of the entire IRA (excluding any nondeductible
contributions included therein) will be includable in your gross income; and, if
at the time of the prohibited transaction you are under age 59 1/2, you may also
be subject to the 10% penalty tax on early distributions. If you pledge your
IRA, or your benefits under the contract, as security for a loan, the portion
pledged as security will cease to be tax-qualified, the value of that portion
will be treated as distributed to you, and you will have to include the value of
the portion pledged as security in your income that year for federal tax
purposes. You may also be subject to early withdrawal penalties, as described in
Part I, Section 5.b.
(e) Overstatement or Understatement of Nondeductible Contributions. If
you overstate your nondeductible IRA contributions on your federal income tax
return (without reasonable cause) you may be subject to a penalty. A penalty
also applies for failure to file any form required by the IRS to report
nondeductible contributions. These penalties are in addition to any generally
applicable tax, interest, and penalties for which you may be liable if you
understate income upon receiving a distribution from your IRA. See Part I,
Section 4(b) of this Disclosure Statement. See Part I, Section 4(b).
IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA
in any amount up to the contribution limits described in Part II, Section 3 of
this Disclosure Statement. Such contributions are also subject to the minimum
amount under the Contract. Such contribution shall be in cash. Your contribution
for a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year. Unlike traditional IRAs, you may
continue making contributions after you reach age 70 1/2.
(b) Spousal Roth IRA. If you and your spouse file a joint federal
income tax return for the taxable year and if your spouse's compensation, if
any, includable in gross income for the year is less than the compensation
includable in your gross income for the year, you and your spouse may each
establish your own individual Roth IRA and may make contributions to those Roth
IRAs in accordance with the rules and limits for contributions contained in the
Code, which are described in Part II, Section 3 of this Disclosure Statement.
Such contributions shall be in cash. Your contribution to a Spousal Roth IRA for
a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth
IRA within 60 days after receiving a distribution from an existing Roth IRA,
subject to certain limitations discussed in Part II, Section 3.
(d) Transfer Roth IRA. You may make an initial or subsequent
contribution hereunder by directing a Trustee of an existing Roth IRA to
transfer the assets in that Roth IRA to your new Roth IRA.
(e) Conversion Roth IRA. You may open a Conversion Roth IRA within 60
days of receiving a distribution form an existing Traditional IRA or by
instructing the Trustee or issuer of an existing Traditional IRA to transfer the
assets in that Traditional IRA account to your new Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your Adjusted Gross Income ("AGI"), not including the rollover or transfer
amount, is greater than $100,000, or if you are married and you and your spouse
file separate tax returns, you may not convert a Traditional IRA into a Roth
IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers,
or conversions to this Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica does
not provide tax advice, and assumes no liability for the tax consequences of any
contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions.
However, distributions from your Roth IRA are generally not subject to federal
income tax (see Part II, 4(b) below). This is unlike a Traditional IRA, which
permits deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs
may not exceed the lesser of 100% of your compensation or $2,000 each year.
Rollover, transfer and conversion contributions, if properly made, do not count
towards your maximum annual contribution limit.
(a) Regular Roth IRAs. The maximum amount you may contribute to a
Regular Roth IRA will depend on the amount of your income. Your maximum $2,000
contribution begins to phase out when your AGI reaches $95,000 (unmarried) or
$150,000 (married filing jointly). Under the phase out, your maximum
contributions generally will not be less than $200; however, no contribution is
allowed if your AGI exceeds $110,000 (unmarried) or $160,000 (married filing
jointly). If you are married and you and your spouse file separate tax returns,
your maximum contribution phases out between $0 and $10,000. You should consult
your tax advisor to determine your maximum contribution.
If you are married but you and your spouse lived apart for the entire
taxable year and file separate federal income tax returns, your maximum
contribution is calculated as if you were not married.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's
Spousal Roth IRA may not exceed the lesser of (a) 100% of both spouses' combined
compensation minus any Roth or deductible Traditional IRA contribution for the
spouse with the higher compensation or (b) $2,000. A maximum of $4,000 may be
contributed to both spouses' Spousal Roth IRAs. Contributions can be divided
between the spouses' Roth IRAs as you and your spouse wish, but no more than
$2,000 can be contributed to either one of the Roth IRAs each year.
(c) Rollover Roth IRAs. There is no contribution limit on the amounts
that you may rollover from another Roth IRA into this Roth IRA. You may roll
over a distribution from any single Roth IRA to another Roth IRA only once in
any 365-day period.
(d) Transfer Roth IRAs. There is no contribution limit on amounts that
you transfer from another Roth IRA into this Roth IRA.
(e) Conversion Roth IRAs. There is no contribution limit on amounts
that you convert from your Traditional IRA into this Roth IRA if you are
eligible to open a Conversion Roth IRA as described above. However, the
distribution proceeds from your Traditional IRA are includable in your taxable
income to the extent that they represent a return of deductible contributions
and earnings on any contributions. The distribution proceeds from your
Traditional IRA are not subject to the 10% early distribution penalty tax
(described below) if the distribution proceeds are deposited to your Rollover
Roth IRA within 60 days. You may roll over a distribution from any single
Traditional IRA to a conversion Roth IRA or any other IRA only once in any
365-day period.
You can also open a Conversion Roth IRA by instructing the issuer,
custodian or trustee of your existing Traditional IRA to transfer your
Traditional IRA assets to a Roth IRA, which will be the successor to your
existing Traditional IRA. The transfer will be treated as a distribution from
your Traditional IRA, and that amount will be includable in your taxable income
to the extent that it represents a return of deductible contributions and
earnings on any contributions, but will not be subject to the 10% distribution
penalty tax.
For tax years before 1999, if you make a rollover or transfer from a
Traditional IRA to a Roth IRA, the income tax due upon distribution from the
Traditional IRA is payable ratably over four years beginning in the year of the
conversion.
Also, consult your tax advisor before combining amounts in a Conversion
Roth IRA with any regular contributions or with amounts rolled over or
transferred into the Conversion IRA in other tax years.
4. Distributions
(a) Required Minimum Distribution. Unlike a Traditional IRA, there are
no rules that require that distribution be made to you from your Roth IRA during
your lifetime.
If you die before the entire value of your Roth IRA is distributed to
you, the balance of your Roth IRA must be distributed by December 31 of the
calendar year that is five years after your death. However, if you die and you
have a designated beneficiary, your designated beneficiary may elect to take
distributions in the form of settlement option payments made in substantially
equal installments over the life or life expectancy of the designated
beneficiary, beginning by December 31 of the calendar year that is one year
after your death.
If your beneficiary is your surviving spouse, he or she will become a
new owner/annuitant and can continue this Roth IRA on the same basis as before
your death. If your surviving spouse does not wish to continue this Contract as
his or her Roth IRA, he or she may elect to receive the death benefit in the
form of settlement option payments. Such payments must be in equal amounts over
your spouse's life or a period not extending beyond his or her expectancy. Your
surviving spouse must elect this option and begin receiving payments no later
than the earliest of the following dates: (i) December 31 of the year following
the year you died; or (ii) December 31 of the year in which you would have
reached age 701/2.
Your beneficiary is responsible for assuring that the required minimum
distribution following your death is taken in a timely manner and that the
correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw
from your Roth IRA are generally tax-free. However, since the purpose of a Roth
IRA is to accumulate funds for retirement, your receipt or use of Roth IRA
earnings before you attain age 59 1/2 , or within 5 years of your first
contribution to the Roth IRA, or within 5 years of a contribution rolled over,
transferred, or converted from a Traditional IRA, will generally be treated as
an early distribution subject to regular income tax. No income tax will apply to
earnings that are withdrawn before you attain age 59 1/2, but which are
withdrawn five or more years after the first contribution or the rollover or
transfer contribution from a Traditional IRA to the Roth IRA, where the
withdrawal is made (i) upon your death or disability, or (ii) to pay first-time
homebuyer expenses of you or certain family members. Note that for amounts
converted from a Traditional IRA to a Roth IRA, the five-year period applies
separately to amounts converted. No portion of your distribution is taxable as a
capital gain.
(c) Withholding. If the distribution from your Roth IRA is subject to
federal income tax, unless you elect not to have withholding apply, federal
income tax will be withheld from your Roth IRA distributions. If you receive
distributions under a settlement option tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your Roth
IRA contributions (other than rollovers, transfers, or conversions) exceed the
maximum allowable contributions for that year, the excess contribution amount
will be subject to a nondeductible 6% excise (penalty) tax. However, if you
withdraw the excess contribution, plus any earnings on it, before the due date
for filing your federal income tax return (including extensions) for the taxable
year in which you made the excess contribution, the excess contribution will not
be subject to the 6% penalty tax. The amount of the excess contribution
withdrawn will not be considered an early distribution, but the earnings
withdrawn will be taxable income to you and may be subject to an additional 10%
tax on early distributions. Alternatively, excess contributions for one year may
be withdrawn in a later year or may be carried forward as Roth IRA contributions
in a later year to the extent that the excess, when aggregated with your Roth
IRA contribution (if any) for the subsequent year, does not exceed the maximum
allowable contribution for that year. The 6% excise tax will be imposed on
excess contributions in each year they are neither returned to your nor applied
as contributions in subsequent years.
(b) Early Distributions. Since the purpose of a Roth IRA is to
accumulate funds for retirement, your receipt or use of any portion of your Roth
IRA before you attain age 59 1/2 , or within 5 years of your first contribution
to the Roth IRA, or within 5 years of a contribution rolled over, transferred or
converted from a Traditional IRA, constitutes an early distribution subject a
10% penalty tax on the earnings in your Roth IRA. This penalty tax will not
apply if the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRA tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% or your
AGI, or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. The 10% penalty tax also will not apply to an early
distribution made to pay for first-time homebuyer expenses for you or certain
family members, or for higher education expenses for you or certain family
members. First-time homebuyer expenses must be paid within 120 days of the
distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including
settlement, financing and closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution.
In addition, it is likely that the law will change in 1998 to provide
retroactively that if amounts transferred, rolled over, or converted from a
Traditional IRA to a Roth IRA are withdrawn before five years, (i) the entire
amount that was transferred or rolled over, not just the earnings, may be
subject to the 10% penalty tax, and (ii) an additional 10% tax may apply if the
amounts transferred, rolled over, or converted were (or are to be) included in
income ratably over four years. Special rules may apply to withdrawals from a
Roth IRA that includes both amounts transferred, rolled over or converted from a
Traditional IRA and annual contributions to the Roth IRA; for that reason, it
may be advisable to establish separate Roth IRAs for amounts transferred, rolled
over, or converted and annual contributions.
(c) Required Distributions Upon Death. If the required minimum
distribution rules described in Part II, Section 4(a) of this Disclosure
Statement apply to your beneficiary and if the amount distributed in during a
calendar year is less than the minimum amount required to be distributed, your
beneficiary will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the Roth IRA, or any interference with the independent status of
the Roth IRA), the Roth IRA will lose its tax exemption and be treated as having
been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and, if at the time of
the prohibited transaction, you are under age 59 1/2 or it is within five years
of your first contribution to the Roth IRA, or within five years of a rollover,
transfer or conversion from a Traditional IRA, you may also be subject to the
10% penalty tax on early distributions. If you pledge your Roth IRA, or your
benefits under the contract, as a security for a loan, the portion pledged as
security will cease to be tax-qualified, the value of that portion will be
treated as distributed to you, and you may be subject to the 10% penalty tax on
early distributions from a Roth IRA.
PART III: OTHER INFORMATION
1. Federal Estate and Gift Taxes
Any amount distributed from your IRAs or Roth IRAs upon your death may
be subject to federal estate tax, although certain credits and deductions may be
available. The exercise or non-exercise of an option to pay an annuity to your
beneficiary at or after your death will not be considered a transfer for gift
tax purposes under Code Section 2517.
2. Tax Reporting
You need not file IRS Form 5329 with your income tax return unless
during the taxable year there is an excess contribution to, an early
distribution from, or insufficient minimum required distributions from your IRA
or Roth IRA. You must report contributions to, and distributions from your IRA
and Roth IRA (including the year end aggregate account balance of all IRAs and
Roth IRA) on your federal income tax return for the year. For Traditional IRA,
you must designate on the return how much of your annual contribution is
deductible and how much is nondeductible.
3. Vesting
Your interest in your IRA and Roth IRA must be non-forfeitable at all times.
4. Exclusive Benefit
Your interest in your IRA and Roth IRA is for the exclusive benefit of
you and your beneficiaries.
5. Publication 590
Additional information about your IRA or Roth IRA can be obtained from
any district office of the IRS and by calling 1-800-TAX-FORM for a free copy of
Publication 590, Individual Retirement Arrangements.
<PAGE>
Please forward (without charge) a copy of the Statement of Additional
Information concerning the Transamerica Seriessm - Transamerica Classicsm
Variable Annuity issued by Transamerica Life Insurance and Annuity Company to:
(Please print or type and fill in all information)
--------------------------------------------------
Name
--------------------------------------------------
Address
--------------------------------------------------
City/State/Zip
--------------------------------------------------
Date: ________________________ Signed
Return to Transamerica Life Insurance and Annuity Company, Annuity Service
Center, 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202.
<PAGE>
TRANSAMERICA SERIES sm
TRANSAMERICA CLASSIC sm VARIABLE ANNUITY
Contract Form 4-701 Certificate Form TCG-311
Issued by Transamerica Life Insurance and Annuity Company
401 North Tryon Street, Suite 700, Charlotte, North Carolina, 28202
VIM 119-598
<PAGE>
6
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm -
TRANSAMERICA CLASSIC sm
VARIABLE ANNUITY
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects
discussed in the May 1, 1998, prospectus for the Transamerica Classic sm
Variable Annuity ("contract") issued by Transamerica Life Insurance and Annuity
Company ("Transamerica") through Separate Account VA-6. The owner may obtain a
free copy of the prospectus by writing to: Transamerica Life Insurance and
Annuity Company, Annuity Service Center, 401 North Tryon Street, Suite 700,
Charlotte, North Carolina 28202 or calling 800-420-7749. Terms used in the
current prospectus for the contract are incorporated into this statement.
The contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used herein refers to both the individual contract and
the certificates issued under the group contract.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND SHOULD BE READ ONLY IN
CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT AND THE PORTFOLIOS.
May 1, 1998
<PAGE>
TABLE OF CONTENTS Page
THE CONTRACT ....................................................3
NET INVESTMENT FACTOR............................................3
SETTLEMENT OPTION PAYMENTS.......................................3
Variable Annuity Units and Payments.....................3
Variable Annuity Unit Value.............................3
Transfers After the Annuity Date .......................4
GENERAL PROVISIONS ..............................................4
IRS Required Distributions..............................4
Non-Participating.......................................4
Misstatement of Age or Sex .............................4
Proof of Existence and Age .............................4
Annuity Data............................................4
Assignment..............................................5
Annual Report...........................................5
Incontestability........................................5
Entire Contract.........................................5
Changes in the Contract.................................5
Protection of Benefits..................................5
Delay of Payments.......................................5
Notices and Directions..................................6
CALCULATION OF YIELDS AND TOTAL RETURNS..........................6
Money Market Sub-Account Yield Calculation..............6
Other Sub-Account Yield Calculations....................7
Standard Total Return Calculations......................7
Adjusted Historical Portfolio Performance Data..........8
Other Performance Data..................................8
HISTORIC PERFORMANCE DATA........................................8
General Limitations.....................................8
Adjusted Historical Sub-Account Performance Data........8
DISTRIBUTION OF THE CONTRACT....................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS..........................18
STATE REGULATION................................................18
RECORDS AND REPORTS.............................................18
FINANCIAL STATEMENTS............................................18
APPENDIX - Accumulation Transfer Formula........................20
<PAGE>
THE CONTRACT
......... The following pages provides additional information
about the contract which may be of interest to
some owners.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor
for a valuation period, before the annuity date, is (a) divided by (b), minus
(c) minus (d):
Where (a) is:
The net asset value per share held in the sub-account, as of the end of
the valuation period; plus the per-share amount of any dividend or
capital gain distributions if the "ex-dividend" date occurs in the
valuation period; plus or minus a per-share charge or credit as
Transamerica may determine, as of the end of the valuation period, for
taxes.
Where (b) is:
The net asset value per share held in the sub-account as of the end of
the last prior valuation period.
Where (c) is:
The daily charge of 0.00329% (1.20% annually) for the mortality and
expense risk charge times the number of calendar days in the current
valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current valuation
period. This charge may be increased, but will not exceed 0.00096%
(0.35% annually).
A valuation day is defined as any day that the New York Stock Exchange
is open.
SETTLEMENT OPTION PAYMENTS The variable settlement options provide for payments
that fluctuate in dollar amount, based on the investment performance of the
selected variable sub-account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; by (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of
the number of variable annuity units in each variable sub-account and the
variable sub-account's variable annuity unit value as of the tenth day of the
month before the payment due date. The amount of each payment may vary.
Variable Annuity Unit Value
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. Transamerica may offer other assumed interest rates than
4%. The appropriate interest factor will be applied to compensate for the
assumed interest rate.
Transfers After the Annuity Date
After the annuity date, the owner may transfer variable annuity units
from one sub-account to another, subject to certain limitations. See "Transfers"
page 27 of the prospectus. The dollar amount of each subsequent monthly annuity
payment after the transfer must be determined using the new number of variable
annuity units multiplied by the variable sub-account's variable annuity unit
value on the tenth day of the month preceding payment. Transamerica reserves the
right to change this day of the month.
The formula used to determine a transfer after the annuity date can be
found in the Appendix to this statement of additional information.
GENERAL PROVISIONS
IRS Required Distributions
If any owner under a non-qualified contract dies before the entire
interest in the contract is distributed, the value generally must be distributed
to the designated beneficiary so that the contract qualifies as an annuity under
the Code. (See "Federal Tax Matters" page 42 of the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated in the application, the settlement option payments under the contract
will be whatever the annuity amount applied on the annuity date would purchase
on the basis of the correct age or sex of the annuitant and/or other measuring
life. Any overpayments or underpayments by Transamerica as a result of any such
misstatement may be respectively charged against or credited to the settlement
option payment or payments to be made after the correction so as to adjust for
such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the contract, Transamerica may require
proof of the existence and/or proof of the age of the annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
Annuity Data
Transamerica will not be liable for obligations which depend on
receiving information from a payee or measuring life until such information is
received in a satisfactory form.
<PAGE>
Assignment
No assignment of a contract will be binding on Transamerica unless made
in writing and given to Transamerica at the Service Center. Transamerica is not
responsible for the adequacy of any assignment. The owner's rights and the
interest of any annuitant or non-irrevocable beneficiary will be subject to the
rights of any assignee of record.
Annual Report
At least once each contract year prior to the annuity date, the owner
will be given a report of the current account value allocated to each
sub-account of the variable account and any general account option. This report
will also include any other information required by law or regulation. After the
annuity date, a confirmation will be provided with every variable annuity
payment.
Incontestability
Each contract is incontestable from the contract effective date except
in certain states where medical questions are required on the application for
the optional Living Benefits Rider.
Entire Contract
Transamerica has issued the contract in consideration and acceptance of
the payment of the initial purchase payment and certain required information in
an acceptable form and manner or, where state law requires, the application. In
those states that require a written application, a copy of the application is
attached to and is part of the contract and along with the contract constitutes
the entire contract.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. The owner has all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any change in the individual contract
or the group contract or individual certificates thereunder and then only in
writing. Transamerica will not be bound by any promise or representation made by
any other persons.
Transamerica may change or amend the individual contract or the group
contract or individual certificates thereunder if such change or amendment is
necessary for the individual contract or the group contract or individual
certificates thereunder to comply with any state or federal law, rule or
regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death benefits)
under the contract will be subject to any claim or process of law by any
creditor.
Delay of Payments
Payment of any cash withdrawal, lump sum death benefit, or variable
payment or transfer due from the variable account will occur within seven days
from the date the election becomes effective, except that Transamerica may be
permitted to postpone such payment if: (1) the New York Stock Exchange is closed
for other than usual weekends or holidays, or trading on the Exchange is
otherwise restricted; or (2) an emergency exists as defined by the Securities
and Exchange Commission (Commission), or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
In addition, while it is our intention to process all transfers from
the sub-accounts immediately upon receipt of a transfer request, we have the
right to delay effecting a transfer from a variable sub-account for up to seven
days. We may delay effecting such a transfer if there is a delay of payment from
an affected portfolio. If this happens, then we will calculate the dollar value
or number of units involved in the transfer from a variable sub-account on or as
of the date we receive a transfer request in a acceptable form and manner, but
will not process the transfer to the transferee sub-account until a later date
during the seven-day delay period when the portfolio underlying the transferring
sub-account obtains liquidity to fund the transfer request through sales of
portfolio securities, new purchase payments, transfers by investors or
otherwise. During this period, the amount transferred would not be invested in a
variable sub-account.
Transamerica may delay payment of any withdrawal from any general
account options for a period of not more than six months after Transamerica
receives the request for such withdrawal. If Transamerica delays payment for
more than 30 days, Transamerica will pay interest on the withdrawal amount up to
the date of payment. See "Cash Withdrawals" page 30 of the prospectus.
Notices and Directions
Transamerica will not be bound by any authorization, direction,
election or notice which is not, in a form and manner acceptable to
Transamerica, and received at the Service Center.
Any written notice requirement by Transamerica to the owner will be
satisfied by our mailing of any such required written notice, by first-class
mail, to the owner's last known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, Transamerica
is required to compute the money market sub-account's current annualized yield
for a seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the money market series or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of realized gains and losses on the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the money market
sub-account at the beginning of such seven-day period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return and annualizing this quotient on a 365-day
basis. The net change in account value reflects the deductions for the annual
account fee, the mortality and expense risk charge and administrative expense
charges and income and expenses accrued during the period. Because of these
deductions, the yield for the money market sub-account of the variable account
will be lower than the yield for the money market series or any comparable
substitute funding vehicle.
The Commission also permits Transamerica to disclose the effective
yield of the money market sub-account for the same seven-day period, determined
on a compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 6% of purchase
payments) that may be applicable to a contract.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current annualized
yield of one or more of the variable sub-accounts (except the money market
sub-account) for 30-day periods. The annualized yield of a sub-account refers to
the income generated by the sub-account over a specified 30-day period. Because
this yield is annualized, the yield generated by a sub-account during the 30-day
period is assumed to be generated each 30-day period. The yield is computed by
dividing the net investment income per variable accumulation unit earned during
the period by the price per unit on the last day of the period, according to the
following formula:
YIELD= 2[{a-b + 1}6 - 1]
cd
Where:
a = net investment income earned during the period by the
portfolio attributable to the shares owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements). c = the average daily number of variable accumulation
units outstanding during the period. d = the maximum offering price per
variable accumulation unit on the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all contracts. The yield calculations do not reflect the
effect of any contingent deferred sales load that may be applicable to a
particular contract. Contingent deferred sales load range from 6% to 0% of the
amount of account value withdrawn depending on the elapsed time since the
receipt of each purchase payment.
Because of the charges and deductions imposed by the variable account,
the yield for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts normally will
fluctuate over time. Therefore, the disclosed yield for any given period is not
an indication or representation of future yields or rates of return. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average annual total
returns for one or more of the sub-accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion of such
period).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
contingent deferred sales loads that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
Transamerica may also disclose "historic" performance data for a
portfolio, for periods before the variable sub-account commenced operations.
Such performance information will be calculated based on the performance of the
portfolio and the assumption that the sub-account was in existence for the same
periods as those indicated for the portfolio, with a level of contract charges
currently in effect.
This type of adjusted historical performance data may be disclosed on
both an average annual total return and a cumulative total return basis.
Moreover, it may be disclosed assuming that the contract is not surrendered
(i.e., with no deduction for the contingent deferred sales load) and assuming
that the contract is surrendered at the end of the applicable period (i.e.,
reflecting a deduction for any applicable contingent deferred sales load).
Other Performance Data
Transamerica may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard described
above. The non-standard format will be identical to the standard format except
that the contingent deferred sales load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total
returns in conjunction with the standard format described above. The cumulative
returns will be calculated using the following formula assuming that the
contingent deferred sales load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account
recurring charges for the period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one,
five, or ten-year period at the end of the one, five,
or ten-year period (or fractional portion of the
period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the
standard performance data is also disclosed.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent past performance and are not indicative of
future performance. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses which may not continue in the future.
Portfolio information, including historical daily net asset values and
capital gains and dividends distributions regarding each portfolio has been
provided by that portfolio. The adjusted historical sub-account performance data
is derived from the data provided by the portfolios. Transamerica has no reason
to doubt the accuracy of the figures provided by the portfolios. Transamerica
has not verified these figures.
Adjusted Historical Sub-Account Performance Data
The charts below show adjusted historical performance date for
seventeen sub-accounts for the periods, prior to the inception of the
sub-accounts, based on the performance of the corresponding portfolios since
their inception date, with a level of charges equal to those currently assessed
under the contracts. These figures are not an indication of the future
performance of the sub-accounts.
The dates next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio. The Transamerica VIF
Money Market portfolio has not yet commenced operations. The sub-accounts will
commence operations January 2, 1998. Hence, there is no actual performance data
for these sub-accounts.
Notes:
1. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
at which time the Present Trust commenced operations. The total net assets of
the Small Cap Portfolio immediately after the transaction were $139,812,573 in
the Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of the
Present Trust reflect the performance of the Small Cap Portfolio of the Old
Trust.
2. The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable annuities,
through a reorganization on November 1, 1996. Accordingly, the performance data
for the Transamerica VIF Growth Portfolio includes performance of its
predecessor.
3. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
was effectively divided into two investment funds - The Old Trust and the
present OCC Accumulation Trust (the "Present Trust") at the time of the
transaction there was $682,601,380 in the Old Trust and $51,345,102 in the
Present Trust. For the period prior to September 16, 1994, the performance
figures for the Managed Portfolio of the Present Trust reflect the performance
of the Managed Portfolio of the Old Trust.
Adjusted Historical Performance Data Charts
1. Average Annual Total Returns - Assuming surrender but no Living
Benefits Rider
2. Average Annual Total Returns - Assuming surrender and Living Benefit
Rider
3. Average Annual Total Returns - Assuming no surrender or Living
Benefits Rider
4. Average Annual Total Returns - Assuming no surrender but reflecting
Living Benefits Rider
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
8. Cumulative Returns - Assuming no surrender but reflecting Living
Benefits Rider
<PAGE>
1. Average Annual Total Returns - Assuming surrender but no Living
Benefits Rider
Average annual total returns for periods since inception of the
portfolio, including adjusted historical performance, for each sub-account are
as follows. These figures include mortality and expenses charges of 1.20% per
annum, administrative expenses charge of 0.15% per annum, an account fee of $30
per annum adjusted for average account size and the applicable contingent
deferred sales load (maximum of 6% of purchase payments) and do not reflect any
fee deduction for the optional Living Benefits Rider.
<TABLE>
<CAPTION>
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Alger American Income & 31.06% 27.44% 15.51% N/A 12.19%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 23.15% 26.98% 17.27% N/A 13.57%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 28.33% 30.98% 19.04% N/A 19.74%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 21.74% 26.34% N/A N/A 18.06%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 12.11% 18.53% 24.28% N/A 41.92%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 16.11% 18.23% N/A N/A 14.13%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 16.53% 23.35% N/A N/A 20.63%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 16.38% N/A N/A N/A 20.19%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 23.96% N/A N/A N/A 24.33%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 14.66% N/A N/A N/A 19.04%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 3.26% N/A N/A N/A 3.30%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 6.83% N/A N/A N/A 6.85%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF -2.76% N/A N/A N/A -2.77%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.08% 27.04% 17.94% N/A 18.63%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.40% 16.49% 12.66% N/A 13.83%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 45.11% 41.99% 29.82% 24.22% 18.18%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<PAGE>
2. Average Annual Total Returns - Assuming surrender and reflecting Living
Benefits Rider Average annual total returns for periods since inception
of the portfolio, including adjusted historical
performance, for each sub-account are as follows. These figures include
mortality and expenses charges of 1.20% per annum, administrative expenses
charge of 0.15% per annum, an account fee of $30 per annum adjusted for average
account size, the applicable contingent deferred sales load (maximum 6% of
purchase payments) and optional Living Benefits Rider fee of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 30.99% 27.38% 15.45% N/A 12.13%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 23.08% 26.92% 17.21% N/A 13.51%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 28.27% 30.91% 18.98% N/A 19.68%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 21.67% 26.27% N/A N/A 18.00%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 12.05% 18.47% 24.21% N/A 41.85%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 16.05% 18.17% N/A N/A 14.08%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 16.47% 23.29% N/A N/A 20.57%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 16.32% N/A N/A N/A 20.10%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 23.90% N/A N/A N/A 24.27%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 14.60% N/A N/A N/A 18.98%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 3.23% N/A N/A N/A 3.24%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 6.78% N/A N/A N/A 6.80%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF -2.81% N/A N/A N/A -2.82%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.02% 26.97% 17.88% N/A 18.57%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.34% 16.43% 12.60% N/A 13.77%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 45.03% 41.92% 29.76% 24.16% 18.12%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<PAGE>
3. Average Annual Total Returns - Assuming no surrender or Living Benefits Rider
Non-standard average annual total returns for periods since inception
of the portfolio, including adjusted historical performance, for each
sub-account are as follows. These figures include mortality and expenses charges
of 1.20% per annum, administrative expenses charge of 0.15% per annum and an
account fee of $30 per annum adjusted for average account size, but do not
reflect any applicable contingent deferred sales load (maximum of 6% of purchase
payments) and do not reflect any fee deduction for the optional Living Benefits
Rider.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 36.16% 28.31% 15.89% N/A 12.19%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 28.25% 27.86% 17.63% N/A 13.69%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 33.43% 31.80% N/A N/A 20.02%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 26.84% 27.22% N/A N/A 18.45%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 17.21% 19.53% 24.56% N/A 41.92%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 21.21% 19.23% N/A N/A 14.64%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 21.63% 24.28% N/A N/A 21.16%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 21.48% N/A N/A N/A 21.75%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 29.06% N/A N/A N/A 25.78%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 19.76% N/A N/A N/A 20.38%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 8.39% N/A N/A N/A 8.41%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 11.93% N/A N/A N/A 11.97%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF 2.34% N/A N/A N/A 2.35%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.18% 27.91% 18.29% N/A 18.63%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.50% 17.53% 13.08% N/A 13.83%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 50.21% 42.69% 30.06% 24.22% 18.18%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<PAGE>
4. Average Annual Total Returns - Assuming no surrender but reflecting Living Benefits Rider
Non-standard average annual total returns for periods since inception
of the portfolio, including adjusted historical performance, for each
sub-account are as follows. These figures include mortality and expenses charges
of 1.20% per annum, administrative expenses charge of 0.15% per annum and, an
account fee of $30 per annum adjusted for average account size, but do not
reflect any applicable contingent deferred sales load (maximum 6% of purchase
payments). They do reflect deduction of the fee for the optional Living Benefits
Rider Fee of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 36.09% 28.25% 15.83% N/A 12.13%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 28.18% 27.79% 17.57% N/A 13.63%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 33.37% 31.73% 19.32% N/A 19.96%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 26.77% 27.16% N/A N/A 18.39%
Appreciation (4/27/93) 6%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 17.15% 19.47% 24.50% N/A 41.85%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 21.15% 19.17% N/A N/A 14.58%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 21.57% 24.22% N/A N/A 21.10%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 21.42% N/A N/A N/A 21.69%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 29.00% N/A N/A N/A 25.72%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 19.70% N/A N/A N/A 20.32%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 8.33% N/A N/A N/A 8.36%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 11.88% N/A N/A N/A 11.91%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF 2.29% N/A N/A N/A 2.30%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.12% 27.84% 18.23% N/A 18.57%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.44% 17.47% 13.02% N/A 13.77%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 50.13% 42.62% 30.00% 24.16% 18.12%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<PAGE>
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expenses charges of 1.20% per annum, administrative
expenses charge of 0.15% per annum, an account fee of $30 per annum adjusted for
average account size and the applicable contingent deferred sales load (maximum
of 6% of purchase payments) and do not reflect any fee deduction for the
optional Living Benefits Rider.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 31.06% 107.00% 105.63% N/A 185.94%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 23.15% 104.76% 121.80% N/A 142.70%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 28.33% 124.70% N/A N/A 170.27%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 21.74% 101.66% N/A N/A 117.54%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 12.11% 66.51% 196.43% N/A 1207.41%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 16.11% 65.26% N/A N/A 76.65%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 16.53% 87.70% N/A N/A 124.16%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 16.38% N/A N/A N/A 56.65%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 23.69% N/A N/A N/A 62.63%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 14.66% N/A N/A N/A 52.95%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 3.26% N/A N/A N/A 3.29%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 6.83% N/A N/A N/A 6.83%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF -2.76% N/A N/A N/A -2.76%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.08% 105.01% 128.17% N/A 400.31%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.40% 58.08% 81.48% N/A 139.00%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 45.11% 186.28% 268.75% 775.02% 1636.62%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expenses charges of 1.20% per annum, administrative
expenses charge of 0.15% per annum, an account fee of $30 per annum adjusted for
average account size, the applicable contingent deferred sales load (maximum 6%
of purchase payments) and the optional Living Benefits Rider Fee of 0.05% per
annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 30.99% 106.68% 105.11% N/A 184.64%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 23.08% 104.45% 121.24% N/A 141.85%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 28.27% 124.36% 138.47% N/A 169.52%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 21.67% 101.35% N/A N/A 117.03%
Appreciation (4/27/93) 6%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 12.05% 66.25% 195.68% N/A 1202.63%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 16.05% 65.01% N/A N/A 76.27%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 16.47% 87.41% N/A N/A 123.67%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 16.32% N/A N/A N/A 56.45%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 23.90% N/A N/A N/A 62.45%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 14.60% N/A N/A N/A 52.76%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 3.23% N/A N/A N/A 3.23%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 6.78% N/A N/A N/A 6.78%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF -2.81% N/A N/A N/A -2.81%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.02% 104.70% 127.59% N/A 397.96%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 16.34% 57.84% 81.02% N/A 237.41%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 45.03% 185.85% 267.82% 770.67% 1621.85%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
Adjusted historical non-standard cumulative total returns for periods
since inception of the portfolio for each sub-account are as follow. These
figures include mortality and expenses charges of 1.20% per annum,
administrative expenses charge of 0.15% per annum and an account fee of $30 per
annum adjusted for average account size but do not reflect any applicable
contingent deferred sales load (maximum of 6% of purchase payments) and do not
reflect any fee deduction for the optional Living Benefits Rider.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 36.16% 111.25% 109.03% N/A 185.94%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 28.25% 109.01% 125.20% N/A 144.40%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 33.43% 128.95% N/A N/A 173.67%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 26.84% 105.92% N/A N/A 120.94%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 17.21% 70.76% 199.83% N/A 1207.41%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 21.21% 69.51% N/A N/A 80.05%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 21.63% 91.95% N/A N/A 128.41%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 21.48% N/A N/A N/A 61.75%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 29.06% N/A N/A N/A 66.88%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 19.76% N/A N/A N/A 57.20%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 8.39% N/A N/A N/A 8.39%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 11.93% N/A N/A N/A 11.93%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF 2.34% N/A N/A N/A 2.34%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.18% 109.26% 131.57% N/A 400.31%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.50% 62.33% 84.88% N/A 239.00%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 50.21% 190.53% 272.15% 775.02% 1636.62%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
<PAGE>
8. Cumulative Returns - Assuming no surrender but reflecting Living Benefits Rider
Adjusted historical non-standard cumulative total returns for periods
since inception of the portfolio for each sub-account are as follow. These
figures include mortality and expenses charges of 1.20% per annum,
administrative expenses charge of 0.15% per annum and an account fee of $30 per
annum adjusted for average account size, but do not reflect any applicable
contingent deferred sales load (maximum 6% of purchase payments). They do
reflect deductions of the fee for the optional Living Benefits Rider Fee of
0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/97 ending ending 12/31/97 portfolio operations
corresponding portfolio) 12/31/97 12/31/97 to 12/31/97
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 36.09% 110.93% 108.51% N/A 184.64%
Growth (11/14/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 28.18% 108.70% 124.64% N/A 143.55%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 33.37% 128.61% 141.87% N/A 172.92%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 26.77% 105.60% N/A N/A 120.43%
Appreciation (4/27/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap 17.15% 70.50% 199.08% N/A 1202.63%
(8/30/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 21.15% 69.26% N/A N/A 79.67%
(9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 21.57% 91.66% N/A N/A 127.92%
Growth (9/12/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 21.42% N/A N/A N/A 61.55%
(7/23/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 29.00% N/A N/A N/A 66.70%
(10/8/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/25/95) 19.70% N/A N/A N/A 57.01%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF Fixed 8.33% N/A N/A N/A 8.33%
Income (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF High 11.88% N/A N/A N/A 11.88%
Yield (1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Morgan Stanley UF 2.29% N/A N/A N/A 2.29%
International Magnum
(1/1/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.12% 108.95% 130.99% N/A 397.96%
Managed (7/31/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 21.44% 62.09% 84.42% N/A 237.41%
Small Cap (7/31/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 50.13% 190.10% 271.22% 770.67% 1621.85%
(12/1/80) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
</TABLE>
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the contracts. TSSC may also serve as principal underwriter and
distributor of other contracts issued through the variable account and certain
other separate accounts of Transamerica and any affiliated of Transamerica. TSSC
is a wholly owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Transamerica pays
TSSC for acting as the principal underwriter under a distribution agreement.
TSSC has entered into sales agreements with other broker-dealers to
solicit applications for the contracts through registered representatives who
are licensed to sell securities and variable insurance products. These
agreements provide that applications for the contracts may be solicited by
registered representatives of the broker-dealers appointed by Transamerica to
sell its variable life insurance and variable annuities. These broker-dealers
are registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for contracts will be sold by
broker-dealers which will receive compensation as described in the Prospectus.
The offering of the contracts is expected to be continuous and TSSC
does not anticipate discontinuing the offering of the contracts. However, TSSC
reserves the right to discontinue the offering of the contracts.
During fiscal years 1996 and 1997, no commissions were paid to TSSC as
underwriter of the contracts; no amounts were retained by TSSC. Under the Sales
Agreement, TSSC will pay broker-dealers compensation based on a percentage of
each purchase payment. The percentage may be up to 6% and in certain situations
additional amounts for marketing allowances, production bonuses, service fees,
sales awards and meetings, and asset based trailer commission may be paid.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The
assets of the variable account are kept separate and apart from Transamerica
general account assets. Records are maintained of all purchases and redemptions
of portfolio shares held by each of the sub-accounts.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the contract will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be
maintained by Transamerica or by the Service Center. As presently required by
the provisions of the 1940 Act and regulations promulgated thereunder which
pertain to the variable account, reports containing such information as may be
required under the 1940 Act or by other applicable law or regulation will be
sent to owners semi-annually at their last known address of record.
FINANCIAL STATEMENTS
Because the variable account had not yet commenced operations as of
December 31, 1997, there is no financial statement for the variable account.
The financial statements for Transamerica included in this statement of
additional information should be considered only as bearing on the ability of
Transamerica to meet its obligations under the contracts. They should not be
considered as bearing on the investment performance of the assets in the
variable account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next Variable Accumulation Payment's due date.
Where:
(AUV1) is the variable accumulation Unit value of the Variable
sub-account that the transfer is being made from as of the end of the
valuation Period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the Variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
<PAGE>
1
PROFILE
of the
TRANSAMERICA CATALYSTsm VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
May 1, 1998
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Catalystsm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual fund portfolios
("portfolios") in the Variable Account and two general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. Transamerica guarantees the safety of money invested in the general
account options. Certain portfolios and general account options may not be
available in all states.
The contract is a deferred annuity and it has two phases: the
accumulation phase, and the annuitization phase. During the accumulation phase,
you can make additional payments on your contract, transfer money among the
investment options, and withdraw some or all of your investment. During this
phase, your earnings accumulate on a tax-deferred basis for individuals, but
some or all of any money you withdraw may be taxable. Tax deferral is not
available for non-qualified contracts owned by corporations and some trusts.
During the annuity phase, Transamerica will make periodic payments to
you. The dollar amount of the payments may depend on the amount of money
invested and earned during the accumulation phase and on other factors, such as
the annuitant's age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from Transamerica. You may choose fixed
payments, where the dollar amount of each payment generally remains the same, or
variable payments, where the dollar amount of each payment may increase or
decrease based on the investment performance of the portfolios you select. You
can choose among payments for the lifetime of an individual, or payments for the
longer of one lifetime or a guaranteed period of 10, 15, or 20 years, or
payments for one lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $5,000 ($2,000 for
IRAs) to purchase a contract. You can make additional payments of at least
$1,000 each ($100 each if made under an automatic payment plan deducted from
your bank account). When you make a payment, Transamerica currently adds a
credit of 3.25% of the payment to your account value; Transamerica may vary this
percentage. You may cancel your contract during the free look period (see item
10 below).
The Transamerica Catalyst Variable Annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement and other
long-term goals. Individuals in high tax brackets get the most benefit from the
tax deferral feature. You should not invest in the contract for short-term
purposes or if you cannot take the risk of losing some of your investment.
<PAGE>
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the
following 17 portfolios:
<TABLE>
<CAPTION>
<S> <C> <C>
----------------------------------------------- -------------------------------------------------
Alger American Income & Growth MFS VIT Research
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Alliance VPF Premier Growth Morgan Stanley UF High Yield
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Janus Aspen Balanced OCC Accumulation Trust Small Cap
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Janus Aspen Worldwide Growth Transamerica VIF Growth
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
MFS VIT Emerging Growth Transamerica VIF Money Market
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
MFS VIT Growth with Income
----------------------------------------------- -------------------------------------------------
</TABLE>
You can earn or lose money in any of these portfolios. These portfolios
are described in their own prospectuses. All portfolios may not be available in
all states.
GENERAL ACCOUNT: You can also allocate payments to the general account
options, where Transamerica guarantees the principal invested plus an annual
interest rate of at least 3%. The general account options include a fixed
account and guarantee period options.
5. Expenses. Transamerica makes certain charges and deductions in order to
provide the benefits and features available under the contract:
If you withdraw your money within seven years of investing it,
there may be a withdrawal charge of up to 8% of
the amount invested.
Transamerica deducts an annual account fee of no more than $30
(the fee is waived for account values over
$50,000).
Transamerica deducts insurance and administrative charges of 1.35% per
year from your average daily value in the variable account.
If you elect the Living Benefits Rider (or Waiver of CDSL Rider),
Transamerica will deduct a monthly fee equal to 1/12 of 0.05% of the
account value.
The first 18 transfers each year are free (then Transamerica
will deduct a $10 fee for each additional
transfer).
Advisory fees are also deducted by the portfolios' managers, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your
investment and/or amounts you use to purchase
annuity benefits (depending on your state's law).
The following chart shows these charges (not including the optional
Living Benefits Rider fee, any transfer fees or premium taxes). The $30 annual
account fee is included in the first column as a charge of 0.075%. The third
column is the sum of the first two columns. The examples in the last two columns
show the total amounts you would be charged if you invested $1,000, a 3.25%
credit was added to the investment and it grew 5% each year, and you withdrew
your entire investment after one year or 10 years. Year one includes the
withdrawal charge and year 10 does not.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Charges Charges Charges 1 Year 10 Years
-----------------------------------------------------------------------
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.425% 0.74% 2.165 $94.67 $257.93
Alliance VPF Growth & Income 1.425% 0.72% 2.145 $94.44 $252.83
Alliance VPF Premier Growth 1.425% 0.95% 2.375 $96.84 $279.94
Dreyfus VIF Capital Appreciation Growth 1.425% 0.80% 2.225 $95.27 $262.26
Dreyfus VIF Small Cap 1.425% 0.78% 2.205 $95.07 $259.90
Janus Aspen Balanced 1.425% 0.83% 2.255 $95.59 $265.79
Janus Aspen Worldwide Growth 1.425% 0.74% 2.165 $94.65 $255.18
MFS Emerging Growth 1.425% 0.87% 2.295 $96.02 $271.61
MFS Growth & Income 1.425% 1.00% 2.425 $97.36 $285.10
MFS Research 1.425% 0.88 % 2.305 $96.12 $272.65
Morgan Stanley UF Fixed Income 1.425% 0.70% 2.125 $94.23 $250.47
Morgan Stanley UF High Yield 1.425% 0.80% 2.225 $95.27 $262.26
Morgan Stanley UF International Magnum 1.425% 1.15% 2.575 $98.94 $303.51
OCC Accumulation Trust Managed 1.425% 0.87% 2.295 $96.01 $270.51
OCC Accumulation Trust Small Cap 1.425% 0.97% 2.395 $97.05 $282.29
Transamerica VIF Growth 1.425% 0.85% 2.275 $95.81 $269.52
Transamerica VIF Money Market 1.425% 0.60% 2.025 $93.22 $242.97
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31,
1997 (except for Transamerica VIF Money Market portfolio) and reflect any
expense reimbursements or fee waivers. The figures for Transamerica VIF Money
Market portfolio are estimates for the year 1998, its first year of operation.
Expenses may be higher or lower in the future. See the "Variable Account Fee
Table" in the Transamerica Catalyst Variable Annuity prospectus for more
detailed information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
contract value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portion (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increases in the contract value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. Transamerica may assess a withdrawal charge of up to 8% of a
purchase payment, but no withdrawal charge will be assessed on money that has
been in the contract for seven years. In certain cases, if you elect the Living
Benefits Rider when you purchase the contract, the withdrawal charge may be
waived if you are in a hospital or nursing home for a long period or, in some
states, if you are diagnosed with a terminal illness, or if you are receiving
medically required in-home care (if the withdrawal charge is waived, any credit
less than 12 months old will be forfeited). Subject to certain conditions, each
contract year you may withdraw up to 10% of purchase payments received less than
seven years ago, without incurring a withdrawal charge. Withdrawals from
qualified contracts may be subject to severe restrictions and, in certain
circumstances, prohibited.
You may have to pay income taxes on amounts you withdraw and there
may also be a 10% tax penalty if you make
withdrawals before you are 59 1/2years old.
<PAGE>
If you withdraw money from a guarantee period prematurely, you may
forfeit some of the interest that you earned, but you will always receive the
principal you invested plus 3% interest.
8. Past Investment Performance. The value of the money you allocate to the
portfolios will go up or down, depending on the investment performance of the
portfolios you select. The following chart shows the adjusted past investment
performance on a year-by-year basis for each portfolio. These figures have
already been reduced by the insurance charges, the account fee, the advisory fee
and all the expenses of the portfolios. These figures do not include the
withdrawal charge, the fee for the optional Living Benefits Rider, any transfer
fees or premium taxes, which would reduce performance if applied. The credit
Transamerica adds to the account value is not included in these figures. Past
performance is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
-----------------------------------------------------------------------
SUB-ACCOUNT 1997 1996 1995 1994 1993
-----------------------------------------------------------------------
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 36.16% 18.40% 35.18% -8.55% 9.43%
Alliance VPF Growth & Income 28.25% 21.65% 35.31% -1.09% 10.24%
Alliance VPF Premier Growth 33.43% 19.63% 43.41% -3.41% 11.16%
Dreyfus VIF Capital Appreciation Growth 26.84% 22.76% 31.76% 1.52% N/A
Dreyfus VIF Small Cap 17.21% 15.11% 29.06% 7.78% 67.23%
Janus Aspen Balanced 21.21% 14.55% 22.93% -0.66% N/A
Janus Aspen Worldwide Growth 21.63% 26.40% 25.28% -0.22% N/A
MFS Emerging Growth 21.48% 15.49% N/A N/A N/A
MFS Growth & Income 29.06% 21.67% N/A N/A N/A
MFS Research 19.76% 20.50% N/A N/A N/A
Morgan Stanley UF Fixed Income 8.40% N/A N/A N/A N/A
Morgan Stanley UF High Yield 11.94% N/A N/A N/A N/A
Morgan Stanley UF International Magnum 2.35% N/A N/A N/A N/A
OCC Accumulation Trust Managed 21.18% 20.45% 43.39% 1.71% 9.29%
OCC Accumulation Trust Small Cap 21.50% 16.88% 15.08% -1.43% 18.20%
Transamerica VIF Growth 50.31% 26.60% 52.98% 7.68% 21.70%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------
SUB-ACCOUNT 1992 1991 1990 1989 1988
-----------------------------------------------------------------------
- -----------------------------------------------------
Alger American Income & Growth 7.12% 22.70% -1.39% 5.91% N/A
Alliance VPF Growth & Income 6.42% N/A N/A N/A N/A
Alliance VPF Premier Growth N/A N/A N/A N/A N/A
Dreyfus VIF Capital Appreciation Growth N/A N/A N/A N/A N/A
Dreyfus VIF Small Cap 70.60% 156.10% N/A N/A N/A
Janus Aspen Balanced N/A N/A N/A N/A N/A
Janus Aspen Worldwide Growth N/A N/A N/A N/A N/A
MFS Emerging Growth N/A N/A N/A N/A N/A
MFS Growth & Income N/A N/A N/A N/A N/A
MFS Research N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed Income N/A N/A N/A N/A N/A
Morgan Stanley UF High Yield N/A N/A N/A N/A N/A
Morgan Stanley UF International Magnum N/A N/A N/A N/A N/A
OCC Accumulation Trust Managed 17.38% 43.71% -5.87% 31.08% N/A
OCC Accumulation Trust Small Cap 18.84% 46.61% -11.17% 16.36% N/A
Transamerica VIF Growth 13.55% 41.44% -12.60% 32.90% 29.23%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Death Benefit. If you die during the accumulation phase, a death benefit will
be paid to your beneficiary.
If you dies before you turn 80 the death benefit will be the greater
of: (1) the contract's account value reduced by any credits less than 12 months
old; or (2) the sum of all purchase payments less withdrawals and applicable
premium taxes. If death occurs after your or your joint owner's 80th birthday,
the death benefit is equal to the contract's account value reduced by any
credits less than 12 months old.
<PAGE>
10. Other Information. The Transamerica Catalyst Variable Annuity offers other
features you might be interested in. Some of these features are as follows:
Free Look. After you get your contract, you have 10 days to look it
over and decide if it is really right for you (this period may be longer in
certain states). If you decide not to keep the contract, you can cancel it
during this period by delivering a written notice of cancellation and returning
the contract to the Service Center at the address listed in item 11 below.
Unless otherwise required by law, Transamerica will refund the purchase payments
allocated to any general account option (less any withdrawals) plus the value in
the Variable Account as of the date the written notice and the contract are
received by Service Center.
Telephone Transfers. You can generally arrange to transfer money
between the investments in your contract by
telephone.
Dollar Cost Averaging. You can instruct Transamerica to automatically
transfer money from either the money market sub-account or the fixed account to
any of the other variable sub-accounts each month. This is intended to give you
a lower average cost per share or unit than a single one time investment.
Automatic Rebalancing Option. The performance of each sub-account may
cause the allocation of value among the sub-accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
sub-accounts by reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have Transamerica send
you money automatically each month out of your contract, during the accumulation
phase. There are limits on the amounts, and the payments may be taxable, and,
prior to age 59 1/2, subject to the penalty tax. If the total withdrawals
(including systematic withdrawals) made in a contract year exceed the allowed
amount to be withdrawn without a charge for that year, any applicable withdrawal
charge will then apply.
Automatic Payout Option. For qualified contracts, certain pension and
retirement plans require that certain amounts be distributed from the plan at
certain ages. You can arrange to have such amounts distributed automatically
during the accumulation phase.
These features may not be available in all states and may not be
suitable for your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
<PAGE>
PROSPECTUS FOR
TRANSAMERICA SERIES sm ---
TRANSAMERICA CATALYST sm
VARIABLE ANNUITY
A Variable Annuity Issued by
Transamerica Life Insurance
and Annuity Company
Including Prospectuses for:
<TABLE>
<CAPTION>
<S> <C> <C>
Income and Growth Portfolio of The Alger American Fund
Growth and Income Portfolio and
Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.
Capital Appreciation Portfolio and
Small Cap Portfolio of Dreyfus Variable Investment Fund
Balanced Portfolio and
Worldwide Growth Portfolio of Janus Aspen Series
Emerging Growth Series
Growth with Income Series and
Research Series of MFS Variable Insurance Trust
Fixed Income Portfolio
High Yield Portfolio and
International Magnum Portfolio of Morgan Stanley Universal Funds, Inc.
Managed Portfolio and
Small Cap Portfolio of OCC Accumulation Trust
Growth Portfolio and
Money Market Portfolio of Transamerica Variable Insurance Fund, Inc.
</TABLE>
May 1, 1998
<PAGE>
TRANSAMERICA SERIES sm CATALYST VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY
COMPANY 401 North Tryon Street, Charlotte, North
Carolina 28202
This prospectus describes the Transamerica Catalyst Variable Annuity, a
variable annuity contract ("contract") issued by Transamerica Life Insurance and
Annuity Company (referred to as "Transamerica"). The contract allows you, the
owner, to accumulate assets on a tax-deferred basis for retirement and other
long-term financial purposes.
You may direct your purchase payments, as well as any value accumulated
under the contract, to one or more variable sub-accounts of Separate Account
VA-6 or to the general account options, or to both. We add a credit to your
account value with each purchase payment received. The money you place in each
variable sub-account will be invested solely in a corresponding mutual fund
investment portfolio ("portfolio"). The value of each variable sub-account will
vary in accordance with the investment performance of the portfolio in which
that variable sub-account invests. You bear the entire investment risk for all
assets you place in the variable sub-accounts. This means that, depending on
market conditions, the amount you invest in the variable sub-accounts may
increase or decline. Currently you may choose among the following 17 variable
sub-accounts:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You may also place your purchase payments or accumulated value in the
general account options. We are currently offering two general account options.
In one, the fixed account, Transamerica guarantees the return of the amount
invested at a specified rate of interest for at least 12 months. Transamerica
will periodically declare the rate of interest applicable to each amount
allocated to the fixed account. In the second option, the guarantee period
account, Transamerica guarantees the return of the amount invested at a declared
rate of interest for a specified guarantee period. Currently, the guarantee
periods available are three, five and seven years; there may be a reduction made
to the amount of interest credited on amounts withdrawn or transferred before
the end of these periods. For both general account options, 3% will be the
minimum rate of interest credited.
This prospectus contains vital information that you should know before
investing. You can obtain more information about the contract by requesting a
copy of the Statement of Additional Information ("SAI") dated May 1, 1998. The
SAI is available free by writing to Transamerica Life Insurance and Annuity
Company, Annuity Service Center, 401 North Tryon Street, Suite 700, Charlotte,
North Carolina, 28202 or by calling 800-420-7749. The current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this prospectus. The table of contents of the SAI is included at the end of
this prospectus.
These securities have not been approved or disapproved by the
Securities and Exchange Commission, nor has the Commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
For your own benefit and protection, please read this prospectus
carefully before you invest. Keep it on hand for future reference. The date of
this prospectus is May 1, 1998.
<PAGE>
Under the terms of the contract, we promise to pay you a series of
monthly settlement option payments. Payments may be for a fixed or a variable
amount or a combination of both for the life of the annuitant or for some other
period as you select prior to the annuity date.
On or before the annuity date, you may transfer assets between and
among the variable sub-accounts and the general account options. The fixed
account has restrictions on certain transfers while transfers from a guarantee
period account may be subject to an interest adjustment. After the annuity date,
transfers are permitted among the variable sub-accounts only if you elect to
receive variable settlement option payments.
On or before the annuity date, you may elect to withdraw all or a
portion of your cash surrender value in exchange for a cash payment. Withdrawals
out of the guarantee period account may be subject to an interest adjustment.
Withdrawals may be subject to a contingent deferred sales load, certain
administrative fees, premium tax charges, federal, state or local income taxes,
and/or a tax penalty.
This prospectus must be accompanied by current prospectuses
for the portfolios.
THIS PROSPECTUS MAY NOT BE OFFERED IN ANY JURISDICTION WHERE SUCH OFFERING IS
UNLAWFUL. ANY INFORMATION THAT A DEALER, SALESPERSON, OR OTHER PERSON GIVES YOU
ABOUT THIS CONTRACT SHOULD BE CONTAINED IN THIS PROSPECTUS. IF YOU RECEIVE ANY
INFORMATION ABOUT THE CONTRACT THAT IS NOT CONTAINED IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON THAT INFORMATION.
Please note that your investment in the contract:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
Investing in the contract involves certain investment risks, including possible
loss of principal.
This prospectus generally describes only the variable account
portion of the contract, except when the general account
options are specifically mentioned.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.................................................................6
SUMMARY.....................................................................8
CONDENSED FINANCIAL INFORMATION............................................18
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT...19
Transamerica Life Insurance and Annuity Company...................19
Published Ratings.................................................19
The Variable Account..............................................19
THE PORTFOLIOS.............................................................20
THE CONTRACT...............................................................25
PURCHASE PAYMENTS............................................26
Purchase Payments...................................26
Allocation of Purchase Payments.....................26
Investment Option Limit.............................27
Credits.............................................27
ACCOUNT VALUE................................................28
TRANSFERS....................................................29
Before the Annuity Date.............................29
Other Restrictions..................................29
Telephone Transfers.................................30
Dollar Cost Averaging...............................30
Automatic Asset Rebalancing.........................31
After the Annuity Date..............................31
CASH WITHDRAWALS.............................................31
Systematic Withdrawal Option........................32
Automatic Payment Option (APO)......................33
DEATH BENEFIT................................................33
Payment of Death Benefit............................34
Designation of Beneficiaries........................34
Death of Owner of Joint Owner Before Annuity Date...34
If Annuitant Dies Before Annuity Date...............36
Death After Annuity Date............................36
Survival Provision..................................36
CHARGES, FEES AND DEDUCTIONS.................................36
Contingent Deferred Sales Load......................36
Free Withdrawal - Allowed Amount....................37
Free Withdrawal - Living Benefits Rider.............37
Other Free Withdrawals..............................38
Administrative Charges..............................38
Mortality and Expense Risk Charge...................38
Living Benefits Rider Fee...........................39
Premium Tax Charges.................................39
Transfer Fee........................................39
Option and Service Fees.............................40
Taxes...............................................40
Portfolio Expenses..................................40
Interest Adjustment.................................40
Sales in Special Situations.........................40
SETTLEMENT OPTION PAYMENTS...................................40
Annuity Date........................................40
Settlement Option Payments..........................41
Election of Settlement Option Forms and Payment Options.41
Payment Options.........................................41
Fixed Payment Option....................................42
Variable Payment Option.................................42
Settlement Option Forms.................................42
FEDERAL TAX MATTERS..............................................44
Introduction............................................44
Purchase Payments.......................................44
Taxation of Annuities...................................44
Qualified Contracts.....................................47
Taxation of Transamerica ...............................49
Tax Status of Contract..................................49
Possible Changes in Taxation............................50
Other Tax Consequences..................................50
PERFORMANCE DATA ................................................51
DISTRIBUTION OF THE CONTRACT.....................................52
PREPARING FOR YEAR 2000..........................................52
LEGAL PROCEEDINGS................................................53
LEGAL MATTERS....................................................53
ACCOUNTANTS......................................................53
VOTING RIGHTS....................................................53
AVAILABLE INFORMATION............................................54
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS..........55
APPENDIX A - THE GENERAL ACCOUNT OPTIONS.........................56
Fixed Account ..........................................56
Guarantee Period Account ...............................57
APPENDIX B.......................................................60
Example of Variable Accumulation Unit Value Calculation.60
Example of Variable Annuity Unit Value Calculations.....60
Example of Variable Annuity Payment Calculations........60
APPENDIX C
Disclosure Statement for Individual Retirement Annuities.............61
The contract is not available in all states.
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general
account options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract
is surrendered on or before the
annuity date. The cash surrender value is equal to: the account value;
less any account fee, interest
adjustment, contingent deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown on the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period
of at least twelve months for each
allocation or transfer.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges, or
transfers out to the variable account prior to the annuity date.
General Account Options: The fixed account and the guarantee period
account offered by us to which the owner
may allocate purchase payments and transfers.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee
period.
Guarantee Period: The number of years that a guaranteed rate of interest will
be credited to a guarantee period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods, each
with a different guaranteed rate of interest, offered under the guarantee period
account.
Living Benefits Rider: Also called a "Waiver of CDSL" rider in some contracts,
it provides benefits described on
page 37.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any amounts the
owner allocates to that variable sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box 31848,
Charlotte, North Carolina 28231-1848,
telephone 800-258-4260.
Status (Qualified and Non-Qualified): The contract has a qualified status
if it is issued in connection with a
retirement plan or program. Otherwise, the status is non-qualified.
Valuation Day: Any day the New York Stock Exchange is open. To determine
the value of an asset on a day that is
not a valuation day, we will use the value of that asset as of the end of the
next valuation day.
Valuation Period: The time interval between the closing (generally 4:00 p.m.
Eastern Time) of the New York Stock
Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code.
Variable Accumulation Unit: A unit of measure used to determine the variable
accumulated value before the annuity date. The value of a variable accumulation
unit varies with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable
accumulation units under this contract prior
to the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account
which invests solely in shares of one of
the underlying portfolios.
We: The company, Transamerica.
You: The owner.
<PAGE>
SUMMARY
The Contract
The Transamerica Series sm Transamerica Catalyst sm Variable Annuity is
a flexible purchase payment deferred annuity that is designed to aid your
long-term financial planning and retirement needs. The contract may be used in
connection with a retirement plan which qualifies as a retirement program under
Sections 403(b), 408 or 408A of the Code, with various types of qualified
pension and profit sharing plans under Section 401 of the Code, or with
non-qualified plans. Some qualified contracts may not be available in all states
or in all situations. The contract is issued by Transamerica Life Insurance and
Annuity Company ("Transamerica"), an indirect wholly-owned subsidiary of
Transamerica Corporation. Its principal office is at 401 North Tryon Street,
Charlotte, North Carolina 28202.
This contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used in this prospectus refers to either the individual
annuity contract or to a certificate issued under a group annuity contract. The
term "owner" refers to the owner(s) of the individual contract or the owner(s)
of the certificate, as appropriate.
Transamerica will establish and maintain an account for each contract.
Each owner will receive either an individual annuity contract, or a certificate
evidencing the owner's coverage under a group annuity contract. The contract
provides that the account value, after certain adjustments, will be applied to a
settlement option on a future date you select ("annuity date").
You may allocate all or portions of your purchase payments to one or
more variable sub-accounts or to the general account options. At the time of
each purchase payment we will add a credit to your account value in an amount
equal to a percentage of each purchase payment.
The account value prior to the annuity date, except for amounts in the
general account options, will vary depending on the investment experience of
each of the variable sub-accounts selected by the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, prior to the annuity date the owner bears the entire investment risk
under the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts
allocated to the variable account, so the proceeds of a surrender could be less
than the amount invested.
The initial purchase payment for each contract must be at least $5,000
($2,000 for contributory IRAs, SEP/IRAs and Roth IRAs). Generally each
additional purchase payment must be at least $1,000, unless an automatic
purchase payment plan is selected. See "Purchase Payments" page 26.
The Variable Account
The variable account is a separate account (designated Separate Account
VA-6) that is subdivided into variable sub-accounts. See "The Variable Account"
page 19. Assets of each variable sub-account are invested in a specified mutual
fund portfolio ("portfolio"). The variable sub-accounts currently available for
investment are:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
The portfolios pay their investment advisers and administrators certain
fees charged against the assets of each portfolio. The variable accumulated
value, if any, of a contract and the amount of any variable settlement option
payments will vary to reflect the investment performance of the variable
sub-accounts to which amounts have been allocated. Additionally, applicable
charges are deducted. See "Charges, Fees and Deductions" page 36. For more
information about the portfolios, see "The Portfolios" page 20 and the
accompanying portfolios' prospectuses.
General Account Options
There are two types of general account options - the fixed account and
the guarantee period account. See "The General Account Options" in Appendix A.
The amounts in the fixed account will be credited interest at a rate of
not less than 3% annually. Transamerica may credit interest at a rate in excess
of 3% at its discretion for any class. Each interest rate will be guaranteed to
be credited for at least 12 months.
The other general account option, the guarantee period account,
provides specified rates of interest for specified terms, of currently, three,
five and seven years subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the 3%
minimum rate.
Investment Option Limit
Currently, the owner may not elect more than a total of 18 investment
options over the life of the contract. Investment options include variable
sub-accounts and general account options. See "Investment Option Limits" page
27.
Transfers Before the Annuity Date
Prior to the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see "After the Annuity Date" page 31.
Transfers out of the fixed account are restricted to four per contract
year and to a limited percentage of the fixed account value. More frequent
transfers may be allowed under certain services and options, for example, dollar
cost averaging. Transfers out of a guarantee period prior to the end of the term
may be subject to an interest adjustment which may reduce interest credited to
the 3% minimum rate. See "General Account Options" in Appendix A of this
prospectus.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 18 made during the same contract year. See "Transfers" on page 29
for additional limitations and information regarding transfers.
<PAGE>
Withdrawals
You may withdraw all or part of the cash surrender value on or before
the annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $50,000.
Transamerica may delay payment of any withdrawal from the general account
options for up to six months. See "Cash Withdrawals" page 31.
Withdrawals may be taxable, subject to withholding and subject
to a penalty tax. Withdrawals from
qualified contracts may be subject to severe restrictions and, in
certain circumstances, prohibited. See
"Federal Tax Matters" page 44
Contingent Deferred Sales Load
Transamerica does not deduct a sales charge when purchase payments are
made (although premium tax charges may be deducted). However, if any part of the
account value is withdrawn, a contingent deferred sales load of up to 8% of
purchase payments may be deducted. After a purchase payment has been held by
Transamerica for seven years, it may be withdrawn without charge. In most
states, the owner may elect, for an extra charge, an optional Living Benefits
Rider that provides that the contingent deferred sales load will be waived in
certain circumstances. No contingent deferred sales load is assessed on payment
of the death benefit, on transfers within the contract, or on certain
annuitizations. See "Contingent Deferred Sales Load" page 36, "Cash Withdrawals"
page 31 and "Living Benefits Rider" page 37.
Also, beginning 30 days from the contract effective date (or the end of
the free look period if later), any portion of the "allowed amount" may be
withdrawn each contract year without imposition of any contingent deferred sales
load. The allowed amount for each contract year is equal to 10% of purchase
payments, that were received during the last seven years, as of the prior
contract anniversary, less any withdrawals already taken that contract year. All
purchase payments not previously withdrawn that have been held at least seven
years are not subject to a contingent deferred sales load. For purposes of
calculating the contingent deferred sales load, withdrawals will be considered
to be taken first from purchase payments, on a first in/first out basis, and
then from earnings and last from any credits.
Other Charges and Deductions
Transamerica deducts a mortality and expense risk charge of 1.20%
(annually) of the assets in the variable account and an administrative expense
charge of 0.15% (annually) of these assets. The administrative expense charge
may change, but it is guaranteed not to exceed a maximum effective annual rate
of 0.35%. See "Mortality and Expense Risk Charge" page 38 and "Administrative
Charges" page 38.
An account fee of currently $30 (or 2% of the account value, if less)
is deducted at the end of each contract year and upon surrender. This fee may
change but it is guaranteed not to exceed $60 (or 2% of the account value, if
less) per contract year. If the account value is more than $50,000 on the last
business day of a contract year, (or as of the date the contract is
surrendered), the account fee will be waived for that year.
After the annuity date, the annual annuity fee of $30 will be deducted
in equal installments from each periodic payment under the variable payment
option.
For each transfer in excess of 18 during a contract year, a
transfer fee of $10 will be imposed. (See
"Transfer Fee" page 39.)
Charges for premium taxes (including retaliatory premium taxes) are not
currently deducted, except for annuitizations, but such charges could be imposed
in some jurisdictions. Depending on the applicability of such taxes, the charges
could be deducted from purchase payments, from amounts withdrawn, and/or upon
annuitization.
(See "Premium Tax Charges" page 39.)
In addition, amounts withdrawn or transferred out of a guarantee period
account prior to the end of its term may be subject to an interest adjustment.
(See "Guaranteed Period Account" in Appendix A.)
If the owner elects the Living Benefits Rider a fee of 0.05%
(annually) of the account value will be
deducted at the end of each contract month at the rate of 1/12 times 0.05%
times the account value. The Living
Benefit Rider is not available in all states.
Currently, no fees are deducted for any other services or options under
the contract. However, Transamerica does reserve the right to impose fees to
cover processing for certain services and options in the future, including
dollar cost averaging, systematic withdrawals, automatic payouts, asset
allocation and asset rebalancing.
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. The information below should be considered together with the narrative
provided under the heading "Charges, Fees and Deductions" on page 36 of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Sales Load(1)
Sales Load Imposed on Purchase Payments 0%
Maximum Contingent Deferred Sales Load(2) 8%
Range of Contingent Deferred Sales Load Over Time
<TABLE>
<CAPTION>
Contingent Deferred
Years Since Sales Load
Purchase Payment Receipt (as a percentage of purchase payment)
<S> <C> <C>
Less than 1 year 8%
1 year but less than 2 years 8%
2 years but less than 3 years 7%
3 years but less than 4 years 6%
4 years but less than 5 years 5%
5 years but less than 6 years 4%
6 years but less 7 years 3%
7 or more years 0%
<PAGE>
Other Contract Expenses
Transfer Fee (first 18 per contract year)(3) 0
Fees For Other Services and Options(4) 0
Account Fee(5) $30
Living Benefits Rider Fee (if elected)(6) 0.05%
Variable Account Annual Expenses(7)
(as a percentage of the variable accumulated value)
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge(8) 0.15%
Total Variable Account Annual Expenses 1.35%
</TABLE>
<TABLE>
<CAPTION>
Portfolio Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(9)
Management Other Total Portfolio
Portfolio Fees Expenses Annual
Expenses
<S> <C> <C> <C>
Alger American Income & Growth 0.625 0.115 0.74
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 0.85 0.10 0.95
Dreyfus VIF Capital Appreciation 0.75 0.05 0.80
Dreyfus VIF Small Cap 0.75 0.03 0.78
Janus Aspen Balanced 0.76 0.07 0.83
Janus Aspen Worldwide Growth 0.66 0.08 0.74
MFS VIT Emerging Growth 0.75 0.12 0.87
MFS VIT Growth with Income 0.75 0.25 1.00
MFS VIT Research 0.75 0.13 0.88
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF International Magnum 0.00 1.15 1.15
OCC Accumulation Trust Managed 0.80 0.07 0.87
OCC Accumulation Trust Small Cap 0.80 0.17 0.97
Transamerica VIF Growth 0.62 0.23 0.85
Transamerica VIF Money Market 0.35 0.25 0.60
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. In preparing the tables above and below and the examples that
follow, Transamerica has relied on the figures provided by the portfolios.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. These figures are for the year
ended December 31, 1997, except for the Transamerica VIF Money Market Portfolio
which are estimates for the year 1998, its first year of operation. Actual
expenses in future years may be higher or lower than these figures.
Notes to Fee Table:
(1) The contingent deferred sales load applies to each contract, regardless
of how the account value is allocated between the variable account and
the general account options.
(2) A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after
seven years, a purchase payment may be withdrawn free of any contingent
deferred sales load. See "Charges, Fees and Deductions" page 36.
(3) A transfer fee of $10 will be imposed for each transfer in excess of
18 in a contract year.
See "Charges, Fees and Deductions" page 36.
(4) Transamerica currently does not impose fees for any other services, or
options. However, Transamerica reserves the right to impose a fee for
various services and options including dollar cost averaging,
systematic withdrawals, automatic payouts, asset allocation and asset
rebalancing.
(5) The current account fee is $30 (or 2% of the account value, if
less) per contract year. This fee will
be waived for account values over $50,000. This limit may be
changed in the future. The fee may be
changed, but it may not exceed $60 (or 2% of the account value,
if less). See "Charges, Fees and
Deductions" page 36.
(6) If the owner elects the Living Benefits Rider, the rider fee will be
deducted at the rate of 1/12 of 0.05% at the end of each contract month
based on the account value at that time. See "Living Benefits Rider"
page 37.
(7) The variable account annual expenses do not apply to the general account
options.
(8) The current annual administrative expense charge of 0.15% may be
increased to 0.35%. See "Charges, Fees
and Deductions" page 36.
(9) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in
the Portfolio Expenses table are the expenses paid for 1997 (except for
the Transamerica VIF Money Market Portfolio, which are estimates). The
expenses shown in that table reflect a portfolio's adviser's waivers of
fees or reimbursement of expenses, if applicable. It is anticipated
that such waivers or reimbursements will continue for calendar year
1998, except for Alliance VPF Premier Growth For which the management
fee, other expenses and total portfolio annual expenses for 1998
without waivers or reimbursements are estimated to be 1.00%, 0.08% and
1.08%, respectively. Without such waivers or reimbursements, the annual
expenses for 1997 for certain portfolios would have been, as a
percentage of assets, as follows:
<TABLE>
<CAPTION>
Total Portfolio
Management Other Expenses Annual Expense
Fee
<S> <C> <C> <C>
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 1.00 0.10 1.10
Janus Aspen Balanced 0.77 0.06 0.83
Janus Aspen Worldwide Growth 0.72 0.09 0.81
MFS VIT Growth with Income 0.75 0.35 1.10
Morgan Stanley UF Fixed Income 0.40 1.31 1.71
Morgan Stanley UF High Yield 0.80 0.88 1.68
Morgan Stanley UF International Magnum 0.80 1.98 2.78
Transamerica VIF Growth 0.75 0.23 0.98
</TABLE>
Without expense reimbursements, the management fee, other expenses and
total portfolio expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.35%, 0.45%
and 0.80%, respectively. There were no fee waivers or expense
reimbursements during 1997 for the Alger American Income and Growth
Portfolio, Dreyfus VIF Capital Appreciation Portfolio, Dreyfus VIF
Small Cap Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Research Portfolio, OCC Accumulation Trust Managed Portfolio or OCC
Accumulation Trust Small Cap Portfolio.
EXAMPLES
The following tables show the total expenses an owner would incur in
various situations assuming a $1,000 investment and a 5% annual return on
assets.
These examples assume an average account value of $40,000 and,
therefore, a deduction of 0.075% has been made to reflect the $30 account fee,
and a 3.25% credit added to the $1000 purchase payment. These examples also
assume that all amounts were allocated to the variable sub-account indicated.
These examples also assume that no transfer fees or other option or service fees
or premium tax charges have been assessed. Premium tax charges may be
applicable. See "Premium Tax Charges" page 39.
Examples 1 through 3 show expenses for contracts without the optional
Living Benefit Rider based on fee waivers and reimbursements for the portfolios
for 1997. There is no guarantee that any fee waivers or expense reimbursements
will continue in the future. For annuitizations before the first contract
anniversary, and for annuitizations under a form that does not include life
contingencies, the contingent deferred sales load may apply (see expense
examples in column 1).
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
Example 1: If the owner surrenders the contract at the end of the applicable time period:
--------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $94.67 $132.96 $164.96 $257.93
Alliance VPF Growth & Income $94.44 $132.10 $163.24 $252.83
Alliance VPF Premier Growth $96.84 $139.50 $175.91 $279.94
Dreyfus VIF Capital Appreciation Growth $95.27 $134.67 $167.65 $262.26
Dreyfus VIF Small Cap $95.07 $134.03 $166.54 $259.90
Janus Aspen Balanced $95.59 $135.64 $169.30 $265.79
Janus Aspen Worldwide Growth $94.65 $132.74 $164.34 $255.18
MFS Emerging Growth $96.02 $137.02 $171.76 $271.61
MFS Growth & Income $97.36 $141.06 $178.50 $285.10
MFS Research $96.12 $137.33 $172.28 $272.65
Morgan Stanley UF Fixed Income $94.23 $131.45 $162.13 $250.47
Morgan Stanley UF High Yield $95.27 $134.67 $167.65 $262.26
Morgan Stanley UF International Magnum $98.94 $145.95 $186.94 $303.51
OCC Accumulation Trust Managed $96.01 $136.93 $171.50 $270.51
OCC Accumulation Trust Small Cap $97.05 $140.15 $177.02 $282.29
Transamerica VIF Growth $95.81 $136.39 $170.71 $269.52
Transamerica VIF Money Market $93.22 $128.57 $157.60 $242.97
- ---------------------------------------------------------------------------------------------------------------------------
Example 2: If the owner does not surrender and does not annuitize the contract:
--------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $22.67 $69.96 $119.96 $257.93
Alliance VPF Growth & Income $22.44 $69.10 $118.24 $252.83
Alliance VPF Premier Growth $24.84 $76.50 $130.91 $279.94
Dreyfus VIF Capital Appreciation Growth $23.27 $71.67 $122.65 $262.26
Dreyfus VIF Small Cap $23.07 $71.03 $121.54 $259.90
Janus Aspen Balanced $23.59 $72.64 $124.30 $265.79
Janus Aspen Worldwide Growth $22.65 $69.74 $119.34 $255.18
MFS Emerging Growth $24.02 $74.02 $126.76 $271.61
MFS Growth & Income $25.36 $78.06 $133.50 $285.10
MFS Research $24.12 $74.33 $127.28 $272.65
Morgan Stanley UF Fixed Income $22.23 $68.45 $117.13 $250.47
Morgan Stanley UF High Yield $23.27 $71.67 $122.65 $262.26
Morgan Stanley UF International Magnum $26.94 $82.95 $141.94 $303.51
OCC Accumulation Trust Managed $24.01 $73.93 $126.50 $270.51
OCC Accumulation Trust Small Cap $25.05 $77.15 $132.02 $282.29
Transamerica VIF Growth $23.81 $73.39 $125.71 $269.52
Transamerica VIF Money Market $21.22 $65.57 $112.60 $242.97
- ---------------------------------------------------------------------------------------------------------------------------
Example 3: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
--------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $22.67 $69.96 $119.96 $257.93
Alliance VPF Growth & Income $22.44 $69.10 $118.24 $252.83
Alliance VPF Premier Growth $24.84 $76.50 $130.91 $279.94
Dreyfus VIF Capital Appreciation Growth $23.27 $71.67 $122.65 $262.26
Dreyfus VIF Small Cap $23.07 $71.03 $121.54 $259.90
Janus Aspen Balanced $23.59 $72.64 $124.30 $265.79
Janus Aspen Worldwide Growth $22.65 $69.74 $119.34 $255.18
MFS Emerging Growth $24.02 $74.02 $126.76 $271.61
MFS Growth & Income $25.36 $78.06 $133.50 $285.10
MFS Research $24.12 $74.33 $127.28 $272.65
Morgan Stanley UF Fixed Income $22.23 $68.45 $117.13 $250.47
Morgan Stanley UF High Yield $23.27 $71.67 $122.65 $262.26
Morgan Stanley UF International Magnum $26.94 $82.95 $141.94 $303.51
OCC Accumulation Trust Managed $24.01 $73.93 $126.50 $270.51
OCC Accumulation Trust Small Cap $25.05 $77.15 $132.02 $282.29
Transamerica VIF Growth $23.81 $73.39 $125.71 $269.52
Transamerica VIF Money Market $21.22 $65.57 $112.60 $242.97
- ---------------------------------------------------------------------------------------------------------------------------
<PAGE>
Examples 4 through 6 show expenses for contracts with the optional
Living Benefits Rider, based on the fee waivers and reimbursements for the
portfolios for 1997. There is no guarantee that fee waivers or expense
reimbursements will continue in the future. For annuitizations before the first
contract anniversary and for annuitizations under a form that does not include
life contingencies, a contingent deferred sales load may apply (see examples in
column 4).
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
Example 4: If the owner surrenders the contract at the end of the applicable time period:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $95.19 $134.52 $167.58 $263.21
Alliance VPF Growth & Income $94.96 $133.65 $165.84 $258.06
Alliance VPF Premier Growth $97.36 $141.06 $178.50 $285.10
Dreyfus VIF Capital Appreciation Growth $95.79 $136.23 $170.25 $267.47
Dreyfus VIF Small Cap $95.58 $135.59 $169.14 $265.12
Janus Aspen Balanced $96.11 $137.19 $171.90 $270.99
Janus Aspen Worldwide Growth $95.16 $134.30 $166.94 $260.41
MFS Emerging Growth $96.53 $138.57 $174.36 $276.82
MFS Growth & Income $97.88 $142.61 $181.09 $290.24
MFS Research $96.64 $138.88 $174.88 $277.86
Morgan Stanley UF Fixed Income $94.75 $133.01 $164.74 $255.71
Morgan Stanley UF High Yield $95.79 $136.23 $170.25 $267.47
Morgan Stanley UF International Magnum $99.45 $147.50 $189.51 $308.62
OCC Accumulation Trust Managed $96.52 $138.48 $174.10 $275.70
OCC Accumulation Trust Small Cap $97.57 $141.70 $179.60 $287.45
Transamerica VIF Growth $496.33 $137.95 $173.32 $274.74
Transamerica VIF Money Market $93.74 $130.14 $160.24 $248.34
- ----------------------------------------------------------------------------------------------------------------------------
Example 5: If the owner does not surrender and does not annuitize the contract:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $23.19 $71.52 $122.58 $263.21
Alliance VPF Growth & Income $22.96 $70.65 $120.84 $258.06
Alliance VPF Premier Growth $25.36 $78.06 $133.50 $285.10
Dreyfus VIF Capital Appreciation Growth $23.79 $73.23 $125.25 $267.47
Dreyfus VIF Small Cap $23.58 $72.59 $124.14 $265.12
Janus Aspen Balanced $24.11 $74.19 $126.90 $270.99
Janus Aspen Worldwide Growth $23.16 $71.30 $121.94 $260.41
MFS Emerging Growth $24.53 $75.57 $129.36 $276.82
MFS Growth & Income $25.88 $79.61 $136.09 $290.24
MFS Research $24.64 $75.88 $129.88 $277.86
Morgan Stanley UF Fixed Income $22.75 $70.01 $119.74 $255.71
Morgan Stanley UF High Yield $23.79 $73.23 $125.25 $267.47
Morgan Stanley UF International Magnum $27.45 $84.50 $144.51 $308.62
OCC Accumulation Trust Managed $24.52 $75.48 $129.10 $275.70
OCC Accumulation Trust Small Cap $25.57 $78.70 $134.60 $287.45
Transamerica VIF Growth $24.33 $74.95 $128.32 $274.74
Transamerica VIF Money Market $21.74 $67.14 $115.24 $248.34
- ----------------------------------------------------------------------------------------------------------------------------
Example 6: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------
- -------------------------------------------------------------
Alger American Income & Growth $23.19 $71.52 $122.58 $263.21
Alliance VPF Growth & Income $22.96 $70.65 $120.84 $258.06
Alliance VPF Premier Growth $25.36 $78.06 $133.50 $285.10
Dreyfus VIF Capital Appreciation Growth $23.79 $73.23 $125.25 $267.47
Dreyfus VIF Small Cap $23.58 $72.59 $124.14 $265.12
Janus Aspen Balanced $24.11 $74.19 $126.90 $270.99
Janus Aspen Worldwide Growth $23.16 $71.30 $121.94 $260.41
MFS Emerging Growth $24.53 $75.57 $129.36 $276.82
MFS Growth & Income $25.88 $79.61 $136.09 $290.24
MFS Research $24.64 $75.88 $129.88 $277.86
Morgan Stanley UF Fixed Income $22.75 $70.01 $119.74 $255.71
Morgan Stanley UF High Yield $23.79 $73.23 $125.25 $267.47
Morgan Stanley UF International Magnum $27.45 $84.50 $144.51 $308.62
OCC Accumulation Trust Managed $24.52 $75.48 $129.10 $275.70
OCC Accumulation Trust Small Cap $25.57 $78.70 $134.60 $287.45
Transamerica VIF Growth $24.33 $74.95 $128.32 $274.74
Transamerica VIF Money Market $21.74 467.14 $115.24 $248.34
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT
TO THE GUARANTEES IN THE CONTRACT. THE ASSUMED 5% ANNUAL RATE OF RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS ASSUMED RATE.
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a
variable basis or a combination of a fixed and variable basis, as you select.
You have flexibility in choosing the annuity date, but it may generally not be a
date later than the annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last, but never later than the annuitant's 90th birthday.
Certain qualified contracts may have restrictions as to the annuity date and the
types of settlement options available. (See "Settlement Option Payments" page
40.)
Four settlement options are available under the contract:
(1) life annuity; (2) life and contingent
annuity; (3) life annuity with period certain; and (4) joint and survivor
annuity. (See "Settlement Option Forms"
page 42.)
Death of Owner Before the Annuity Date
If an owner dies prior to the annuity date and before either the
owner's or any joint owner's 80th birthday, the death benefit for the contract
will be the greater of (a) the account value reduced by credits less than 12
months or (b) the sum of all purchase payments made to the contract, less
withdrawals and applicable premium tax charges. If death occurs after the
earlier of the owner's or joint owner's 80th birthday, the death benefit will be
the account value less any credits less than 12 months old. If the owner is not
a natural person, the annuitant will be treated as the owner(s) for purposes of
the death benefit.
The death benefit will generally be paid within seven days of receipt
of the required proof of death of the owner and election of the method of
settlement or as soon thereafter as Transamerica has sufficient information to
make the payment, but if no settlement method is elected the death benefit will
be distributed within five years after the owner's death. No contingent deferred
sales load is imposed. The death benefit may be paid as either a lump sum or as
a settlement option. (See "Death Benefit" page 33). Amounts in the guarantee
period account will not be subject to interest adjustments in calculating the
death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on
increases in the account value until a distribution under the contract occurs
(e.g., a withdrawal or settlement option payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of a contract). Generally, a portion (up to 100%) of
any distribution or deemed distribution is taxable as ordinary income. The
taxable portion of distributions is generally subject to income tax withholding
unless the recipient elects otherwise (although withholding is mandatory for
certain qualified contracts). In addition, a federal penalty tax may apply to
certain distributions. (See "Federal Tax Matters" page 44.)
Right to Cancel
The owner has the right to examine the contract for a limited period,
known as a "free look period." The owner can cancel the contract during this
period by delivering or mailing a written notice of cancellation, or sending a
telegram to the Service Center and by returning the contract before midnight of
the tenth day after receipt of the contract (or longer if required by state
law). Notice given by mail and the return of the contract by mail will be
effective on the date received by Transamerica. Unless otherwise required by
law, Transamerica will refund the purchase payment(s) allocated to any general
account option (less any withdrawals) plus the variable accumulated value as of
the date the written notice and the contract are received by Transamerica. Any
credits will not be included in the amount paid. See "Purchase Payments" page 26
and "Account Value" page 28.
Questions
Questions about procedures or the contract can be answered by the
Transamerica Annuity Service Center ("Service Center"), at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, 800-258-4260. All inquiries should include
the contract number and the owner's name.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this prospectus and in the prospectuses
for the portfolios which should be referred to for more detailed information.
With respect to qualified contracts, it should be noted that the requirements of
a particular retirement plan, an endorsement to the contract, or limitations or
penalties imposed by the Code or the Employee Retirement Income Security Act of
1974, as amended, may impose additional limits or restrictions on purchase
payments, withdrawals, distributions, or benefits, or on other provisions of the
contract. This prospectus does not describe such limitations or restrictions.
(See "Federal Tax Matters" page 44.)
CONDENSED FINANCIAL INFORMATION
Because the variable account had not yet commenced operations as of
December 31, 1997, there are no financial statements available.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company ("Transamerica") is a
stock life insurance company incorporated under the laws of the State of
California in 1966 and redomesticated to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies.
Transamerica is a wholly-owned indirect subsidiary of Transamerica Corporation.
The address of Transamerica is 401 North Tryon Street, Charlotte, North Carolina
28202.
Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial
strength and/or claims-paying ability of Transamerica and should not be
considered as bearing on the investment performance of the variable account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of
Transamerica as measured by Standard & Poor's Insurance Ratings Services,
Moody's, or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to owners. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms, including its obligations
under the general account options of this contract. Such ratings do not reflect
the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
The Variable Account
Separate Account VA-6 of Transamerica (the "variable account") was
established by Transamerica as a separate account under the laws of the State of
North Carolina pursuant to June 11, 1996, resolutions of Transamerica's Board of
Directors. The variable account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the variable account.
The assets of the variable account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 58-7-95 of
the North Carolina Insurance Law provides that the assets of a separate account
are not chargeable with liabilities incurred in any other business operation of
the insurance company (except to the extent that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the variable account, whether or not
realized, are credited to or charged against the variable account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the variable account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica.
The variable account currently has seventeen variable sub-accounts
available under the contract, each of which invests solely in a specific
corresponding portfolio. Changes to the variable sub-accounts may be made at the
discretion of Transamerica.
<PAGE>
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests
exclusively in one of the portfolios. Descriptions of each portfolio's
investment objectives follow. The management fees listed below are fees
specified in the applicable advisory contract (i.e., before any fee waivers).
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. Except during temporary defensive periods, the portfolio attempts
to invest 100%, and it is a fundamental policy of the portfolio to invest at
least 65%, of its total assets in dividend paying equity securities. Alger
Management will favor securities it believes also offer opportunities for
capital appreciation. The portfolio may invest up to 35% of its total assets in
money market instruments and repurchase agreements and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks may be made
by the portfolio. Purchases and sales of portfolio securities are made at such
times and in such amounts as are deemed advisable in light of market, economic
and other conditions.
Adviser: Alliance Capital Management L.P. Management Fee: 0.625%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since
investments will be made based upon their potential for capital appreciation,
current income will be incidental to the objective of capital growth. The
portfolio will invest predominantly in the equity securities (common stocks,
securities convertible into commons stocks and rights and warrants to subscribe
for or purchase common stocks) of a limited number of large, carefully selected,
high-quality U.S. companies that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. The portfolio investments in the 25 such
companies most highly regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets. The portfolio thus
differs from more typical equity mutual funds by investing most of its assets in
a relatively small number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the value of its total
assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P. Management Fee: 1%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio, the primary investment objective of which is to provide
long-term capital growth consistent with the preservation of capital; current
income is a secondary investment objective. During periods which the Sub-Adviser
determines to be of market strength, the portfolio acts aggressively to increase
shareholders' capital by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt securities of
foreign governments. The portfolio will seek investment opportunities generally
in large capitalization companies (those with market capitalizations exceeding
$500 million) which the Sub-Adviser believes have the potential to experience
above average and predictable earnings growth.
Adviser: The Dreyfus Corporation. Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation. It seeks to achieve its objective by investing
principally in common stocks. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase which The Dreyfus Corporation
believes to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
Adviser: The Dreyfus Corporation. Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. The portfolio normally invests in issuers from at least five
different countries, including the United States. The portfolio may at times
invest in fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the investment objective of long-term
growth of capital. The policy is to invest primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks of companies that the
Adviser believes are early in their life cycle but which have the potential to
become major enterprises (emerging growth companies). While the portfolio will
invest primarily in common stocks, the portfolio may, to a limited extent, seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment grade"
(commonly known as "junk bonds") or in comparable unrated securities, when, in
the opinion of the Adviser, such an investment presents a greater opportunity
for appreciation with comparable risk to an investment in "investment grade"
securities. Under normal market conditions the portfolio will invest not more
than 5% of its nets assets in these securities. Consistent with its investment
objective and policies described above, the portfolio may also invest up to 25%
(and generally expects to invest not more than 15%) of its net assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the portfolio will invest at least 65% of its assets
in equity securities of companies that are believed to have long-term prospects
for growth and income. Equity securities in which the portfolio may invest
include the following: common stocks, preferred stocks and preference stock;
securities such as bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized markets. Consistent with its investment objective and policies
described above, the portfolio may also invest up to 75% (and generally expects
to invest no more than 15%) of its net assets in foreign securities (including
emerging market securities and Brady Bonds) which are not traded on a U.S.
exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The policy is to invest a substantial proportion
of its assets in equity securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in which the portfolio
may invest include the following: common stocks, preferred stocks and preference
stocks, securities such as bonds, warrants or rights that are convertible into
stocks and depository receipts for those securities. These securities may be
listed on securities exchanges, traded in various over-the-counter markets or
have no organized markets. A smaller proportion of the assets may be invested in
bonds, short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's non-convertible debt
investments, if any, may consist of "investment grade" securities, and, with
respect to no more than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser believes to be a similar
quality to these lower rated securities (commonly know as "junk bonds").
Consistent with its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Fixed Income Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of U.S. government and agencies,
corporate bonds, mortgage backed securities, foreign bonds and other fixed
income securities and derivatives. The portfolio's average weighted maturity
will ordinarily exceed five years and will usually be between five and fifteen
years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the
first $500 million plus 0.35% of the next
$500 million plus 0.30% of the assets over $1 billion.
The High Yield Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities of U. S. and foreign issuers,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds." The portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first
$500 million plus 0.45% of next $500
million plus 0.40% of the assets over $1 billion.
The International Magnum Portfolio of the Morgan Stanley Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The countries in which the
portfolio will invest are those comprising the Morgan Stanley Capital
International EAFE Index, which includes Australia, Japan, New Zealand, most
nations located in Western Europe and certain developed countries in Asia, such
as Hong Kong and Singapore (collectively the "EAFE countries"). The portfolio
may invest up to 5% of its total assets in securities of issuers domiciled in
non-EAFE countries. Under normal circumstances, at least 65% of the total assets
of the portfolio will be invested in equity securities of issuers in at least
three different EAFE countries.
Adviser: Morgan Stanley Asset Management Inc. Management Fee: 0.80% of
the first $500 million plus 0.75% of the
next $500 million plus 0.70% of the assets over $1 billion.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the portfolio will also invest in high
quality short term money market and cash equivalent securities and may invest
almost all of its assets in such securities when the Adviser deems it advisable
in order to preserve capital. In addition, the portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the-counter
markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of first $400 million
plus 0.75% of next $400 million plus
0.70% of the assets over $800 million.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations of under $1 billion. Under
normal circumstances at least 65% of the portfolio's assets will be invested in
equity securities. The majority of securities purchased by the portfolio will be
traded on the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options, warrants, bonds, notes
and debentures which are convertible into or exchangeable for, or which grant a
right to purchase or sell, such securities. In addition, the portfolio may also
purchase foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by American depository receipts
listed on a domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million
plus 0.75% of the next $400 million
plus 0.70% of assets over $800 million.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth. Common stock (listed and unlisted) is the basic form
of investment. The Growth Portfolio invests primarily in common stocks of growth
companies that are considered by the manager to be premier companies. In the
manager's view, characteristics of premier companies include one or more of the
following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements. When in the judgment of the
Sub-Adviser market conditions warrant, the portfolio may, for temporary
defensive purposes, hold part or all of its assets in cash, debt or money market
instruments. The portfolio may invest up to 10% of its assets in debt securities
having a call on common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Money Market Portfolio of the Transamerica Variable Insurance Fund,
Inc., seeks to maximize current income
from money market securities consistent with liquidity and the preservation
of principal. The portfolio invests
primarily in high quality U. S. dollar-denominated money market instruments
with remaining maturities of 13
months or less, including: obligations issued or guaranteed by the U. S.
and foreign governments and their
agencies and instrumentalities; obligations of U. S. and foreign banks, or
their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial
paper, notes and bonds; other short-term
debt obligations with remaining maturities of 397 days or less; and
repurchase agreements involving any of the
securities mentioned above. The portfolio may also purchase other
marketable, non-convertible corporate debt
securities of U. S. issuers. These investments include bonds, debentures,
floating rate obligations, and issues
with optional maturities.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.35%.
Meeting investment objectives depends on various factors,
including, but not limited to, how well the
portfolio managers anticipate changing economic and market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE
PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
An investment in the contract is not a deposit or obligation of, or
guaranteed or endorsed, by any bank, nor is the contract federally insured by
the Federal Deposit Insurance Corporation or any other government agency.
Investing in the contract involves certain investment risks, including possible
loss of principal.
Since all of the portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the variable account and one or more
other separate accounts investing in the portfolios. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate accounts from investing in
the portfolios. See the portfolios' prospectuses for greater details.
Additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the portfolios which accompany this prospectus. The portfolios' prospectuses
should be read carefully before any decision is made concerning the allocation
of purchase payments to, or transfers among, the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or
their advisers, in varying amounts, that may be based on the amount of assets
allocated to the portfolios. The payments are for administrative or distribution
services.
Addition, Deletion, or Substitution
Transamerica does not control the portfolios and cannot guarantee that
any of the variable sub-accounts offered under this contract or any of the
portfolios will always be available for allocation of purchase payments or
transfers. Transamerica retains the right to make changes in the variable
account and in its investments.
Transamerica reserves the right to eliminate the shares of any
portfolio held by a variable sub-account and to substitute shares of another
portfolio or of another investment company for the shares of any portfolio, if
the shares of the portfolio are no longer available for investment or if, in
Transamerica's judgment, investment in any portfolio would be inappropriate in
view of the purposes of the variable account. To the extent required by the 1940
Act, a substitution of shares attributable to the owner's interest in a variable
sub-account will not be made without prior notice to the owner and the prior
approval of the Commission. Nothing contained herein shall prevent the variable
account from purchasing other securities for other series or classes of variable
annuity contracts, or from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
New variable sub-accounts for the contracts may be established when, in
the sole discretion of Transamerica, marketing, tax, investment or other
conditions so warrant. Any new variable sub-accounts will be made available to
existing owners on a basis to be determined by Transamerica. Each additional
variable sub-account will purchase shares in a mutual fund portfolio or other
investment vehicle. Transamerica may also eliminate one or more variable
sub-accounts if, in its sole discretion, marketing, tax, investment or other
conditions so warrant. In the event any variable sub-account is eliminated,
Transamerica will notify owners and request a re-allocation of the amounts
invested in the eliminated variable sub-account.
In the event of any substitution or change, Transamerica may make such
changes in the contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the contracts, the variable account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred variable annuity
contract. Other variable contracts are also available from Transamerica. The
rights and benefits of this contract are described below and in the individual
contract or in the certificate and group contract; however, Transamerica
reserves the right to make any modification to conform the individual contract
and the group contract and certificates thereunder to, or give the owner the
benefit of, any federal or state statute or rule or regulation. The obligations
under the contract are obligations of Transamerica. The contracts are available
on a non-qualified basis and on a qualified basis. Contracts available on a
qualified basis are as follows: (1) rollover and contributory individual
retirement annuities (IRAs) under Code Sections 408(a) and 408(b); (2)
conversion, rollover and contributory Roth IRAs under Code Section 408A; (3)
simplified employee pension plans (SEP/IRAs) that qualify for special federal
income tax treatment under Code Section 408(k); (4) rollover Code Section 403(b)
annuities (including Rev. Rul. 90-24 transfers); and (5) qualified pension and
profit sharing plans intended to qualify under Code Section 401. Generally,
qualified contracts contain certain restrictive provisions limiting the timing
and amount of purchase payments to, and distributions from, the qualified
contract. For further discussion concerning qualified contracts, see "Federal
Tax Matters" page 44.
Ownership
The owner is entitled to the rights granted by the contract. If the
owner dies, the rights of the owner belong to the joint owner, if any, and then
to the owner's beneficiary. If there are joint owners, the one designated as the
primary owner will receive all mail and any tax reporting information.
For non-qualified contracts, the owner is entitled to designate the
annuitant(s) and, if the owner is an individual, the owner can change the
annuitant(s) at any time before the annuity date. Any such change will be
subject to our then current underwriting requirements. Transamerica reserves the
right to reject any change of annuitant(s) which has been made without our prior
written consent.
If the owner is not an individual, the annuitant(s) may not be changed
once the contract is issued. Different rules apply to qualified contracts. See
"Federal Tax Matters," page 44.
For each contract, a different account will be established and values,
benefits and charges will be calculated separately. The various administrative
rules described below will apply separately to each contract, unless otherwise
noted.
PURCHASE PAYMENTS
Purchase Payments
All purchase payments must be paid to the Service Center. A
confirmation will be issued to the owner upon the acceptance of each purchase
payment.
The initial purchase payment must be at least $5,000 ($2,000 for
contributory IRAs, SEP/IRAs and Roth
IRAs).
The contract will be issued and the initial purchase payment generally
will be credited within two business days after the receipt of both sufficient
information to issue a contract and the initial purchase payment at the Service
Center. Acceptance is subject to sufficient information being provided in a form
acceptable to Transamerica, and Transamerica reserves the right to reject any
request for issuance of a contract or purchase payment. Contracts normally will
not be issued with respect to owners, joint owners, or annuitants more than 80
years old, nor will Transamerica normally accept purchase payments after the
owners' (or annuitants' if non-individual owner) 81st birthday, although
Transamerica in its discretion may waive these restrictions in appropriate
cases.
If the initial purchase payment allocated to the variable
sub-account(s) cannot be credited within two days of receipt of the purchase
payment and information requesting issuance of a contract because the
information is incomplete or for any other reason, then Transamerica will
contact the owner, explain the reason for the delay and will refund the initial
purchase payment within five business days, unless the owner consents to
Transamerica retaining the initial purchase payment and crediting it as soon as
the requirements are fulfilled.
Additional purchase payments may be made at any time prior to the
annuity date. Additional purchase payments must be at least $1,000 or at least
$100 if made pursuant to an automatic purchase payment plan under which the
additional purchase payments are automatically deducted from a bank account and
allocated to the contract. In addition, minimum allocation amounts apply (see
"Allocation of Purchase Payments" below). Additional purchase payments are
credited to the contract as of the date the payment is received.
Total purchase payments for any contract may not exceed $1,000,000
without prior approval of Transamerica.
In no event may the sum of all purchase payments for a contract during
any taxable year exceed the limits imposed by any applicable federal or state
law, rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract.
You may allocate purchase payments between and among one or more of the variable
sub-accounts and the general account options as long as the portions are whole
number percentages and any allocation percentage for a variable sub-account is
at least 10%. In addition, there is a minimum allocation of $100 to any variable
sub-account and the fixed account, and $1,000 to each guarantee period.
Transamerica may waive this minimum allocation amount under certain options and
circumstances.
Each purchase payment will be subject to the allocation percentages in
effect at the time of receipt of such purchase payment. The allocation
percentages for additional purchase payments may be changed by the owner at any
time by submitting a request for such change, in a form and manner acceptable to
Transamerica, to the Service Center. Any changes to the allocation percentages
are subject to the limitation(s) above. Any change will take effect with the
first purchase payment received with or after receipt by the Service Center of
the request for such change and will continue in effect until subsequently
changed.
In certain jurisdictions and under certain conditions where by law
Transamerica is required to return upon the exercise of the free look option,
either (1) the purchase payment or (2) the greater of the purchase payment or
account value (credits will not be included in the amount paid). Any initial
allocation to the variable account may be held in the money market variable
sub-account during the applicable free look period plus 5 days for delivery. Any
such allocations to the money market variable sub-account will automatically be
transferred at the end of the free-look period plus 5 days according to the
owner's requested allocation. Such transfer will not count against the 12
allowed transfers without charge during the first contract year.
Investment Option Limit
Currently, the owner may not allocate amounts to more than eighteen
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. Each variable sub-account,
each duration of guarantee period under the guarantee period account and the
fixed account that ever received a transfer or purchase payment allocation count
as one towards this total of eighteen limit.
Transamerica may waive this limit in the future.
For example, if the owner makes an allocation to the money market
variable sub-account and later transfers all amounts out of this money market
variable sub-account, it would still count as one for the purposes of the
limitation even if it held no value. If the owner transfers from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If the owner selects a
guarantee period and renews for the same term, the count will be one; but if the
owner renews to a guarantee period with a different term, the count will be two.
Credit
We add a credit to your account value with each purchase payment
received. This credit is funded from our general account. Each credit is
allocated to the account value at the same time as the applicable purchase
payment. Credits are applied to the investment options in the same ratio as the
applicable purchase payment. The amount available as a death benefit or upon
waiver of the contingent deferred sales load under the Living Benefits Rider
does not include credits applied in the immediately preceding 12 months. The
amount returned if you exercise your right to cancel the contract during the
free-look period does not include any credits applied.
The credit is expressed and payable only as a percentage of purchase
payments. Currently the percentage is 3.25%. We may vary this percentage.
Examples. The following examples illustrate how a 3.25% credit works.
Suppose you invest $10,000 in a contract. Transamerica immediately
credits an additional 3.25%, or $325, so your Account Value begins at $10,325.
Assume that in six months the Account Value increases by 5%, so it is $10,841
(($10,325 x 0.05= $516.25) + $10,325= $10,841). At that point in time, the death
benefit would be $10,516 ($10,841 less the $325 credit). Note that although the
credit is not included in the death benefit, the $16.25 of earnings on the
credit is included. The cash surrender value would be $10,841 minus the
contingent deferred sales load of 8% and other applicable deductions.
Assume that at the end of twelve months, the Account Value has
increased by 10% so it is $11,357.50 (($10,325 x .10=$1,032.50) +
$10,325=$11,357.50). The death benefit at that time would be the full Account
Value of $11,357.50 and the cash surrender value would be $11,357.50 minus the
contingent deferred sales load of 8% and other applicable deductions.
A decrease in value works in a similar manner. Again suppose you invest
$10,000 and Transamerica credits a 3.25%, or $325, credit, and the Account Value
decreases 10% in six months, so your Account Value is $9292.50 ($10,325 minus
$1,032.50). Your death benefit at that point in time would be $10,000, since it
is never less than your purchase payments (less any partial withdrawals and
premium taxes). Your cash surrender value would be the Account Value of
$9,292.50 minus the 8% surrender charge and other applicable deductions.
In the case of multiple purchase payments, for purposes of the credit
the most recent purchase payment is deemed to be withdrawn first. Suppose you
make a $10,000 purchase payment in January 1998 (getting a $325 credit) and a
$20,000 purchase payment in June 1998 (getting a $650 credit). If you die in
March 1999 (more than 12 months after the January 1998 purchase payment, but
less than 12 months after the June 1998 purchase payment), the $650 credit for
the June purchase payment has not vested (since it is less than 12 months old)
so the full $650 is deducted in calculating the death benefit. However, the
death benefit would include any earnings attributable to that credit. The $325
credit for the January payment is over 12 months old so it (and any earnings on
it) is included in the death benefit.
ACCOUNT VALUE
Before the annuity date, the account value is equal to: (a) the general
account options accumulated value plus (b) the variable accumulated value.
The variable accumulated value is determined at the end of each
valuation day. To determine the variable accumulated value on a day that is not
a valuation day, the value as of the end of the next valuation day will be used.
The variable accumulated value is expected to change from valuation period to
valuation period, reflecting the investment experience of the selected
portfolios as well as the deductions for charges and fees. A valuation period is
the period between successive valuation days. It begins at the close of the New
York Stock Exchange (generally 4:00 p.m. ET) on each valuation day and ends at
the close of the New York Stock Exchange on the next succeeding valuation day. A
valuation day is each day that the New York Stock Exchange is open for regular
business.
Purchase payments allocated to a variable sub-account are credited to
the variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of: (a) the date sufficient information, in an
acceptable manner and form, is received at our Service Center; or (b) the date
our Service Center receives the initial purchase payment. In the case of any
additional purchase payment, variable accumulation units for that payment will
be credited at the end of the valuation period during which Transamerica
receives the payment. The value of a variable accumulation unit for each
variable sub-account is established at the end of each valuation period and is
calculated by multiplying the value of that unit at the end of the prior
valuation period by the variable sub-account's net investment factor for the
valuation period. The value of a variable accumulation unit may go up or down.
The net investment factor is used to determine the value of
accumulation and annuity unit values for the end of a valuation period. The
applicable formula can be found in the statement of additional information.
Transfers involving variable sub-accounts will result in the crediting
and/or cancellation of variable accumulation units having a total value equal to
the dollar amount being transferred to or from a particular variable
sub-account. The crediting and cancellation of such units is made using the
variable accumulation unit value of the applicable variable sub-account as of
the end of the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the
account value among the variable sub-accounts and the guarantee periods.
Transfers are restricted into or out of the fixed account. See "General Account
Options" in Appendix A.
Transfers among the variable sub-accounts and the general account
options may be made by submitting a request, in a form and manner acceptable to
Transamerica, to the Service Center. The transfer request must specify: (1) the
variable sub-account(s) and/or the general account option(s) from which the
transfer is to be made; (2) the amount of the transfer; and (3) the variable
sub-account(s) and/or general account option(s) to receive the transferred
amount. The minimum amount which may be transferred from the variable
sub-accounts and the general account options is $1,000. Transfers among the
variable sub-accounts are also subject to such terms and conditions as may be
imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its
term, the amount transferred may be subject to an interest adjustment. (See "The
General Account Options" in Appendix A.) A transfer from a guarantee period made
within 30 days before the last day of its term will not be subject to any
interest adjustment.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 18 made during the same contract year. Transamerica reserves the
right to waive the transfer fee or vary the number of transfers without charge
or not count transfers under certain options or services for purposes of the
allowed number without charge. See "Transfers" on page 29 for additional
limitations regarding transfers. A transfer generally will be effective on the
date the request for transfer is received by the Service Center.
If a transfer reduces the value in a variable sub-account or guarantee
period or in the fixed account to less than $1,000, then Transamerica reserves
the right to transfer the remaining amount along with the amount requested to be
transferred in accordance with the transfer instructions provided by the owner.
Under current law, there will not be any tax liability for transfers within the
contract.
Other Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect owners from adverse impacts on portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant variable sub-account values from one
variable sub-account to another may prevent the underlying portfolio from taking
advantage of investment opportunities because the portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in portfolio transaction costs which must be
indirectly borne by owners. Therefore, Transamerica reserves the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney and to require that each transfer request be made by
a separate communication to Transamerica. Transamerica also reserves the right
to require that each transfer request be submitted in writing and be manually
signed by the owner(s); telephone or facsimile transfer requests may not be
allowed.
Telephone Transfers
Transamerica will allow telephone transfers if the owner has provided
proper authorization for such transfers in a form and manner acceptable to
Transamerica. Transamerica reserves the right to suspend telephone transfer
privileges at any time, for some or all contracts, for any reason. Withdrawals
are not permitted by telephone.
Transamerica will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to unauthorized or
fraudulent instructions. In the opinion of certain government regulators,
Transamerica may be liable for such losses if it does not follow those
procedures. The procedures Transamerica will follow for telephone transfers may
include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Prior to the annuity date, the owner may request that amounts be
automatically transferred on a monthly basis from a "source account," which is
currently either the money market sub-account or the fixed account, to any of
the variable sub-accounts by submitting a request to the Service Center in a
form and manner acceptable to Transamerica. Other source accounts may be
available; call the Service Center for availability.
Only one source account can be elected at a time. The transfers will
begin when the owner requests, but no sooner than one week following, receipt of
such request, provided that dollar cost averaging transfers will not commence
until the later of (a) 30 days after the contract effective date, or (b) the
estimated end of the free look period (allowing 5 days for delivery). Transfers
will continue for the number of consecutive months selected by the owner unless
(1) terminated by the owner, (2) automatically terminated by Transamerica
because there are insufficient amounts in the source account, or (3) for other
reasons as described in the election form. The owner may request that monthly
transfers be continued for a term then available by giving notice to the Service
Center in a form and manner acceptable to Transamerica within 30 days prior to
the last monthly transfer. If no request to continue the monthly transfers is
made by the owner, this option will terminate automatically with the last
transfer at the end of the term.
In order to be eligible for dollar cost averaging, the following
conditions must be met: (1) the value of the source account must be at least
$5,000; (2) the minimum amount that can be transferred out of the source account
is $250 per month; and (3) the minimum amount transferred into any other
variable sub-account is the greater of $250 or 10% of the amount being
transferred. These limits may be changed for new elections of this service.
Dollar cost averaging transfers can not be made from a source account from which
systematic withdrawals or automatic payouts are also being made.
There is currently no charge for the dollar cost averaging option and
transfers due to dollar cost averaging currently will not count toward the
number of transfers allowed without charge per contract year.
Transamerica may charge in the future for dollar cost averaging.
Dollar cost averaging transfers may not be made to or from the
guarantee period account or to the fixed account.
<PAGE>
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable
sub-accounts, the performance of each variable sub-account may cause proportions
of the values in the variable sub-accounts to vary from the allocation
percentages. The owner may instruct Transamerica to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in the owner
instructions to Transamerica and accepted by Transamerica. The owner may elect
to have the rebalancing done on an annual, semi-annual or quarterly basis. The
owner may elect to have amounts allocated among the variable sub-accounts using
whole percentages, with a minimum of 10% allocated to each variable sub-account.
The owner may elect to establish, change or terminate the automatic
asset rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. Automatic asset rebalancing currently will
not count towards the number of transfers without charge in a contract year.
Transamerica reserves the right to discontinue the automatic asset rebalancing
service at any time for any reason. There is currently no charge for the
automatic asset rebalancing service. Transamerica may in the future charge for
this service and may count the transfers toward those allowed without charge.
Automatic asset rebalancing may not be elected at the same time that dollar cost
averaging is in effect.
After the Annuity Date
If a variable payment option is elected, the owner may make transfers
among variable sub-accounts after the annuity date by giving a written request
to the Service Center, subject to the following provisions: (1) transfers after
the annuity date may be made no more than four times during any contract year;
and (2) the minimum amount transferred from one variable sub-account to another
is the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be
processed based on the formula outlined in the appendix in the Statement of
Additional Information.
CASH WITHDRAWALS
The owner of a non-qualified contract may withdraw all or part of the
cash surrender value at any time prior to the annuity date by giving a written
request to the Service Center. For qualified contracts, reference should be made
to the terms of the particular retirement plan or arrangement for any additional
limitations or restrictions, including prohibitions, on cash withdrawals. See
"Federal Tax Matters," page 44. The cash surrender value is equal to the account
value, less any account fee, interest adjustment, contingent deferred sales load
and premium tax charges. A full surrender will result in a cash withdrawal
payment equal to the cash surrender value at the end of the valuation period
during which the election is received along with all completed forms then
required by Transamerica. No surrenders or withdrawals may be made after the
annuity date. Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct the Service Center
to withdraw amounts from specific variable sub-account(s) and/or from the
general account options. If the owner does not specify, the withdrawal will be
taken pro rata from account value.
A partial withdrawal request cannot be made if it would reduce the
account value to less than $2,000. In that case, the owner will be notified.
Withdrawal (including surrender) requests generally will be processed
as of the end of the valuation period during which the request, including all
completed forms, is received. Payment of any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and processing
of any transfers will occur within seven days from the date the election is
received, except that Transamerica may postpone such payment if: (1) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; or (2) an emergency exists as
defined by the Commission, or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when all required withdrawal request
forms are received. Payments of any amounts derived from a purchase payment paid
by check may be delayed until the check has cleared the owner's bank.
When a withdrawal is made from a guarantee period before the end of its
term, the amount withdrawn may be subject to an interest adjustment. See "The
General Account Options" in Appendix A.
Transamerica may delay payment of any withdrawal from the general
account options for up to six months after Transamerica receives the request for
such withdrawal. If Transamerica delays payment for more than 30 days,
Transamerica will pay interest on the withdrawal amount up to the date of
payment.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK FOR ALL AMOUNTS IN THE
VARIABLE ACCOUNT AND BECAUSE CERTAIN WITHDRAWALS ARE SUBJECT TO A CONTINGENT
DEFERRED SALES LOAD AND OTHER CHARGES, THE TOTAL AMOUNT PAID UPON SURRENDER OF
THE CONTRACT MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
An owner may elect, under the systematic withdrawal option or automatic
payout option (but not both), to withdraw certain amounts on a periodic basis
from the variable sub-accounts prior to the annuity date.
The tax consequences of a withdrawal or surrender are discussed later
in this prospectus. See "Federal Tax Matters" page 44.
Systematic Withdrawal Option
Prior to the annuity date, you may elect to have withdrawals
automatically made from one or more variable sub-account(s) on a monthly basis.
Other distribution modes may be permitted. The withdrawals will not begin until
than the later of (a) 30 days after the contract effective date or (b) the end
of the free look period. Withdrawals will be from the variable sub-account(s)
and in the percentage allocations that you specify. If no specifications are
made, withdrawals will be pro rata based on account value and any applicable
interest adjustment will apply to withdrawals from the guarantee periods.
Systematic withdrawals cannot be made from a variable sub-account from which
dollar cost averaging transfers are being made and cannot be elected
concurrently with the automatic payment option. The systematic withdrawal option
is currently not available with respect to the general account options.
To be eligible for the systematic withdrawal option, the account value
must be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. Currently, the owner can elect any amount over
$100 to be withdrawn systematically. The owner may also make partial withdrawals
while receiving systematic withdrawals. If the total withdrawals (systematic,
automatic, or partial) in a contract year exceed the allowed amount to be
withdrawn without charge for that year, any applicable contingent deferred sales
load will then apply.
The withdrawals will continue indefinitely unless terminated. If this
option is terminated it may not be elected again until the end of the next 12
full months.
Transamerica reserves the right to impose an annual fee of up to $25
for processing payments under this option. This fee, which is currently waived,
will be deducted in equal installments from each systematic withdrawal during a
contract year.
Systematic withdrawals may be taxable and, prior to age 59 1/2,
subject to a 10% federal tax penalty. See
"Federal Tax Matters," page 44.
Automatic Payout Option ("APO")
Prior to the annuity date, for certain qualified contracts, the owner
may elect the automatic payout option (APO) to satisfy minimum distribution
requirements under Sections 401(a)(9), 403(b), and 408(b)(3) of the Code. See
"Federal Tax Matters" page 44. For IRAs and SEP/IRAs this may be elected no
earlier than six months prior to the calendar year in which the owner attains
age 70 1/2, but payments may not begin earlier than January of such calendar
year. For other qualified contracts, APO can be elected no earlier than six
months prior to the later of when the owner (a) attains age 70 1/2; and (b)
retires from employment. Additionally, APO withdrawals may not begin before the
later of (a) 30 days after the contract effective date or (b) the end of the
free look period. APO may be elected in any calendar month, but no later than
the month of the owner's 84th birthday.
Withdrawals will be from the variable sub-account(s) and in the
percentage allocations you specify. If no specifications are made, withdrawals
will be pro rata from account value. Withdrawals can not be made from a variable
sub-account from which dollar cost averaging transfers are being made. The APO
is not currently available with respect to the general account options. The
calculation of the APO amount will reflect the total account value although the
withdrawals are only from the variable sub-accounts. This calculation and APO
are based solely on value in this contract.
To be eligible for this option, the following conditions must be met:
(1) the account value must be at least $12,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500. These conditions may change.
Currently, withdrawals under this option are only paid annually.
The withdrawals will continue indefinitely unless terminated. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If an owner dies before the annuity date, a death benefit is payable.
If death occurs prior to any owner's or joint owner's 80th birthday, the death
benefit will be equal to the greater of (a) the account value reduced by any
credits less than 12 months old, or (b) the sum of all purchase payments made to
the contract less withdrawals and applicable premium tax charges. If the owner
or joint owner dies before the annuity date and after either the deceased
owner's or joint owner's 80th birthday the death benefit will be the account
value less any credits less than 12 months old. For purposes of calculating such
death benefit, the account value is determined as of the date the benefit is
paid. If the owner is not a natural person, the annuitant(s) will be treated as
the owner(s) for purposes of the death benefit. For example, if the owner is a
trust that allows a person(s) other than the trustee to exercise the ownership
rights under this certificate, such person(s) must be named annuitant(s) and
will be treated as the owner(s) so the death benefit will be determined based on
the age of the annuitant(s).
An ownership change will be subject to our then current underwriting
rules and may decrease the death benefit. However, such reduction will never
decrease the death benefit below the account value (minus any credits less than
12 months old).
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death
of the owner. Upon receipt of this proof and an election of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as Transamerica has sufficient information about the beneficiary
to make the payment.
The death benefit will be determined as of the end of the valuation
period during which our Service Center receives both proof of death of the owner
or joint owner and the written notice of the settlement option elected by the
person to whom the death benefit is payable. If no settlement method is elected,
the death benefit will be a lump sum distributed within five years after the
owner's death. No contingent deferred sales load nor interest adjustment will
apply.
Until the death benefit is paid, the account value allocated to the
variable account remains in the variable account, and fluctuates with investment
performance of the applicable portfolio(s). Accordingly, the amount of the death
benefit depends on the account value at the time the death benefit is paid, not
at the time of death.
Designation of Beneficiaries
The owner may select one or more beneficiaries by designating the
person(s) to receive the amounts payable under this contract if: the owner dies
before the annuity date and there is no joint owner; or the owner dies after the
annuity date and settlement option payments have begun under a selected
settlement option that guarantees payments for a certain period of time. The
interest of any beneficiary who dies before the owner will terminate at time of
death of such beneficiary.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as otherwise required by
law.
If more than one beneficiary is named, each named beneficiary will
share equally in any benefits or rights granted by this contract unless the
owner gives us other instructions at the time the beneficiaries are named.
Transamerica may rely on any affidavit by any responsible
person in determining the identity or
non-existence of any beneficiary not identified by name
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay
the death benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, this certificate will remain in
force with the annuitant's surviving spouse as the new annuitant if:
o This contract is owned by a trust; and
o The beneficiary is either the annuitant's surviving spouse, or
a trust holding the contract solely for the benefit of such
spouse.
The manner in which we will pay the death benefit depends on the status
of the person(s) involved in the contract. The death benefit will be payable to
the first person from the applicable list below:
If the owner is the annuitant:
o The joint owner, if any
o The beneficiary, if any
If the owner is not the annuitant:
o The joint owner, if any
o The beneficiary, if any
o The annuitant;
o The joint annuitant; if any
If the death benefit is payable to the owner's surviving spouse (or to a trust
for the sole benefit of such surviving spouse),
We will continue this contract with the owner's spouse as the new
annuitant (if the owner was the annuitant) and the new owner (if applicable),
unless such spouse selects another option as provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse,
We will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above,
The person(s) to whom the death benefit is payable may elect to receive
it:
o In a lump sum; or
o As settlement option payments, provided the person making the
election is an individual. Such payments must begin within one
year after the owner's death and must be in equal amounts over
a period of time not extending beyond the individual's life or
life expectancy.
Election of either option must be made no later than 60 days prior to
the one-year anniversary of the owner's death. Otherwise, the death benefit will
be settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid,
We will pay the remaining death benefit in a lump sum to the payee
named by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse),
We will pay the death benefit in a lump sum within one year after the
owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the
annuitant (or the last of joint annuitants) dies before the annuity date, the
owner will become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts
payable will continue to be distributed at least as rapidly as under the
settlement and payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership
rights granted under this contract will pass to the person to whom the death
benefit would have been paid if the owner had died before the annuity date, as
specified above.
Survival Provision
The interest of any person to whom the death benefit is payable who
dies at the time of, or within 30 days after, the death of the owner will also
terminate if no benefits have been paid to such beneficiary, unless the owner
had given us written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments (although we
reserve the right to charge for any applicable premium tax charges). Therefore,
the full amount of the purchase payments are invested in one or more of the
variable sub-accounts and/or the general account options.
Contingent Deferred Sales Load
No deduction for sales charges is made from purchase payments at the
time they are made. However, a contingent deferred sales load of up to 8% of
purchase payments may be imposed on certain withdrawals or surrenders to
partially cover certain expenses incurred by Transamerica relating to the sale
of the contract, including commissions paid to salespersons, the costs of
preparation of sales literature and other promotional costs and acquisition
expenses.
The contingent deferred sales load percentage varies according to the
number of years between when a purchase payment was credited to the contract and
when the withdrawal is made. The amount of the contingent deferred sales load is
determined by multiplying the amount withdrawn subject to the contingent
deferred sales load by the contingent deferred sales load percentage in
accordance with the following table. In no event shall the aggregate contingent
deferred sales load assessed against the contract exceed 8% of the aggregate
purchase payments.
<TABLE>
<CAPTION>
Number of Years
Since Receipt of Contingent Deferred Sales Load
contingent deferred sales load
Purchase Payment As a Percentage of Purchase Payment
<S> <C>
Less than one year 8%
1 year but less than 2 years 8%
2 years but less than 3 years 7%
3 years but less than 4 years 6%
4 years but less than 5 years 5%
5 years but less than 6 years 4%
6 years but less than 7 years 3%
7 or more years 0%
</TABLE>
Free Withdrawals-Allowed Amount
Beginning 30 days after the contract effective date (or the end of the
free look period, if later), the owner may make a withdrawal up to the "allowed
amount" without incurring a contingent deferred sales load each contract year
before the annuity date.
The allowed amount each contract year is equal to 10% of the total
purchase payments received during the last seven years determined as of the last
contract anniversary less any withdrawals during the present contract year. In
the first contract year, the 10% will be applied to the total purchase payments
at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without
charge.
Withdrawals will be made first from purchase payments on a
first-in/first-out basis and then from earnings and last from credits. The
allowed amount may vary depending on the state of issuance. If the allowed
amount is not fully withdrawn or paid out during a contract year, it does not
carry over to the next contract year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, the owner may also elect, in certain
states, a Living Benefits Rider for an additional fee that provides that the
contingent deferred sales load will be waived in any of the three following
instances:
(1) if the owner receives extended medical care in a licensed hospital or
nursing care facility (as defined in the contract) for at least 60 consecutive
days, and the request for the withdrawal or surrender, together with proof of
such extended care, is received at the Service Center during the term of such
care or within 90 days after the last day upon which the owner received such
extended care; or
(2) if the owner receives medically required in-home care for at least 60 days
and such extended in-home medical care is certified by a qualified medical
professional and the owner may also be required to submit other evidence as
required by Transamerica such as evidence of medicare eligibility; or
(3) if the owner becomes terminally ill after the first contract year and the
terminal illness is diagnosed by a qualified medical professional and is
reasonably expected to result in death within 12 months.
Neither (1) nor (2) apply if the owner is receiving extended medical care in a
licensed hospital or nursing care facility or in-home medical care at the time
the contract is purchased.
Transamerica reserves the right to not accept purchase payments after
the owner has qualified for any of these waivers. Owner under this rider means
either the owner or the joint owner, if any, or annuitant(s) if the contract is
not owned by an individual. Any withdrawals under this rider on which the
contingent deferred sales load is waived will not reduce the allowed amount for
the contract year. Any credits less than 12 months old will not be available for
withdrawal under this rider.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed: upon
annuitization after the first contract year to an option involving life
contingencies; upon payment of the death benefit; or upon transfers of account
value. Any applicable contingent deferred sales load will be deducted from the
amount requested for both partial withdrawals (including withdrawals under the
systematic withdrawal option or the APO) and full surrenders unless the owner
elects to "gross-up" the amount for a partial withdrawal to cover the applicable
contingent deferred sales load. The contingent deferred sales load and any
premium tax charge applicable to a withdrawal from the guarantee period account
will be deducted from the amount withdrawn after the interest adjustment, if
any, is applied and before payment is made.
Administrative Charges
Account Fee
At the end of each contract year before the annuity date, Transamerica
deducts an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60 (or 2% of the account value, if less) per contract year.
If the contract is surrendered, the account fee, unless waived will be deducted
from a full surrender before the application of any continent deferred sales
load. The account fee will be deducted on a pro rata basis (based on values)
from the account value including both the variable sub-accounts and the general
account options. No interest adjustment will be assessed on any deduction for
the account fee taken from the guarantee period account. The account fee for a
contract year will be waived if the account value exceeds $50,000 on the last
business day of that contract year or as of the date the contract is
surrendered.
Annuity Fee
After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year ($2.50 each month if monthly payments). This fee will not
be changed. No annuity fee will be deducted from fixed payments. This fee may be
waived.
Administrative Expense Charge
Transamerica also makes a daily deduction (the administrative expense
charge) from the variable account (both before and after the contract date) at
an effective current annual rate of 0.15% of assets held in each variable
sub-account to reimburse Transamerica for administrative expenses. Transamerica
has the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. Transamerica will provide 30 days
written notice of any change in fees. The administrative charges do not bear any
relationship to the actual administrative costs of a particular contract. The
administrative expense charge is reflected in the variable accumulation or
variable annuity unit values for each variable sub-account.
Mortality and Expense Risk Charge
Transamerica deducts a charge for bearing certain mortality and expense
risks under the contracts. This is a daily charge at an effective annual rate of
1.20% of the assets in the variable account. Transamerica guarantees that this
charge of 1.20% will never increase. The mortality and expense risk charge is
reflected in the variable accumulation and variable annuity unit values for each
variable sub-account.
Variable accumulated values and variable settlement option payments are
not affected by changes in actual mortality experience incurred by Transamerica.
The mortality risks assumed by Transamerica arise from its contractual
obligations to make settlement option payments determined in accordance with the
settlement option tables and other provisions contained in the contract and to
pay death benefits prior to the annuity date.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the contracts and the variable
account will exceed the amount recovered through the administrative expense
charge, account fees, transfer fees and any fees imposed for certain options and
services.
If the mortality and expense risk charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the contingent deferred sales load will
not generate sufficient funds to pay the cost of distributing the contracts. To
the extent that the contingent deferred sales load is insufficient to cover the
actual cost of contract distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the mortality and expense risk charge.
Living Benefits Rider Fee
If the owner elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of 0.05% of the
account value at that time. The fee is deducted from each variable sub-account
on pro rata based on the value in each variable sub-account through the
cancellation of variable accumulation units. If there is insufficient variable
accumulated value, the fee will be deducted pro rata from the values in the
general account options (any interest adjustment will apply.) Transamerica
reserves the right to waive the interest adjustment for deduction from the
guarantee period account for this rider fee.
Premium Tax Charges
Currently there is no charge for premium taxes except upon
annuitization. However, Transamerica may be required to pay premium or
retaliatory taxes currently ranging from 0% to 5%. Transamerica reserves the
right to deduct a charge for these premium taxes from premium payments, from
amounts withdrawn, or from amounts applied on the annuity date. In some states
and jurisdictions, charges for both direct premium taxes and retaliatory premium
taxes may be imposed at the same or different times with respect to the same
purchase payment, depending upon applicable law.
Transfer Fee
Transamerica currently imposes a fee for each transfer in excess of the
first 18 in a single contract year. Transamerica will deduct the charge from the
amount transferred. This fee is $10 and will be used to help cover
Transamerica's costs of processing transfers. Transamerica reserves the right to
waive this fee or to not count transfers under certain options and services as
part of the number of allowed annual transfers without charge.
Option and Service Fees
Transamerica reserves the right to impose reasonable fees for
administrative expenses associated with processing certain options and services.
These fees would be deducted from each use of the option or service during a
contract year.
Taxes
No charges are currently made for taxes. However, Transamerica reserves
the right to deduct charges in the future for federal, state, and local taxes or
the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of
portfolio shares and therefore the fees and expenses paid by each portfolio. A
complete description of the fees, expenses, and deductions from the portfolios
are found in the portfolios' prospectuses. (See "The Portfolios" page 20.)
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from the guaranteed period account, see "The General
Account Options -- the Guarantee Period Account" in Appendix A of this
prospectus.
Sales in Special Situations
Transamerica may sell the contracts in special situations that are
expected to involve reduced expenses for Transamerica. These instances may
include: 1) sales in certain group arrangements, such as employee savings plans;
2) sales to current or former officers, directors and employees (and their
families) of Transamerica and its affiliates; 3) sales to officers, directors,
and employees (and their families) of the portfolios' investment advisers and
their affiliates; and 4) sales to officers, directors, employees and sales
agents (registered representatives) (and their families) of broker-dealers and
other financial institutions that have sales agreements with Transamerica to
sell the contracts. In these situations, 1) the contingent deferred sales load
may be reduced or waived, 2) the mortality and expense risk charge or
administration charges may be reduced or waived; and/or 3) certain amounts may
be credited to the contract account value (for examples, amounts related to
commissions or sales compensation otherwise payable to a broker-dealer may be
credited to the contract account value. These reductions in fees or charges or
credits to account value will not unfairly discriminate against any contract
owner. These reductions in fees or charges or credits to account value may be
taxable and treated as purchase payments for purposes of income tax and any
possible premium tax charge.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the
contract begins. On the annuity date, we will apply the annuity amount (defined
below) to provide payments under the settlement option selected by the owner.
The annuity date is selected by the owner and may be changed from time to time
by the owner by giving notice, in a form and manner acceptable to Transamerica,
to the Service Center, provided that notice of each change is received by the
Service Center at least thirty (30) days prior to the then-current annuity date.
The annuity date cannot be earlier than the first contract anniversary except
for certain qualified contracts. The latest annuity date which may be elected is
the later of (a) the first day of the calendar month immediately preceding the
month of the annuitant's or joint annuitants' 85th birthday, or (b) the first
day of the month coinciding with or next following the tenth contract
anniversary (but in no event later than the annuitants' or joint annuitants'
90th birthday). The latest allowed annuity date may vary in certain
jurisdictions.
The annuity date must be the first day of a calendar month. The first
settlement option payment will be on the first day of the month immediately
following the annuity date. Certain qualified contracts may have restrictions as
to the annuity date and the types of settlement options available. See "Federal
Tax Matters," page 44.
Settlement Option Payments
The annuity amount is the account value, less any interest adjustment,
less any applicable contingent deferred sales load, and less any applicable
premium tax charges. Any contingent deferred sales load will be waived if the
settlement option payments involve life contingencies and begin on or after the
first contract anniversary.
If the amount of the monthly payment from the settlement option
selected by the owner would result in a monthly settlement option payment of
less than $150, or if the annuity amount is less than $5,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the cash
surrender value in a cash payment. Monthly settlement option payments from the
variable payment option will further be subject to a minimum monthly payment of
$75 from each variable sub-account from which such payments are made.
The owner may choose from the settlement options below. Transamerica
may consent to other plans of payment before the annuity date. For settlement
options involving life contingencies, the actual age and/or sex of the
annuitant, or a joint annuitant will affect the amount of each payment.
Sex-distinct rates generally are not allowed under certain qualified contracts.
Transamerica reserves the right to ask for satisfactory proof of the annuitant's
(or joint annuitant's) age. Transamerica may delay settlement option payments
until satisfactory proof is received. Since payments to older annuitants are
expected to be fewer in number, the amount of each annuity payment shall be
greater for older annuitants than for younger annuitants.
The owner may choose from the two payment options described below. The
annuity date and settlement options available for qualified contracts may also
be controlled by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, the owner
may, by written request, change the settlement option or payment option. The
request for change must be received by the Service Center at least 30 days prior
to the annuity date.
In the event that a settlement option form and payment option is not
selected at least 30 days before the annuity date, Transamerica will make
settlement option payments in accordance with the 120 month period certain and
life settlement option and the applicable provisions of the contract.
Payment Options
Owners may elect a fixed or a variable payment option, or a
combination of both (in 25% increments of
the annuity amount).
Unless specified otherwise, the annuity amount in the variable account
will be used to provide a variable payment option and the amount in the general
account options will be used to provide a fixed payment option. In this event,
the initial allocation of variable annuity units for the variable sub-accounts
will be in proportion to the account value in the variable sub-accounts on the
annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
pursuant to the terms of the settlement option elected. If a fixed payment
option is selected, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica, and the amount of payments will be established by the fixed
settlement option selected and the age and sex (if sex-distinct rates are
allowed by law) of the annuitant(s) and will not reflect investment experience
after the annuity date. The fixed payment amounts are determined by applying the
fixed settlement option purchase rate specified in the contract to the portion
of the annuity amount applied to the payment option. Payments may vary after the
death of an annuitant under some options; the amounts of variances are fixed on
the annuity date.
Variable Payment Option
A variable payment option provides for payments that vary in dollar
amount, based on the investment performance of the selected variable
sub-account(s). The variable settlement option purchase rate tables in the
contract reflect an assumed annual interest rate of 4%, so if the actual net
investment performance of the variable sub-account(s) is less than 4%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-account(s) is higher than 4%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 4% rate, then the dollar amount of the actual payments will
remain constant. Transamerica may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts selected
by the owner, and on the allocations among the variable sub-accounts.
For further details as to the determination of variable payments, see
the Statement of Additional Information.
Settlement Option Forms
The owner may choose any of the settlement option forms described
below. Subject to approval by Transamerica, the owner may select any other
settlement option forms then being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments end
with the payment due just before the annuitant's death. There is no death
benefit. It is possible that no payment will be made if the annuitant dies after
the annuity date but before the first payment is due; only one payment will be
made if the annuitant dies before the second payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will continue for as long as the annuitant lives. After the annuitant
dies, payments will be made to the contingent annuitant, for as long as the
contingent annuitant lives. The continued payments can be in the same amount as
the original payments, or in an amount equal to one-half or two-thirds thereof.
Payments will end with the payment due just before the death of the contingent
annuitant. There is no death benefit after both die. If the contingent annuitant
does not survive the annuitant, payments will end with the payment due just
before the death of the annuitant. It is possible that no payments or very few
payments will be made, if the annuitant and contingent annuitant die shortly
after the annuity date.
The written request for this form must: (a) name the contingent
annuitant; and (b) state the percentage of payments to be made after the
annuitant dies. Once payments start under this settlement option form, the
person named as contingent annuitant for purposes of being the measuring life,
may not be changed. Transamerica will require proof of age for the annuitant and
for the contingent annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the
first day of the month immediately
following the annuity date, if the annuitant is living. Payments will
be made for the longer of: (a) the
annuitant's life; or (b) the period certain. The period certain may be 120 or
180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the annuitant's
death. No benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless the owner provides
otherwise.
The written request for this form must: (a) state the length of the
period certain; and (b) name the
beneficiary.
(4) Joint and Survivor Annuity. Payments will be made starting on the
first day of the month immediately following the annuity date, if and for as
long as the annuitant and joint annuitant are living. After the annuitant or
joint annuitant dies, payments will continue for so long as the survivor lives.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that no payments
or very few payments will be made under this form if the annuitant and joint
annuitant both die shortly after the annuity date.
The written request for this form must: (a) name the joint annuitant;
and (b) state the percentage of continued payments to be made upon the first
death. Once payments start under this settlement option form, the person named
as joint annuitant, for the purpose of being the measuring life, may not be
changed. Transamerica will need proof of age for the annuitant and joint
annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
settlement option not described in this section subject to Transamerica's
agreement and any applicable state or federal law or regulation. Requests for
any other settlement option must be made in writing to the Service Center at
least 30 days before the annuity date.
After the annuity date, (a) no changes can be made in the settlement
option and payment option; (b) no additional purchase payment will be accepted
under the contract; and (c) no further withdrawals will be allowed.
The owner of a non-qualified contract may, at any time after the
contract date by written notice to us at our Service Center, change the payee of
benefits being provided under the contract. The effective date of change in
payee will be the latter of: (a) the date we receive the written request for
such change; or (b) the date specified by the owner. The owner of a qualified
contract may not change payees, except as permitted by the plan, arrangement or
federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the likelihood
of the continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis
("non-qualified contract") or purchased and used in connection with plans or
arrangements qualifying for special tax treatment ("qualified contract").
Qualified contracts are designed for use in connection with plans or
arrangements entitled to special income tax treatment under Sections 401,
403(b), 408 and 408A of the Code. The ultimate effect of federal income taxes on
the amounts held under a contract, on settlement option payments, and on the
economic benefit to the owner, the annuitant, or the beneficiary may depend on
the type of retirement plan or arrangement for which the contract is purchased,
on the tax and employment status of the individual concerned, and on
Transamerica's tax status. In addition, certain requirements must be satisfied
in purchasing a qualified contract with proceeds from a tax qualified retirement
plan or arrangement and receiving distributions from a qualified contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
qualified contracts should seek competent legal and tax advice regarding the
suitability of the contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the contract. The following
discussion is based on the assumption that the contract qualifies as an annuity
for federal income tax purposes and that all purchase payments made to qualified
contracts are in compliance with all requirements under the Code and the
specific retirement plan or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, a prospective
purchaser must specify whether he or she is purchasing a non-qualified contract
or a qualified contract. If the initial purchase payment is derived from an
exchange, transfer, conversion or surrender of another annuity contract,
Transamerica may require that the prospective purchaser provide information with
regard to the federal income tax status of the previous annuity contract.
Transamerica will require that persons purchase separate contracts if they
desire to invest monies qualifying for different annuity tax treatment under the
Code. Each such separate contract would require the minimum initial purchase
payment previously described. Additional purchase payments under a contract must
qualify for the same federal income tax treatment as the initial purchase
payment under the contract; Transamerica will not accept an additional purchase
payment under a contract if the federal income tax treatment of such purchase
payment would be different from that of the initial purchase payment.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value (e.g., withdrawals or settlement
option payments). For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the account value (and in the case of a
qualified contract, any portion of an interest in the plan) generally will be
treated as a distribution. The taxable portion of a distribution is taxable as
ordinary income.
The owner of any contract who is not a natural person generally must
include in income any increase in the excess of the account value over the
"investment in the contract" (discussed below) during the taxable year. There
are some exceptions to this rule and a prospective owner that is not a natural
person should discuss these with a competent tax adviser.
The following discussion generally applies to a contract owned by a
natural person.
Withdrawals
With respect to non-qualified contracts, partial withdrawals (including
withdrawals under the systematic withdrawal option) are generally treated as
taxable income to the extent that the account value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The
"investment in the contract" generally equals the amount of non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts (including
withdrawals under the systematic withdrawal option or the automatic payout
option), a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit under the retirement plan or arrangement. The "investment in the
contract" generally equals the amount of non-deductible purchase payments made
by or on behalf of any individual. For certain qualified contracts, the
"investment in the contract" can be zero. Special tax rules applicable to
certain distributions from qualified contracts are discussed below, under
"Qualified Contracts."
If a partial withdrawal from the guarantee period account is subject to
an interest adjustment, the account value immediately before the withdrawal will
not be altered to take into account the interest adjustment. As a result, for
purposes of determining the taxable portion of a partial withdrawal, the account
value will be treated as including the amount deducted from the guarantee period
account due to the interest adjustment.
Full surrenders are treated as taxable income to the extent that the
amount received exceeds the "investment in the contract."
Settlement Option Payments
Although the tax consequences may vary depending on the settlement
option elected under the contract, in general a ratable portion of each payment
that represents the amount by which the account value exceeds the "investment in
the contract" will be taxed based on the ratio of the "investment in the
contract" to the total benefit payable; after the "investment in the contract"
is recovered, the full amount of any additional settlement option payments is
taxable.
For variable payments, the taxable portion is generally determined by
an equation that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract."
For fixed payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the payments for the term selected ;
however, the remainder of each settlement option payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional settlement option payments is taxable. If settlement option payments
cease as a result of an annuitant's death before full recovery of the
"investment in the contract," consult a competent tax adviser regarding
deductibility of the unrecovered amount.
Withholding
The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
The withholding rate varies according to the type of distribution and
the Owner's tax status. "Eligible rollover distributions" from Section 401(a)
plans and Section 403(b) tax sheltered annuities are subject to mandatory
federal income tax withholding at the rate of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan, except
for certain distributions or settlement option payments made in a specified
form. The 20% mandatory withholding does not apply, however, if the Owner
chooses a "direct rollover" from the plan to another tax-qualified plan or to an
IRA.
The federal income tax withholding rate for a distribution that is not
an "eligible rollover distribution" is 10% of the taxable amount of the
distribution.
Penalty Tax
There may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions: (1) made on or after the date on which the owner attains age
59 1/2; (2) made as a result of death or disability of the owner; or (3)
received in substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the life(ves) or life expectancy(ies) of the owner and
a "designated beneficiary." Other exceptions to the tax penalty may apply to
certain distributions from a qualified contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of an
owner. Generally such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under a settlement
option, they are taxed in the same manner as settlement option payments, as
described above. For these purposes, the investment in the contract is not
affected by the owner's death. That is, the investment in the contract remains
the amount of any purchase payments paid which are not excluded from gross
income.
Transfers, Assignments, or Exchanges of the Contract
For non-qualified contracts, a transfer of ownership of a contract, the
designation of an annuitant, payee, or other beneficiary who is not also the
owner, or the exchange of a contract may result in certain tax consequences to
the owner that are not discussed herein. An owner contemplating any such
designation, transfer, assignment, or exchange should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Qualified contracts may not be assigned or transferred, except as permitted by
the Code or the Employee Retirement Income Security Act of 1974 (ERISA).
Multiple Contracts
All deferred non-qualified contracts that are issued by Transamerica
(or its affiliates) to the same owner during any calendar year are treated as
one contract for purposes of determining the amount includible in gross income
under Section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Qualified Contracts
In General
The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/21 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; and in other specified circumstances.
We make no attempt to provide more than general information about use
of the contracts with the various types of retirement plans. Owners and
participants under retirement plans, as well as annuitants and beneficiaries,
are cautioned that the rights of any person to any benefits under qualified
contracts may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the contract (including any
endorsements) issued in connection with such a plan. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
administration of the contracts. Owners are responsible for determining that
contributions and other transactions with respect to the contracts satisfy
applicable law. Purchasers of contracts for use with any retirement plan should
consult their legal counsel and tax adviser regarding the suitability of the
contract.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the owner (or plan
participant) reach age 70 1/2. For IRAs and SEP/IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the owner's death.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the contract in order to provide retirement savings under the plans. Adverse
tax consequences to the plan, to the participant or to both may result if this
contract is assigned or transferred to any individual as a means to provide
benefits payments. Purchasers of a contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan documents and
the contract to their specific needs.
Individual Retirement Annuities, Simplified Employee Plans and Roth IRAs
The sale of a contract for use with any IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a
contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA or their purchase. Purchasers should
seek competent advice as to the suitability of the contract for use with IRAs.
The contract is designed for use with IRA rollovers and contributory
IRA's. A contributory IRA is a contract to which initial and subsequent purchase
payments are subject to limitations imposed by the Code. Section 408 of the Code
permits eligible individuals to contribute to an individual retirement program
known as an Individual Retirement Annuity or Individual Retirement Account (each
hereinafter referred to as an "IRA"). Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA.
Earnings in an IRA are not taxed until distribution. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's
compensation (including earned income as defined in Code Section 401(c)(2)) and
may be deductible in whole or in part depending on the individual's adjusted
gross income and whether or not the individual in considered an active
participant in a qualified plan. The limit on the amount contributed to an IRA
does not apply to distributions from certain other types of qualified plans that
are "rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA (other
than nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP/IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP/IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The contract may also be used for Roth IRA conversions and contributory
Roth IRAs. A contributory Roth IRA is a contract to which initial and subsequent
purchase payments are subject to limitations imposed by the Code. Section 408A
of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a non-Roth IRA may be converted to a Roth IRA. A non-Roth IRA
is an individual retirement account or annuity described in section 408(a) or
408(b), other than a Roth IRA. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA. Purchasers should seek competent advice as to the suitability of
the contract for use with Roth IRAs.
Tax Sheltered Annuities
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to Social Security
and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
qualified contract from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under qualified contracts or under the terms
of the plans in respect of which qualified contracts are issued. A qualified
contract will be amended as necessary to conform to the requirements of the
Code.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the variable account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the variable account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the variable
account, then Transamerica may impose a charge against the variable account
(with respect to some or all contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contract
Diversification Requirements
Section 817(h) of the Code requires that with respect to
non-qualified contracts, the investments of the portfolios be "adequately
diversified" in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control for the investments of a
segregated asset account may cause the investor (i.e., the owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner has additional flexibility in allocating premium payments and
account values. These differences could result in an owner being treated as the
owner of a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any non-qualified contract to
provide that (a) if any owner dies on or after the annuity date but prior to the
time the entire interest in the contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and (b)
if any owner dies prior to the annuity date, the entire interest in the contract
will be distributed within five years after the date of the owner's death. These
requirements will be considered satisfied as to any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary, provided
that such distributions begin within one year of the owner's death. The owner's
"designated beneficiary" refers to a natural person designated by such owner as
a beneficiary and to whom ownership of the contract passes by reason of death.
However, if the owner's "designated beneficiary" is the surviving spouse of the
deceased owner, the contract may be continued with the surviving spouse as the
new owner.
The non-qualified contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. All provisions
in the contract will be interpreted to maintain such tax qualification. We may
make changes in order to maintain this qualification or to conform the contract
to any applicable changes in the tax qualification requirements. We will provide
you with a copy of any changes made to the contract.
Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would adversely modify
the federal taxation of certain insurance and annuity contracts. For example,
one proposal would tax transfers among investment options and tax exchanges
involving variable contracts. A second proposal would reduce the "investment in
the contract" under cash value life insurance and certain annuity contracts by
certain amounts, thereby increasing the amount of income for purposes of
computing gain. Although the likelihood of there being any changes is uncertain,
there is always the possibility that the tax treatment of the Contracts could be
changed by legislation or other means. Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change). You should consult a tax adviser with respect to legislative
developments and their effect on the Contract.
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the variable sub-accounts. In addition, Transamerica may
advertise the effective yield of the money market variable sub-account. These
figures will be based on historical information and are not intended to indicate
future performance.
The yield of the money market variable sub-account refers to the
annualized income generated by an investment in that variable sub-account over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in that variable sub-account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a variable sub-account (other than the money market
variable sub-account) refers to the annualized income generated by an investment
in the variable sub-account over a specified thirty-day period. The yield is
calculated by assuming that the income generated by the investment during that
thirty-day period is generated each thirty-day period over a twelve-month period
and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent
deferred sales load or premium taxes that may be applicable to a particular
contract. To the extent that the contingent deferred sales load or premium taxes
are applicable to a particular contract, the yield of that contract will be
reduced. For additional information regarding yields and total returns, please
refer to the Statement of Additional Information.
The average annual total return of a variable sub-account refers to
return quotations assuming an investment has been held in the variable
sub-account for various periods of time including, but not limited to, a period
measured from the date the variable sub-account commenced operations. When a
variable sub-account has been in operation for 1, 5, and 10 years, respectively,
the average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment (including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes) as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any variable sub-account derived from rankings of
variable annuity separate accounts or their investment products tracked by
Lipper Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and
Poor's Indices, Dow Jones Industrial Average, and other rating services,
companies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (2) the effect
of tax deferred compounding on variable sub-account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the contract, the effects of the contract's lifetime
payout options, and the operation of certain special investment features of the
contract -- such as the dollar cost averaging option. Transamerica may explain
and depict in charts, or other graphics, the effects of certain investment
strategies, such as allocating purchase payments between the general account
options and a variable sub-account. Transamerica may also discuss the Social
Security system and its projected payout levels and retirement plans generally,
using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the variable sub-accounts. The non-standard average annual total return and
cumulative total return will assume that no contingent deferred sales load is
applicable. Transamerica may from time to time also disclose yield, standard
total returns, and non-standard total returns for any or all variable
sub-accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the variable
sub-accounts based on the performance of a portfolio prior to the time the
variable account commenced operations.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the contracts under a Distribution Agreement with Transamerica.
TSSC may also serve as an underwriter and distributor of other contracts issued
through the variable account and certain other separate accounts of Transamerica
and affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products.
Under the Sales Agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. The percentage may be up to 4%
and in certain situations additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 12/31/00 as the
year 1900 rather than the year 2000, disruptions of business activities may
occur with the year 2000. In response, Transamerica established in 1997 a "Y2K"
committee to address this issue. With regard to the systems and software which
administer and affect the contracts, Transamerica has determined that its own
internal systems will be Year 2000 compliant. Additionally, Transamerica
requires any third party vendor which supplies software or administrative
services to Transamerica in connection with the administration of the contracts,
to certify that the software or services will be Year 2000 compliant. In
determining the variable accumulation unit values for each variable sub-account,
Transamerica is reliant upon information received from the portfolios and is
confirming that Year 2000 issues will not interfere with this flow of
information. As of the date of this prospectus, it is not anticipated that
contract owners will experience negative affects on their investment, or on the
services received in connection with their contracts, as a result of Year 2000
issues. However, especially when taking into account interaction with other
systems, it is difficult to predict with precision that there will be no
disruption of service in connection with the year 2000.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable
account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the variable account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the contract has been
provided by Sutherland, Asbill & Brennan LLP. The organization of Transamerica,
its authority to issue the contract and the validity of the form of the contract
have been passed upon by James W. Dederer, General Counsel and Secretary of
Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica for each of the
three years in the period ended December 31, 1997, have been audited by Ernst &
Young LLP, Independent Auditors, as set forth in their reports appearing in the
Statement of Additional Information, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing. There are no audited financial statements for the variable account
since it had not commenced operations as of the date of this prospectus.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in
the variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio in accordance with instructions
received from persons having voting interests in the corresponding variable
sub-account. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, or if
Transamerica determines that it is allowed to vote all portfolio shares in its
own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes
which are available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date
coincident with the date established by that portfolio for determining
shareholders eligible to vote at the meeting of the portfolios. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the respective portfolios.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
contracts participating in the variable sub-account. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis.
Each person or entity having a voting interest in a variable
sub-account will receive proxy material, reports and other material relating to
the appropriate portfolio.
It should be noted that generally the portfolios are not required, and
do not intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission under the 1933 Act
relating to the contract offered by this prospectus. This prospectus has been
filed as a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto, and
reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS Page
THE CONTRACT ....................................................... 3
NET INVESTMENT FACTOR .............................................. 3
VARIABLE PAYMENT OPTIONS............................................ 3
Variable Annuity Units and Payments................................. 3
Variable Annuity Unit Value......................................... 3
Transfers After the Annuity Date.................................... 4
GENERAL PROVISIONS.................................................. 4
IRS Required Distributions................................. 4
Non-Participating.......................................... 4
Misstatement of Age or Sex................................. 4
Proof of Existence and Age................................. 4
Annuity Data............................................... 4
Assignment................................................. 5
Annual Report.............................................. 5
Incontestability........................................... 5
Entire Contract............................................ 5
Changes in the Contract.................................... 5
Protection of Benefits..................................... 5
Delay of Payments.......................................... 5
Notices and Directions..................................... 6
CALCULATION OF YIELDS AND TOTAL RETURNS ............................ 6
Money Market Sub-Account Yield Calculation................. 6
Other Sub-Account Yield Calculations....................... 6
Standard Total Return Calculations......................... 7
Adjusted Historical Portfolio Performance Data............. 8
Other Performance Data..................................... 8
HISTORIC PERFORMANCE DATA........................................... 8
General Limitations........................................ 8
Adjusted Historical Performance Data....................... 8
DISTRIBUTION OF THE CONTRACT........................................ 18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS.............................. 18
STATE REGULATION.................................................... 18
RECORDS AND REPORTS................................................. 18
FINANCIAL STATEMENTS................................................ 18
APPENDIX............................................................ 20
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
This prospectus is generally intended to serve as a disclosure document
only for the contract and the variable account. For complete details regarding
the general account options, see the contract itself.
The account value allocated to the general account options becomes part
of the general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act,
and Transamerica has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus which relate to
the general account options.
The general account options are part of the general account of
Transamerica. The general account of Transamerica consists of all the general
assets of Transamerica, other than those in the variable account, or in any
other separate account. Transamerica has sole discretion to invest the assets of
its general account subject to applicable law.
The allocation or transfer of funds to the general account options does
not entitle the owner to share in the investment experience of Transamerica's
general account.
There are two general account options: the fixed account and the
guarantee period account, as described
below.
THE FIXED ACCOUNT
Currently, Transamerica guarantees that it will credit interest at a
rate of not less than 3% per year, compounded annually, to amounts allocated to
the fixed account under the contracts. However, Transamerica reserves the right
to change the minimum rate according to state insurance law. Transamerica may
credit interest at a rate in excess of 3% per year. There is no specific formula
for the determination of excess interest credits. Some of the factors that the
company may consider in determining whether to credit excess interest to amounts
allocated to the fixed account and the amount in that account are general
economic trends, rates of return currently available and anticipated on the
company's investments, regulatory and tax requirements, and competitive factors.
Any interest credited to amounts allocated to the fixed account in
excess of 3% per year will be determined in the sole discretion of Transamerica.
The owner assumes the risk that interest credited to the fixed account
allocations may not exceed the minimum guarantee of 3% for any given year.
Rates of interest credited to the fixed account will be guaranteed for
at least twelve months and will vary by the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, Transamerica may change the annual rate of interest for
that class; this new annual rate of interest will remain in effect for at least
twelve months. New purchase payments made to the contract which are allocated to
the fixed account may receive different rates of interest. These rates of
interest may differ from those interest rates credited to amounts transferred
from the variable sub-accounts or guarantee period account and from those
credited to amounts remaining in the fixed account and receiving renewal rates.
These rates of interest may also differ from rates for allocations applied under
certain options and services Transamerica may be offering.
Transfers
Each contract year the owner may transfer a percentage of the value of
the fixed account to variable sub-accounts or to the guarantee period account.
The maximum percentage that may be transferred will be declared annually by
Transamerica. This percentage will be determined by Transamerica at its sole
discretion, but will not be less than 10% of the value of the fixed account on
the preceding contract anniversary and will be declared each year. Currently,
this percentage is 25%. The owner is limited to four transfers from the fixed
account each contract year, and the total of all such transfers cannot exceed
the current maximum. If Transamerica permits dollar cost averaging from the
fixed account to the variable sub-accounts, the above restrictions are not
applicable.
Generally, transfers may not be made from any variable sub-account to
the fixed account for the six-month period following any transfer from the fixed
account to one or more of the variable sub-accounts. Additionally, transfers may
not be made from the fixed account to: 1) any guarantee period; 2) the
Transamerica VIF Money Market Sub-Account; and 3) any variable sub-account
identified by Transamerica and investing in a portfolio of fixed income
investments. Transamerica reserves the right to modify the limitations on
transfers to and from the fixed account and to defer transfers from the fixed
account for up to six months from the date of request.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides a guaranteed fixed rates of
interest compounded annually for specific guarantee periods. Amounts allocated
to the guarantee period account will be credited with interest of no less than
3% per year. Amounts withdrawn from a guarantee period prior to the end of its
guarantee period will be subject to an interest adjustment, as explained below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently Transamerica is offering three, five and
seven year guarantee periods but these may change at any time.
The owner bears the risk that, after the initial guarantee period,
Transamerica will not credit interest in excess of 3% per year to amounts
allocated to the guarantee period account.
Each amount allocated or transferred to the guarantee period account
will establish a new guarantee period of a duration selected by the owner from
among those then being offered by Transamerica. Every guarantee period offered
by Transamerica will have a duration of at least one year. The minimum amount
that may be allocated or transferred to a guarantee period is $1,000. Purchase
payments allocated to a guarantee period will be credited on the date the
payment is received at the Service Center. Any amount transferred from another
guarantee period or from a variable sub-account to a guarantee period will
establish a new guarantee period as of the effective date of the transfer.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and
expiration date. The guaranteed interest rate applicable to a guarantee period
will depend on the date the guarantee period is established, the duration chosen
by the owner and the class of that guarantee period . A guarantee period chosen
may not extend beyond the annuity date.
Transamerica reserves the right to limit the maximum number of
guarantee periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
guarantee period. The effective annual rate of interest established by
Transamerica for a guarantee period will remain in effect for the duration of
the guarantee period.
Interest will be credited to a guarantee period based on its daily
balance at a daily rate which is equivalent to the guaranteed interest rate
applicable to that guarantee period for amounts held during the entire guarantee
period. Amounts withdrawn or transferred from a guarantee period prior to its
expiration date will be subject to an Interest Adjustment as described below. In
no event will the effective annual rate of interest applicable to a guarantee
period be less than 3% per year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period prior
to its expiration date (excluding withdrawals for the purpose of paying the
death benefit), the amounts withdrawn or transferred will be subject to an
interest adjustment. The interest adjustment reflects the impact that changing
interest rates have on the value of money invested at a fixed interest rate. The
interest adjustment is computed by multiplying the amount withdrawn or
transferred by the following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1
where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to
the number of years remaining in the guarantee period at the
time of withdrawal or transfer (fractional years are rounded
up to the next full year); and
N is the number of full months remaining in the term at the time
the withdrawal or transfer request is processed.
In general the interest adjustment will operate to decrease the value
upon withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate (as of the date of the
transaction) that would apply for a guarantee period equal to the number of full
years remaining in the guarantee period as of that date. (For purposes of
determining the interest adjustment, if the company does not offer a guarantee
period of that duration, the applicable current interest rate will be determined
by linear interpolation between current interest rates for two periods that are
available). If the current interest rate thus determined plus 1/2 of one percent
is greater than the guaranteed interest rate, the interest adjustment will be
negative and amount withdrawn or transferred will be decreased. However, the
value will never be decreased below the initial allocation plus daily interest
at 3% interest per year. There are no positive interest adjustments.
Expiration of a guarantee period
At least 45 days, but not more than 60 days, prior to the expiration
date of a guarantee period, Transamerica will notify the owner as to the options
available when a guarantee period expires. The owner may elect one of the
following:
(a) transfer the amount held in that guarantee period to a new
guarantee period from among those being offered by
Transamerica at such time.
(b) transfer the amount held in that guaranteed period to one or
more variable sub-accounts or to another general account
option then available.
Transamerica must receive the owner's notice electing one of these at
the Service Center by the expiration date of the guarantee period. If such
election has not been received by Transamerica at the Service Center, the amount
held in that guarantee period will remain in the guaranteed period account and a
new guarantee period of the same duration as the expiring guarantee period, if
offered, will automatically be established by Transamerica with a new guaranteed
interest rate declared by Transamerica for that guarantee period. The new
guarantee period will start on the day following the expiration date of the
previous guarantee period.
If Transamerica is not currently offering guarantee period having the
same duration as the expiring guarantee period, the new guarantee period will be
the next longer duration, or if Transamerica is not offering a guarantee period
longer than the duration of the expiring guarantee period, the next shorter
duration. However, no guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000,
Transamerica reserves the right to transfer such amount to the money market
variable sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the
current valuation period is $20.15; at the end of the immediately preceding
valuation period it was $20.10; the valuation period is one day; and no
dividends or distributions caused the portfolio to go "ex-dividend" during the
current valuation period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for mortality and expense risk charge and the administrative
expense charge of .00367% (the daily equivalent of the current charge of 1.35%
on an annual basis) gives a net investment factor of 1.00245. If the value of
the variable accumulation unit for the immediately preceding valuation period
had been 15.500000, the value for the current valuation period would be 15.53798
(15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a variable annuity unit for the immediately preceding valuation period had been
13.500000. If the first variable annuity payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the variable annuity unit for the current valuation period would be 13.53163
(13.5 x 1.00245 (the net investment factor) x 0.999893). 0.999893 is the factor,
for a one day valuation period, that neutralizes the assumed rate of four
percent (4%) per year used to establish the variable annuity rates found in the
contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000
variable accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable
annuity unit value for the particular variable sub-account for the valuation
period which ends immediately preceding the first day of the month is 15.500000
and 13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000. Then the first variable annuity payment would be:
3,200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments
would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit
value on the 10th day of the second month is 13.565712. Then the second variable
annuity payment would be $285.59 (21.052444 x 13.565712).
<PAGE>
Appendix C
Transamerica Life Insurance and Annuity Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the Owner, in
accordance with the requirements of the Internal Revenue Service (IRS). This
Disclosure Statement contains information about opening and maintaining an
Individual Retirement Annuity ("IRA") and summarizes some of the financial and
tax consequences of establishing an IRA. Part I of this Disclosure Statement
discusses Traditional IRAs, while Part II addresses Roth IRAs. Because the tax
consequences of the two categories of IRAs differ significantly, it is important
that you review the correct part of this Disclosure Statement to learn about
your particular IRA. This Disclosures Statement is intended to be read together
with, and be a part of, the prospectus and the terms used here will have the
same meaning as in the prospectus, unless otherwise stated.
We have filed the Transamerica Life Insurance and Annuity Company's
Individual Retirement Annuity ("Transamerica Life IRA") Contract with the IRS
for approval. Please note that IRS approval applies only to the form of the
contract and does not represent a determination of the merits of such IRA
contract.
It may be necessary for us to amend your Transamerica Life IRA Contract
in order for us to obtain or maintain IRS approval. In addition, laws and
regulations adopted in the future may require changes to your contract in order
to preserve its status as an IRA. We will send you a copy of any such amendment.
No contribution will be accepted under a SIMPLE plan established by any
employer pursuant to Internal Revenue Code Section 408(p). No funds attributable
to contributions made by an employer to your SIMPLE IRA under the employer's
SIMPLE plan may be transferred or rolled over to your Transamerica Life IRA
prior to the expiration of the two (2) year period beginning on the date you
first participated in the employer's SIMPLE plan. In addition, depending on the
annuity contract you purchased, contributory IRAs may or may not be available.
Please refer to your prospectus.
This Disclosure Statement includes the non-technical explanation of
some of the changes made by the Tax Reform Act of 1986 applicable to IRAs and
more recent changes made by the Small Business Job Protection Act of 1996
(SBA-96), the Health Insurance Portability and Accountability Act of 1996
(HIPAA) and the Tax Relief Act of 1997 (TRA-97). The information provided
applies to contributions made and distributions received after December 31,
1986, and reflects the relevant provisions of the Code as in effect on January
1, 1998. This Disclosure Statement is not intended to constitute tax advice, and
you should consult a tax professional if you have questions about your own
circumstances.
Definitions
Contributions - Purchase Payments or Premiums as applicable to your Contract.
Contract - Certificate or contract as applicable.
Compensation - For purposes of determining allowable contributions, the term
"Compensation" includes all earned-income, including net earnings from
self-employment and alimony or separate maintenance payments received and
includable in your gross income, but does not include deferred compensation or
any amount received as a pension or annuity.
<PAGE>
Revocation of Your IRA or Roth IRA
You have the right to revoke your IRA or Roth IRA during the seven
calendar day period following its establishment. The establishment of your IRA
or Roth IRA will be the contract effective date for your contract. This seven
day calendar period may or may not coincide with the free look period of your
contract. In order to revoke your IRA or Roth IRA, you must notify us in writing
and you must mail your revocation to us postage prepaid, at: P.O. Box 31848,
Charlotte, NC 28231-1848. The date of the postmark (or the date of certification
or registration if sent by certified or registered mail) will be considered your
revocation date. If you revoke your IRA or Roth IRA during the seven day period,
an amount equal to your purchase payment (without any adjustments for items such
as administrative expenses, fees, or fluctuation in market value) will be
returned to you.
The rules that apply to a Traditional Individual Retirement Annuity
(which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA") generally also apply to IRAs under Simplified Employee
Pension plans (SEP/IRAs), unless specific rules for SEP/IRAs are stated.
IRA PART I: TRADITIONAL IRAs
1. Contributions
(a) Regular IRA. You may make contributions to a regular IRA in any
amount up to the combined tax deductible and non-tax deductible contribution
limit described in Part I Section 2 of this Disclosure Statement. Such
contributions are also subject to the minimum amount under the contract. Such
contributions shall be in cash. Your contribution to a regular IRA for a tax
year must be made by the due date (not including extensions) for your federal
tax return for that tax year.
(b) Spousal IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in your gross income for the year, you and your spouse may each establish your
own individual IRA and may make contributions to those IRAs in accordance with
the rules and limits for tax deductible and non-tax deductible contributions
contained in Section 219(c) of the Code, which are summarized in Part I, Section
2 of this Disclosure Statement. Such contributions shall be in cash. Your
contribution to a Spousal IRA for a tax year must be made by the due date (not
including extensions) for your federal income tax return for that tax year.
(c) Rollover IRA. Rollover contributions are unlimited in dollar
amount. These consist of eligible distributions received by you from another IRA
or tax-qualified retirement plan. If you elect to make a direct rollover from
another IRA, your distribution will be directly deposited into your rollover
IRA. However, you may only rollover the amounts from one IRA into another IRA
once in any 365-day period. A direct rollover distribution is not taxable until
you withdraw the amounts from your rollover IRA, and no income tax will be
withheld from the direct rollover distribution. If a distribution is paid to you
and you want to roll over all or part of the distributed amount to this IRA, the
rollover must be accomplished within 60 days of the date you receive the amount
to be rolled over. Generally, any distribution from a tax-qualified retirement
plan, such as a pension plan, 401(k) plan, profit sharing or Keogh plan, can be
rolled over unless it is a "minimum required distribution" (see below). A direct
transfer from a tax-qualified retirement plan to an IRA is considered a
rollover. However, distributions of "after-tax" plan contributions (i.e. amounts
which are not subject to federal income tax when distributed from a
tax-qualified retirement plan) cannot be rolled over to an IRA. In addition, you
may not roll over any payment that is a minimum required distribution (as
discussed in Part I, Section 4(a)), or that is part of a series of payments that
are to be made to you from a tax-qualified retirement plan or IRA that is to be
paid to your over your life, life expectancy, or for a period of at least 10
years.
Strict limitations apply to rollovers, and you should seek competent
tax advice in order to comply with all the rules governing rollovers.
(d) Transfers. You may make an initial or subsequent contribution to
your Transamerica IRA hereunder by directing a Trustee of an existing individual
retirement account or IRA to transfer an amount in cash to this IRA.
(e) Simplified Employee Pension Plan (SEP/IRA). If an IRA is
established that meets the requirements of a SEP/IRA, your employer may
contribute an amount not to exceed the lesser of 15% of your includable
compensation ($160,000 for 1998, adjusted for inflation thereafter) or $30,000.
The amount of such contribution is not includable in your income as wages for
federal income tax purposes. Within that overall limit you may elect to defer up
to $10,000 of your compensation in 1998 (as adjusted for inflation in accordance
with the Code) if your employer's SEP/IRA plan permits and if the compensation
deferral feature was in effect prior to January 1, 1997. The amount of such
elective deferral is excludable from your income as wages for federal income tax
purposes.
Your employer is not required to make a SEP/IRA contribution in any
year nor make the same percentage contribution each year. But, if contributions
are made, they must be made to the SEP/IRA for all eligible employees and must
not discriminate in favor of highly compensated employees. If the rules are not
met, any SEP/IRA contributions by the employer will be treated as taxable to the
employees and could result in adverse tax consequences to the participating
employee. For further details, see your employer.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers
to this IRA must be made in accordance with the appropriate sections of the
Code. It is your full and sole responsibility to determine the tax deductibility
of any contribution, and to make such contributions in accordance with the Code.
Transamerica does not provide tax advice, and assumes no liability for the tax
consequences of any contribution to this IRA.
2. Deductibility of Contributions
(a) Eligibility. If neither you, nor your spouse, is an active
participant (see (b) below) and you file a joint income tax return, for each
taxable year you and your spouse may contribute up to $4,000 together (but no
more than $2,000 to each IRA) if your combined compensation is at least equal to
that amount. In this case you and your spouse may take a deduction for the
entire amount contributed. If you are an active participant but have an adjusted
gross income (AGI) below a certain level (see (c) below), you may make a
deductible contribution as under current law. If, however, you or your spouse is
an active participant and your combined AGI is above the specified level, the
amount of the deductible contribution you may make to an IRA is phased out and
eventually eliminated. Beginning in 1998, if you are not an active participant
(even though your spouse is), you may take a full $2,000 deduction for
contributions to an IRA. This deduction is subject to phase out at joint AGI
levels between $150,000 and $160,000, and is eliminated for AGI levels above
$160,000.
(b) Active Participant. You are an "active participant" for a year if
you participate in a retirement plan. For example, if you participate in a
pension plan, profit sharing plan, a 401 plan, certain government plans, a
tax-sheltered arrangement under Code Section 403, or a SEP/IRA plan, you are
considered to be an active participant. Your Form W-2 for the year should
indicate your participation status.
(c) Adjusted Gross Income (AGI). If you are an active participant, you
must look at your AGI for the year (or if you and your spouse file a joint tax
return, you use your combined AGI) to determine whether you can make a
deductible IRA contribution for that taxable year. The instructions for your tax
return will show you how to calculate your AGI for this purpose. If you are at
or below a certain AGI level, called the Threshold Level, you are treated as if
you were not an active participant and can make a deductible contribution under
the same rules as a person who is not an active participant.
Your Threshold Level depends upon whether you are a married taxpayer
filing a joint tax return, an unmarried taxpayer, or a married taxpayer filing a
separate tax return. If you are a married taxpayer but file a separate tax
return, the Threshold Level is $0. If you are a married taxpayer filing a joint
tax return, or an unmarried taxpayer, your Threshold Level depends upon the
taxable year, and can be determined using the appropriate table below:
<TABLE>
<CAPTION>
Married Filing Jointly Unmarried
Taxable Applicable Taxable Applicable
Year Dollar Limitation Year Dollar Limitation
<S><C> <C> <C> <C>
1997...........$40,000 1997................ $25,000
1998...........$50,000 1998................ $30,000
1999...........$51,000 1999................ $31,000
2000...........$52,000 2000................ $32,000
2001...........$53,000 2001.................$33,000
2002...........$54,000 2002.................$34,000
2003...........$60,000 2003.................$40,000
2004...........$65,000 2004.................$45,000
2005...........$70,000 2005 and
2006...........$75,000 thereafter...........$50,000
2007 and
thereafter.....$80,000
</TABLE>
If your AGI is less than $10,000 above your Threshold Level ($20,000
for married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007) you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000 (and an additional $2,000 for a Spousal IRA).
You can calculate your Deduction Limit as follows:
10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
-------------------
10,000
For taxable years beginning on or after January 1, 2007, married
taxpayers filing jointly should substitute 20,000 for 10,000 in the numerator
and denominator of the above equation.
If you are married, but you and your spouse lived apart during the
entire taxable year and file separate income tax returns, the deductibility of
your IRA contribution is calculated as if you were not married.
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot in any event exceed
100% of your earned income.
(d) Restrictions.No deduction is allowed for (i) contributions other
than in cash; (ii) contributions (other than those by an employer to a SEP/IRA)
made during the calendar year in which you attain age 70 1/2 or thereafter; or
(iii) for any amount you contribute which was a distribution from another
retirement plan ("rollover" contribution). However, the limitations in
paragraphs (a) and (c) of this section do not apply to rollover contributions.
3. Nondeductible Contributions to IRAs
Even if you are above the Threshold Level and, thus, may not make a
deductible contribution of $2,000 (and an additional $2,000 for a Spousal IRA),
you may still contribute up to the lesser of 100% of compensation or $2,000 to
an IRA (and an additional $2,000 for a Spousal IRA). The amount of your
contribution which is not deductible will be a nondeductible contribution to the
IRA. You may also choose to make a nondeductible contribution even if you could
have deducted part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible contributions,
will not be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
4. Distributions
(a) Required Minimum Distributions. Distribution of your IRA must be
made or begin no later than April 1 of the calendar year following the calendar
year in which you attain age 70 1/2 (the required beginning date). You may take
required minimum distributions from any IRA you maintain as long as: (i)
distributions begin when required; (ii) periodic payments are made at least once
a year; and (iii) the amount to be distributed is not less than the minimum
required under current federal law. If you own more than one IRA, you can choose
whether to take your minimum distribution from one IRA or a combination of your
IRAs. A distribution may be made at once in a lump sum, or it may be made in
installments. Installment payments must be made in equal or substantially equal
amounts over: (i) your life or the joint lives of you and your beneficiary; or
(ii) a period not exceeding your life expectancy (as redetermined annually under
IRS tables in the income tax regulations), or the joint life expectancy of you
and your beneficiary (as redetermined annually, if that beneficiary is your
spouse). Also, special rules may apply if the age difference between you and
your designated beneficiary (other than your spouse) is greater than ten year.
If settlement option payments start prior to the April 1 following the
year you turn age 70 1/2, then the annuity date of such settlement option
payments will be treated as the required beginning date for purposes of the
death benefit provisions below.
If you die before the entire interest in your IRA is distributed to
you, but after your required beginning date, the entire interest in the IRA must
be distributed to your beneficiary at least as rapidly as your IRA was being
distributed prior to your death. If you die before your required beginning date
and if you have no designated beneficiary, distribution must be completed by
December 31 of the calendar year that is five years after your death. If you die
before your required beginning date and if you have a designated beneficiary,
distributions to your designated beneficiary must be made in substantially equal
installments over the life of life expectancy of the designated beneficiary,
beginning by December 31 of the calendar year that is one year after your death.
If the beneficiary is your surviving spouse, and you die before your
required beginning date your surviving spouse will become the new
owner/annuitant and can continue this IRA on the same basis as before your
death. If your surviving spouse does not wish to continue this contract as his
or her IRA, he or she may elect to receive the death benefit in the form of
settlement option payments. Such payments must be in equal amounts over your
spouse's life or a period not extending beyond his or her life expectancy. The
surviving spouse must elect this option and begin receiving payments no later
than the earliest of the following dates: (i) December 31 of the year following
the year you died; or (ii) December 31 of the year in which you would have
reached the required beginning date if you had not died. Either you or, if
applicable, your beneficiary, is responsible for assuring that the required
minimum distribution is taken in a timely manner and that the correct amount is
distributed.
(b) Taxation of IRA Distributions.Because nondeductible IRA
contributions are made using income which has already been taxed (that is, they
are not deductible contributions), the portion of the IRA distributions
consisting of nondeductible contributions will not be taxed again when received
by you. If you make any nondeductible IRA contributions, each distribution from
your IRAs will consist of a nontaxable portion (return of nondeductible
contributions) and a taxable portion (return of deductible contributions, if
any, and earnings).
Thus, if you receive a distribution from your IRA and you previously
made deductible and nondeductible contributions, you may not take an IRA
distribution which is entirely tax-free. The following formula is used to
determine the nontaxable portion of your distributions for a taxable year.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Remaining Nondeductible contributions Total distributions Nontaxable distributions
Year-end total IRA balances X (for the year) = (for the year)
</TABLE>
To figure the year-end total IRA balance, you must treat all of your
IRAs as a single IRA. This includes all regular IRAs, as well as SEP/IRAs, and
Rollover IRAs. You also add back the distributions taken during the year. Please
refer to IRS Publication 590, Individual Retirement Arrangements, for
instructions, including worksheets that can assist you in these calculations.
Transamerica will report all distributions to the IRS as fully taxable income to
you.
Even if you withdrew all of the money in your IRA in a lump sum, you
will not be entitled to use any form of income averaging to reduce the federal
income tax on your distribution. Also, no portion of your distribution is
taxable as a capital gain.
(c) Withholding. Unless you elect not to have withholding apply,
federal income tax will be withheld from your IRA distributions. If you receive
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
(deductible and nondeductible) contributions for that year, the excess
contribution amount will be subject to a nondeductible 6% excise (penalty) tax.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return for the year
(including extensions) for the taxable year in which you made the excess
contribution, the excess contribution will not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to an additional 10% tax on early distributions. Alternatively,
excess contributions for one year may be withdrawn in a later year or may be
carried forward as IRA contributions in the following year to the extent that
the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum allowable (deductible and
nondeductible) amount for that year. The 6% excise tax will be imposed on excess
contributions in each year they are neither returned to you, or applied as
contributions in subsequent years.
Excess contributions that were withdrawn will not be taxable income to
you if you did not take a deduction for the excess amount.
(b) Early Distributions. Since the purpose of an IRA is to accumulate
funds for retirement, your receipt or use of any portion of your IRA before you
attain age 59 1/2 constitutes an early distribution subject to a 10% penalty tax
unless the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRS tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. Effective for distributions made in 1998 or later, the 10%
penalty tax also will not apply to an early distribution made to pay for
first-time homebuyer expenses of you or certain family members, or for higher
education expenses for you or certain family members. First-time homebuyer
expenses must be paid within 120 days of the distribution from the IRA and
include up to $10,000 of the costs of acquiring, constructing, or reconstructing
a principal residence, including settlement, financing and closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution. The amount of an early distribution (excluding any
nondeductible contribution included therein) is includable in your gross income
and may be subject to the 10% penalty tax unless you transfer it to another IRA
as a qualifying rollover contribution.
(c) Required Minimum Distributions (RMD). If the RMD rules described in
Part I, Section 4 (a) of this Disclosure Statement apply to you and if the
amount distributed during a calendar year is less than the minimum amount
required to be distributed, you will be subject to a penalty tax equal to 50% of
the difference between the amount required to be distributed and the amount
actually distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the IRA, or any interference with the independent status of the
IRA), the IRA will lose its tax exemption and be treated as having been
distributed to you. The value of the entire IRA (excluding any nondeductible
contributions included therein) will be includable in your gross income; and, if
at the time of the prohibited transaction you are under age 59 1/2, you may also
be subject to the 10% penalty tax on early distributions. If you pledge your
IRA, or your benefits under the contract, as security for a loan, the portion
pledged as security will cease to be tax-qualified, the value of that portion
will be treated as distributed to you, and you will have to include the value of
the portion pledged as security in your income that year for federal tax
purposes. You may also be subject to early withdrawal penalties, as described in
Part I, Section 5.b.
(e) Overstatement or Understatement of Nondeductible Contributions. If
you overstate your nondeductible IRA contributions on your federal income tax
return (without reasonable cause) you may be subject to a penalty. A penalty
also applies for failure to file any form required by the IRS to report
nondeductible contributions. These penalties are in addition to any generally
applicable tax, interest, and penalties for which you may be liable if you
understate income upon receiving a distribution from your IRA. See Part I,
Section 4(b) of this Disclosure Statement. IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA
in any amount up to the contribution limits described in Part II, Section 3 of
this Disclosure Statement. Such contributions are also subject to the minimum
amount under the Contract. Such contribution shall be in cash. Your contribution
for a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year. Unlike traditional IRAs, you may
continue making contributions after you reach 70 1/2.
(b) Spousal Roth IRA. If you and your spouse file a joint federal
income tax return for the taxable year and if your spouse's compensation, if
any, includable in gross income for the year is less than the compensation
includable in your gross income for the year, you and your spouse may each
establish your own individual Roth IRA and may make contributions to those Roth
IRAs in accordance with the rules and limits for contributions contained in the
Code, which are described in Part II, Section 3 of this Disclosure Statement.
Such contributions shall be in cash. Your contribution to a Spousal Roth IRA for
a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth
IRA within 60 days after receiving a distribution from an existing Roth IRA,
subject to certain limitations discussed in Part II, Section 3.
(d) Transfer Roth IRA. You may make an initial or subsequent
contribution hereunder by directing a Trustee of an existing Roth IRA to
transfer the assets in that Roth IRA to your new Roth IRA.
(e) Conversion Roth IRA. You may open a Conversion Roth IRA within 60
days of receiving a distribution form an existing Traditional IRA or by
instructing the Trustee or issuer of an existing Traditional IRA to transfer the
assets in that Traditional IRA account to your new Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your Adjusted Gross Income ("AGI"), not including the rollover or transfer
amount, is greater than $100,000, or if you are married and you and your spouse
file separate tax returns, you may not convert a Traditional IRA into a Roth
IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers,
or conversions to this Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica does
not provide tax advice, and assumes no liability for the tax consequences of any
contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions.
However, distributions from your Roth IRA are generally not subject to federal
income tax (see Part II, 4(b) below). This is unlike a Traditional IRA, which
permits deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs
may not exceed the lesser of 100% of your compensation or $2,000 each year.
Rollover, transfer and conversion contributions, if properly made, do not count
towards your maximum annual contribution limit.
(a) Regular Roth IRAs. The maximum amount you may contribute to a
Regular Roth IRA will depend on the amount of your income. Your maximum $2,000
contribution begins to phase out when your AGI reaches $95,000 (unmarried) or
$150,000 (married filing jointly). Under the phase out, your maximum
contributions generally will not be less than $200; however, no contribution is
allowed if your AGI exceeds $110,000 (unmarried) or $160,000 (married filing
jointly). If you are married and you and your spouse file separate tax returns,
your maximum contribution phases out between $0 and $10,000. You should consult
your tax advisor to determine your maximum contribution.
If you are married but you and your spouse lived apart for the entire
taxable year and file separate federal income tax returns, your maximum
contribution is calculated as if you were not married.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's
Spousal Roth IRA may not exceed the lesser of (a) 100% of both spouses' combined
compensation minus any Roth or deductible Traditional IRA contribution for the
spouse with the higher compensation or (b) $2,000. A maximum of $4,000 may be
contributed to both spouses' Spousal Roth IRAs. Contributions can be divided
between the spouses' Roth IRAs as you and your spouse wish, but no more than
$2,000 can be contributed to either one of the Roth IRAs each year.
(c) Rollover Roth IRAs. There is no contribution limit on the amounts
that you may rollover from another Roth IRA into this Roth IRA. You may roll
over a distribution from any single Roth IRA to another Roth IRA only once in
any 365-day period.
(d) Transfer Roth IRAs. There is no contribution limit on amounts that
you transfer from another Roth IRA into this Roth IRA.
(e) Conversion Roth IRAs. There is no contribution limit on amounts
that you convert from your Traditional IRA into this Roth IRA if you are
eligible to open a Conversion Roth IRA as described above. However, the
distribution proceeds from your Traditional IRA are includable in your taxable
income to the extent that they represent a return of deductible contributions
and earnings on any contributions. The distribution proceeds from your
Traditional IRA are not subject to the 10% early distribution penalty tax
(described below) if the distribution proceeds are deposited to your Rollover
Roth IRA within 60 days. You may roll over a distribution from any single
Traditional IRA to a conversion Roth IRA or any other IRA only once in any
365-day period.
You can also open a Conversion Roth IRA by instructing the issuer,
custodian or trustee of your existing Traditional IRA to transfer your
Traditional IRA assets to a Roth IRA, which will be the successor to your
existing Traditional IRA. The transfer will be treated as a distribution from
your Traditional IRA, and that amount will be includable in your taxable income
to the extent that it represents a return of deductible contributions and
earnings on any contributions, but will not be subject to the 10% distribution
penalty tax.
For tax years before 1999, if you make a rollover or transfer from a
Traditional IRA to a Roth IRA, the income tax due upon distribution from the
Traditional IRA is payable ratably over four years beginning in the year of the
conversion.
Also, consult your tax advisor before combining amounts in a Conversion
Roth IRA with any regular contributions or with amounts rolled over or
transferred into the Conversion IRA in other tax years.
4. Distributions
(a) Required Minimum Distribution. Unlike a Traditional IRA, there are
no rules that require that distribution be made to you from your Roth IRA during
your lifetime.
If you die before the entire value of your Roth IRA is distributed to
you, the balance of your Roth IRA must be distributed by December 31 of the
calendar year that is five years after your death. However, if you die and you
have a designated beneficiary, your designated beneficiary may elect to take
distributions in the form of settlement option payments made in substantially
equal installments over the life or life expectancy of the designated
beneficiary, beginning by December 31 of the calendar year that is one year
after your death.
If your beneficiary is your surviving spouse, he or she will become a
new owner/annuitant and can continue this Roth IRA on the same basis as before
your death. If your surviving spouse does not wish to continue this Contract as
his or her Roth IRA, he or she may elect to receive the death benefit in the
form of settlement option payments. Such payments must be in equal amounts over
your spouse's life or a period not extending beyond his or her life expectancy.
Your surviving spouse must elect this option and begin receiving payments no
later than the earliest of the following dates: (i) December 31 of the year
following the year you died; or (ii) December 31 of the year in which you would
have reached age 70 1/2.
Your beneficiary is responsible for assuring that the required minimum
distribution following your death is taken in a timely manner and that the
correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw
from your Roth IRA are generally tax-free. However, since the purpose of a Roth
IRA is to accumulate funds for retirement, your receipt or use of Roth IRA
earnings before you attain age 59 1/2 , or within 5 years of your first
contribution to the Roth IRA, or within 5 years of a contribution rolled over,
transferred, or converted from a Traditional IRA, will generally be treated as
an early distribution subject to regular income tax. No income tax will apply to
earnings that are withdrawn before you attain age 59 1/2, but which are
withdrawn five or more years after the first contribution or the rollover or
transfer contribution from a Traditional IRA to the Roth IRA, where the
withdrawal is made (i) upon your death or disability, or (ii) to pay first-time
homebuyer expenses of you or certain family members. Note that for amounts
converted from a Traditional IRA to a Roth IRA, the five-year period applies
separately to amounts converted. No portion of your distribution is taxable as a
capital gain.
(c) Withholding. If the distribution from your Roth IRA is subject to
federal income tax, unless you elect not to have withholding apply, federal
income tax will be withheld from your Roth IRA distributions. If you receive
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your Roth
IRA contributions (other than rollovers, transfers, or conversions) exceed the
maximum allowable contributions for that year, the excess contribution amount
will be subject to a nondeductible 6% excise (penalty) tax. However, if you
withdraw the excess contribution, plus any earnings on it, before the due date
for filing your federal income tax return (including extensions) for the taxable
year in which you made the excess contribution, the excess contribution will not
be subject to the 6% penalty tax. The amount of the excess contribution
withdrawn will not be considered an early distribution, but the earnings
withdrawn will be taxable income to you and may be subject to an additional 10%
tax on early distributions. Alternatively, excess contributions for one year may
be withdrawn in a later year or may be carried forward as Roth IRA contributions
in a later year to the extent that the excess, when aggregated with your Roth
IRA contribution (if any) for the subsequent year, does not exceed the maximum
allowable contribution for that year. The 6% excise tax will be imposed on
excess contributions in each year they are neither returned to your nor applied
as contributions in subsequent years.
(b) Early Distributions. Since the purpose of a Roth IRA is to
accumulate funds for retirement, your receipt or use of any portion of your Roth
IRA before you attain age 59 1/2 , or within 5 years of your first contribution
to the Roth IRA, or within 5 years of a contribution rolled over, transferred or
converted from a Traditional IRA, constitutes an early distribution subject a
10% penalty tax on the earnings in your Roth IRA. This penalty tax will not
apply if the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRA tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% or your
AGI, or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. The 10% penalty tax also will not apply to an early
distribution made to pay for first-time homebuyer expenses for you or certain
family members, or for higher education expenses for you or certain family
members. First-time homebuyer expenses must be paid within 120 days of the
distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including
settlement, financing and closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution.
In addition, it is likely that the law will change in 1998 to provide
retroactively that if amounts transferred, rolled over, or converted from a
Traditional IRA to a Roth IRA are withdrawn before five years, (i) the entire
amount that was transferred or rolled over, not just the earnings, may be
subject to the 10% penalty tax, and (ii) an additional 10% tax may apply if the
amounts transferred, rolled over, or converted were (or are to be) included in
income ratably over four years. Special rules may apply to withdrawals from a
Roth IRA that includes both amounts transferred, rolled over or converted from a
Traditional IRA and annual contributions to the Roth IRA; for that reason, it
may be advisable to establish separate Roth IRAs for amounts transferred, rolled
over, or converted and annual contributions.
(c) Required Distributions Upon Death. If the required minimum
distribution rules described in Part II, Section 4(a) of this Disclosure
Statement apply to your beneficiary and if the amount distributed in during a
calendar year is less than the minimum amount required to be distributed, your
beneficiary will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the Roth IRA, or any interference with the independent status of
the Roth IRA), the Roth IRA will lose its tax exemption and be treated as having
been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and, if at the time of
the prohibited transaction you are under age 59 1/2 or it is within five years
of your first contribution to the Roth IRA, or within five years of a rollover,
transfer or conversion from a Traditional IRA, you may also be subject to the
10% penalty tax on early distributions. If you pledge your Roth IRA, or your
benefits under the contract, as a security for a loan, the portion pledged as
security will cease to be tax-qualified, the value of that portion will be
treated as distributed to you, and you may be subject to the 10% penalty tax on
early distributions from a Roth IRA.
PART III: OTHER INFORMATION
1. Federal Estate and Gift Taxes
Any amount distributed from your IRA or Roth IRA upon your death may be
subject to federal estate taxes, although certain credits and deductions may be
available. The exercise or non-exercise of an option to pay an annuity to your
beneficiary at or after your death will not be considered a transfer for gift
tax purposes under Code Section 2517.
2. Tax Reporting
You need not file IRS Form 5329 with your income tax return unless
during the taxable year there is an excess contribution to, an early
distribution from, or insufficient minimum required distributions from your IRA
or Roth IRA. You must report contributions to, and distributions from your IRA
and Roth IRA (including the year end aggregate account balance of all IRAs and
Roth IRA) on your federal income tax return for the year. For a Traditional IRA,
you must designate on the return how much of your annual contribution is
deductible and how much is nondeductible.
3. Vesting
Your interest in your IRA and Roth IRA must be non-forfeitable at all times.
4. Exclusive Benefit
Your interest in your IRA and Roth IRA is for the exclusive benefit of
you and your beneficiaries.
5. Publication 590
Additional information about your IRA or Roth IRA can be obtained from
any district office of the IRS and by calling 1-800-TAX-FORM for a free copy of
Publication 590, Individual Retirement Arrangements.
<PAGE>
Please forward (without charge) a copy of the Statement of Additional
Information concerning the Transamerica Seriessm - Transamerica Catalystsm
Variable Annuity issued by Transamerica Life Insurance and Annuity Company to:
(Please print or type and fill in all information)
-----------------------------------------------------------
Name
-----------------------------------------------------------
Address
-----------------------------------------------------------
City/State/Zip
-----------------------------------------------------------
Date: ________________________ Signed: _______
Return to Transamerica Life Insurance and Annuity Company, Annuity Service
Center, 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202.
<PAGE>
TRANSAMERICA SERIES sm
TRANSAMERICA CATALYST sm VARIABLE ANNUITY
Contract Form 4-703 Certificate Form 313
Issued by Transamerica Life Insurance and Annuity Company
401 North Tryon Street, Suite 700, Charlotte, North Carolina, 28202
VIM 135-598
<PAGE>
6
PROFILE
of the
TRANSAMERICA CLASSICsm VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
May 1, 1998
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Classicsm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual funds portfolios
("portfolios") in the Variable Account and two general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. Transamerica guarantees the safety of money invested in the general
account options. Certain portfolios and general account options may not be
available in all states.
The contract is a deferred annuity and it has two phases: the accumulation
phase, and the annuitization phase. During the accumulation phase, you can make
additional payments on your contract, transfer money among the investment
options, and withdraw some or all of your investment. During this phase, your
earnings accumulated on a tax-deferred basis for individuals, but some or all of
any money you withdraw may be taxable. Tax deferral is not available for
non-qualified contracts owned by corporations and some trusts.
During the annuity phase, Transamerica will make periodic payments to
you. The dollar amount of the payments may depend on the amount of money
invested and earned during the accumulation phase and on other factors, such as
the annuitants' age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from Transamerica. You may choose fixed
payments, where the dollar amount of each payment generally remains the same, or
variable payments, where the dollar amount of each payment may increase or
decreased based on the investment performance of the portfolios you select. You
can choose among payments for the lifetime of an individual, or payments for the
longer of one lifetime or a guaranteed period of 10, 15 or 20 years, or payments
for one lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $5,000 ($2,000 for
IRAs) to purchase a contract. You can make additional payments of at least
$1,000 each ($100 each if made under an automatic payment plan deducted from
your bank account). You may cancel your contract during the free look period
(see item 10 below).
The Transamerica Classic Variable Annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement and other
long-term goals. Individuals in high tax brackets get the most benefit from the
tax deferral feature. You should not invest in the contract for short-term
purposes or if you cannot take the risk of losing some of your investment.
<PAGE>
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the
following 17 portfolios:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You can earn or lose money in any of these portfolios. These portfolios
are described in their own prospectuses. All portfolios may not be available in
all states.
GENERAL ACCOUNT: You can also allocate payments to the general account
options, where Transamerica guarantees the principal invested plus an annual
interest rate of at least 3%. The general account options include a fixed
account and guarantee period options.
5. Expenses. Transamerica makes certain charges and deductions in order to
provide the benefits and features available under the contract:
If you withdraw your money within seven years of investing it, there
may be a withdrawal charge of up to 6% of the amount invested.
Transamerica deducts an annual account fee of no more than $30
(the fee is waived for account values
over $50,000).
Transamerica deducts insurance and administrative charges of 1.35% per
year from your average daily value in the variable account.
If you elect the Living Benefits Rider (or Waiver of CDSL Rider),
Transamerica will deduct a monthly fee equal to 1/12 of 0.05% of the
account value.
The first 18 transfers each year are free (then Transamerica will
deduct a $10 fee for each additional
transfer).
Advisory fees are also deducted by the portfolios' manager, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your
investment and/or amounts you use to purchase annuity benefits
(depending on your state's law).
The following chart shows these charges (not including the optional
Living Benefits Rider fee, any transfer fees or premium taxes). The $30 annual
account fee is included in the first column as a charge of 0.075%. The third
column is the sum of the first two columns. The examples in the last two columns
show the total amounts you would be charged if you invested $1,000, the
investment grew 5% each year, and you withdrew your entire investment after one
year or 10 years. Year one includes the withdrawal charge and year 10 does not.
<TABLE>
<CAPTION>
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Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Sub-Accounts Charges Charges Charges 1 Year 10 Years
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<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.425% 0.74% 2.165 $72.96 $249.81
Alliance VPF Growth & Income 1.425% 0.72% 2.145 $72.76 $247.75
Alliance VPF Premier Growth 1.425% 0.95% 2.375 $75.06 $271.12
Dreyfus VIF Capital Appreciation Growth 1.425% 0.80% 2.225 $73.56 $255.95
Dreyfus VIF Small Cap 1.425% 0.78% 2.205 $73.36 $253.90
Janus Aspen Balanced 1.425% 0.83% 2.255 $73.86 $259.00
Janus Aspen Worldwide Growth 1.425% 0.74% 2.165 $72.96 $249.81
MFS Emerging Growth 1.425% 0.87% 2.295 $74.26 $263.06
MFS Growth & Income 1.425% 1.00% 2.425 $75.56 $276.13
MFS Research 1.425% 0.88 % 2.305 $74.36 $264.07
Morgan Stanley UF Fixed Income 1.425% 0.70% 2.125 $72.56 $245.69
Morgan Stanley UF High Yield 1.425% 0.80% 2.225 $73.56 $255.95
Morgan Stanley UF International Magnum 1.425% 1.15% 2.575 $77.06 $290.98
OCC Accumulation Trust Managed 1.425% 0.87% 2.295 $74.23 $259.34
OCC Accumulation Trust Small Cap 1.425% 0.97% 2.395 $75.24 $270.64
Transamerica VIF Growth 1.425% 0.85% 2.275 $74.06 $261.03
Transamerica VIF Money Market 1.425% 0.60% 2.025 $71.55 $235.33
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</TABLE>
The Annual Portfolio Charges above are for the year ended December 31,
1997 (except for Transamerica VIF Money Market Portfolios) and do not reflect
expense reimbursements or fee waivers. The figures for Transamerica VIF Money
Market Portfolios are estimates for the year 1998, its first year of operation.
Expenses may be higher or lower in the future. See the "Variable Account Fee
Table" in the Transamerica Classic Variable Annuity prospectus for more detailed
information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
contract value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portions (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increase in the contract value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money our at any time during the
accumulation phase. Transamerica may assess a withdrawal charge of up to 6% of a
purchase payment, but no withdrawal charge will be assessed on money that has
been in the contract for seven years. In certain cases, if you elect the Living
Benefits Rider when you purchase the contract, the withdrawal change may be
waived if you are in a hospital or nursing home for a long period or, in some
states, if you are diagnosed with a terminal illness, or if you are receiving
medically required in-home care. Subject to certain conditions, each contract
year you may withdraw up to 15% of purchase payments received less than seven
years ago, without incurring a withdrawal charge. Withdrawals from qualified
contracts may be subject to severe restrictions and, in certain circumstances,
prohibited.
You may have to pay income taxes on amounts you withdraw and there may
also be a 10% tax penalty if you make withdrawals before you are 59 1/2 years
old.
If you withdraw money from a guarantee period prematurely, you may
forfeit some of the interest that you earned, but you will always receive the
principal you invested plus 3% interest.
8. Past Investment Performance. The value of the money you allocated to the
portfolios will go up or down, depending on the investment performance of the
portfolios you select. The following chart shows the adjusted past investment
performance on a year-by-year basis for each portfolio. These figures have
already been reduced by the insurance charges, the account fee, the advisory fee
and all the expenses of the portfolios. These figures do not include the
withdrawal charge, the fee for the optional Living Benefits Rider, any transfer
fees or premium taxes, which would reduce performance if applied. Past
performance is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
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SUB-ACCOUNT 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 36.16% 18.40% 35.18% -8.55% 9.43%
Alliance VPF Growth & Income 28.25% 21.65% 35.31% -1.09% 10.24%
Alliance VPF Premier Growth 33.43% 19.63% 43.41% -3.41% 11.16%
Dreyfus VIF Capital Appreciation Growth 26.84% 22.76% 31.76% 1.52% N/A
Dreyfus VIF Small Cap 17.21% 15.11% 29.06% 7.78% 67.23%
Janus Aspen Balanced 21.21% 14.55% 22.93% -0.66% N/A
Janus Aspen Worldwide Growth 21.63% 26.40% 25.28% -0.22% N/A
MFS Emerging Growth 21.48% 15.49% N/A N/A N/A
MFS Growth & Income 29.06% 21.67% N/A N/A N/A
MFS Research 19.76% 20.50% N/A N/A N/A
Morgan Stanley UF Fixed Income 8.40% N/A N/A N/A N/A
Morgan Stanley UF High Yield 11.94% N/A N/A N/A N/A
Morgan Stanley UF International Magnum 2.35% N/A N/A N/A N/A
OCC Accumulation Trust Managed 21.18% 20.45% 43.39% 1.71% 9.29%
OCC Accumulation Trust Small Cap 21.50% 16.88% 15.08% -1.43% 18.20%
Transamerica VIF Growth 50.31% 26.60% 52.98% 7.68% 21.70%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
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SUB-ACCOUNT 1992 1991 1990 1989 1988
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Alger American Income & Growth 7.12% 22.70% -1.39% 5.91% N/A
Alliance VPF Growth & Income 6.42% N/A N/A N/A N/A
Alliance VPF Premier Growth N/A N/A N/A N/A N/A
Dreyfus VIF Capital Appreciation Growth N/A N/A N/A N/A N/A
Dreyfus VIF Small Cap 70.60% 156.10% N/A N/A N/A
Janus Aspen Balanced N/A N/A N/A N/A N/A
Janus Aspen Worldwide Growth N/A N/A N/A N/A N/A
MFS Emerging Growth N/A N/A N/A N/A N/A
MFS Growth & Income N/A N/A N/A N/A N/A
MFS Research N/A N/A N/A N/A N/A
Morgan Stanley UF Fixed Income N/A N/A N/A N/A N/A
Morgan Stanley UF High Yield N/A N/A N/A N/A N/A
Morgan Stanley UF International Magnum N/A N/A N/A N/A N/A
OCC Accumulation Trust Managed 17.38% 43.71% -5.87% 31.08% N/A
OCC Accumulation Trust Small Cap 18.84% 46.61% -11.17% 16.36% N/A
Transamerica VIF Growth 13.55% 41.44% -12.60% 32.90% 29.23%
Transamerica VIF Money Market N/A N/A N/A N/A N/A
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</TABLE>
9. Death Benefit. If you die during the accumulation phase, a death benefit will
be paid to your beneficiary.
If you die before you turn 85, the death benefit will be the greatest
of three things: (1) the account value; (2) the sum of all purchase payments
less withdrawals and applicable premium taxes; or (3) the highest account value
on any contract anniversary prior to the earlier of the owner's (or joint
owner's) 85th birthday, plus purchase payment made less withdrawals and
applicable premium tax charges since that contract anniversary. If death occurs
after your or your joint owner's 85th birthday, the death benefit is equal to
the account value.
10. Other Information. The Transamerica Classic Variable Annuity offers other
features you might be interest in. Some of these features are as follows:
Free Look. After you get your contract, you have ten days to look it
over and decide if it is really right for you (this period may be longer in
certain states). If you decide not to keep the contract, you can cancel it
during this period by delivering a written notice of cancellation and returning
the contract to the Service Center at the address listed in item 11 below.
Unless otherwise required by law, Transamerica will refund the purchase payments
allocated to any general account option (less any withdrawals) plus the value in
the Variable Account as of the date the written notice and the contract are
received by the Service Center.
Telephone Transfers. You can generally arrange to transfer
money between the investments in your
contract by telephone.
Dollar Cost Averaging. You can instruct Transamerica to automatically
transfer money from either the money market sub-account or the fixed account to
any of the other variable sub-accounts each month. This is intended to give you
a lower average cost per share or unit than a single one time investment.
Automatic Rebalancing Option. The performance of each sub-account may
cause the allocation of value among the sub-accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
sub-accounts by reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have Transamerica send
you money automatically each month out of your contract during the accumulation
phase. There are limits on the amounts, and the payments may be taxable, and,
prior to age 59 1/2, subject to the penalty tax. If the total withdrawals
(including systematic withdrawals) made in a contract year exceed the allowed
amount to be withdrawn without a charge for that year, any applicable withdrawal
charge will then apply.
Automatic Payout Option. For qualified contracts, certain pension and
retirement plans require that certain amounts be distributed from the plan at
certain ages. You can arrange to have such amounts distributed automatically
during the accumulation phase.
These features may not be available in all state and may not be
suitable for your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
