As filed with the Securities and Exchange Commission on April 28, 1999
Registration Nos. 333-57697
No. 811-08835
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o
Pre-Effective Amendment No. o
Post-Effective Amendment No. 1
[x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 2
SEPARATE ACCOUNT VA-7
(Exact Name of Registrant)
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
(Name of Depositor)
Transamerica Square, 401 North Tryon Street, Charlotte, North Carolina 28202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (704) 330-5600
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
General Counsel and Secretary Sutherland, Asbill & Brennan LLP
Transamerica Life Insurance 1275 Pennsylvania Avenue, N.W.
and Annuity Company Washington, D.C. 20004-2415
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate date of proposed public offering: As soon as practicable after
effectiveness of the Registration Statement.
Title of securities being registered:
Flexible premium deferred variable annuity contracts.
It is proposed that this filing will become effective: o
immediately upon filing pursuant to paragraph (b) x
on May 1, 1998 pursuant to paragraph (b) o60 days
after filing pursuant to paragraph (a)(1) o on _
pursuant to paragraph (a)(1)
If appropriate, check the following box:
o this Post-Effective Amendment designates a new
effective date for a previously filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
<S> <C> <C>
1. Cover Page.............................................. Cover Page
2. Definitions............................................. Definitions
3. Synopsis................................................ Summary of this Prospectus; Variable Account Fee Table
4. Condensed Financial Information......................... Condensed Financial Information
5. General
(a) Depositor.......................................... Transamerica and the Separate Account
(b) Registrant......................................... Transamerica and the Separate Account
(c) Portfolio Company.................................. The Funds
(d) Fund Prospectus.................................... The Funds
(e) Voting Rights...................................... Voting Rights
(f) Administrator....................................... Charges under the Contracts
6. Deductions and Expenses
(a) General............................................ Charges under the Contracts
(b) Sales Load %....................................... Charges under the Contracts
(c) Special Purchase Plan.............................. Not Applicable
(d) Commissions........................................ Underwriter
(e) Fund Expenses...................................... Charges under the Contracts
(f) Operating Expenses................................. Fee Table
7. Contracts
(a) Persons with Rights................................ Description of the Contracts; Surrender of a Contract;
Death Benefits; Voting Rights; Ownership
(b) (i) Allocation of Purchase Payments
Payments..................................... Description of the Contracts
(ii) Transfers.................................... Transfers
(iii) Exchanges.................................... Federal Tax Matters
(c) Changes............................................ The Funds; Voting Rights
(d) Inquiries.......................................... Voting Rights
8. Annuity Period.......................................... Settlement Payments
9. Death Benefit........................................... Death Benefits
10. Purchase and Contract Value
(a) Purchases.......................................... Description of the Contracts
(b) Valuation.......................................... Description of the Contracts
(c) Daily Calculation.................................. Description of the Contracts
(d) Underwriter........................................ Underwriter
11. Redemptions
(a) By Contract Owners................................. Surrender of a Contract
By Annuitant....................................... Not Applicable
(b) Texas ORP.......................................... Not Applicable
(c) Check Delay........................................ Surrender of a Contract
(d) Lapse.............................................. Not Applicable
(e) Free Look.......................................... Right to Cancel
12. Taxes................................Federal Tax Matters
13. Legal Proceedings....................................... Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information.................................. Table of Contents of the Statement of Additional
Information
PART B
Item of Form N-4 Statement of Additional Information Caption
15. Cover Page.............................................. Cover Page
16. Table of Contents....................................... Table of Contents
17. General Information
and History............................................. General Information and History
18. Services
(a) Fees and Expenses
of Registrant...................................... (Prospectus) Variable Account Fee Table; (Prospectus)
The Funds
(b) Management Contracts............................... Not Applicable
(c) Custodian.......................................... Safekeeping of Separate Account Assets; Records and
Reports
Independent Auditors ............................. Accountants
(d) Assets of Registrant............................... Not Applicable
(e) Affiliated Person.................................. Not Applicable
(f) Principal Underwriter.............................. The Underwriter
19. Purchase of Securities
Being Offered........................................... (Prospectus) Description of the Contracts
Offering Sales Load..................................... Charges under the Contracts
20. Underwriters............................................ The Underwriter
21. Calculation of Performance
Data ...........Calculation of Yields and Total Returns
22. Annuity Payments........................................ (Prospectus) Settlement Option Payments
23. Financial Statements.................................... Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits
(a) Financial Statements............................... Financial Statements
(b) Exhibits........................................... Exhibits
25. Directors and Officers of
the Depositor........................................... Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant ....................... Persons Controlled By or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners............................... Number of Contract Owners
28. Indemnification......................................... Indemnification
29. Principal Underwriters.................................. Principal Underwriter
30. Location of Accounts
and Records............................................. Location of Accounts and Records
31. Management Services..................................... Management Services
32. Undertakings............................................ Undertakings
Signature Page.......................................... Signature Page
</TABLE>
<PAGE>
6
PROFILE
of the
TRANSAMERICA BOUNTYsm VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
May 1, 1999
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 Bountysm 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 the 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. We guarantee 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 annuitization phase, we 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 us. 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 $25,000 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.
The Transamerica Bounty 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.
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 MSDW UF Fixed Income
Alliance VPF Premier Growth MSDW UF High Yield
Dreyfus VIF Capital Appreciation MSDW 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
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 multi-year
guarantee periods.
5. Expenses. Transamerica makes certain charges and deductions in order to
provide the benefits and features available under the contract:
We do not currently deduct an annual account fee. However, we reserve
the right to deduct an account fee in the future of no more than $30
(the fee is waived for account values over $50,000).
We deduct insurance and administrative charges of 1.40% per year from
your average daily value in the variable account.
If you elect the Guaranteed Minimum Death Benefit Rider, we will
deduct a monthly fee equal to 1/12 of 0.20% of the account value.
If you elect the Guaranteed Minimum Income Benefit Rider with the
Guaranteed Minimum Death Benefit Rider, we will deduct a monthly fee
equal to 1/12 of 0.40% of the account value.
The first 18 transfers each year are free (then we 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 fees for the optional
Riders any transfer fees or premium taxes). These examples assume an average
account value of over $50,000 and, therefore, no deduction has been made to
reflect the $30 account fee. 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.
- -------------------
<TABLE>
<CAPTION>
Total Total 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 1.40% 0.70% 2.10% $21 $243
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 1.40% 0.73% 2.13% $22 $246
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 1.40% 1.06% 2.46% $25 $280
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 1.40% 0.81% 2.21% $22 $254
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 1.40% 0.77% 2.17% $22 $250
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 1.40% 0.74% 2.14% $22 $247
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 1.40% 0.72% 2.12% $22 $245
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 1.40% 0.85% 2.25% $23 $258
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth with Income 1.40% 0.88% 2.28% $23 $262
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 1.40% 0.86% 2.26% $23 $260
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 1.40% 0.70% 2.10% $21 $243
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 1.40% 0.80% 2.20% $22 $253
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 1.40% 1.15% 2.55% $26 $289
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 1.40% 0.82% 2.22% $23 $255
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 1.40% 0.88% 2.28% $23 $262
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 1.40% 0.85% 2.25% $23 $258
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1.40% 0.60% 2.00% $20 $233
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31, 1998 and,
if applicable, reflect expense reimbursements or fee waivers which reduced
operating expenses. Expenses may be higher or lower in the future. See the
"Variable Account Fee Table" in the Transamerica Bounty 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 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 out at any time during the
accumulation phase. We do not assess withdrawal charges. However, 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% annual interest. 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.
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 past investment performance
on a year-by-year basis for each sub-account. Some of the performance is for
periods since inception of the portfolios but before the sub-accounts began
operations. These figures have already been reduced by the insurance charges and
the advisory fees and all the expenses of the portfolios. These figures do not
include the $30 account fee, the fees for the optional Riders, 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 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 30.54% 34.38% 18.00% 33.24% -9.57%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 19.20% 26.99% 22.35% 33.96% -1.83%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 45.91% 31.99% 20.98% 42.82% -4.32%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 28.30% 26.30% 23.80% 31.65% 1.60%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.79% 15.11% 14.96% 27.57% 6.24%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 32.41% 20.39% 14.55% 23.04% -0.57%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 27.12% 20.44% 27.23% 25.59% 0.11%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.37% 20.12% 15.38% NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth with Income 20.62% 27.97% 22.71% NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.58% 18.65% 20.61% NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 6.39% NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 3.34% NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 7.44% NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 5.63% 20.58% 21.04% 43.52% 1.18%
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap -10.30% 20.53% 17.05% 13.62% -2.39%
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.28% 44.45% 26.01% 51.34% 6.12%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
<PAGE>
------------------------------------------------------------------------
SUB-ACCOUNT 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 8.80% 7.12% 21.78% -1.12% 5.91%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 10.13% 6.42% NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 11.05% NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 65.81% 69.03% 156.10% NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth with Income NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS VIT Research NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 8.84% 16.98% 43.94% -4.98% 30.70%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 17.84% 19.79% 46.05% -11.03% 16.70%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 20.99% 12.21% 39.33% -12.02% 32.25%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market NA NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Death Benefit. If you die during the accumulation phase, a death benefit
equal to the account value will be paid to your beneficiary.
If the Guaranteed Minimum Death Benefit Rider is elected the death benefit will
be as described below. If you die before the annuitization phase and before you
turn 85, the death benefit will be the greatest of three amounts: (1) the
account value; (2) the sum of all purchase payments less the proportion of
withdrawals taken and applicable premium tax charges; 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 payments made, less the proportion of
withdrawals taken and premium tax charges since that contract anniversary. If
death occurs after your or your joint owner's 85th birthday, the death benefit
will be the greater of two amounts: (1) the account value; or (2) 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 the proportion of
withdrawals taken and premium tax charges since that contract anniversary.
10. Other Information. The Transamerica
Bounty 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 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 our Service Center at the address listed in item 11 below. Unless otherwise
required by law, we 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 our 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 us to
automatically transfer money from the money
market sub-account to any of the other variable
sub-accounts each month.
Automatic Rebalancing Option. The performance of each sub-account may cause the
allocation of value among the sub-accounts to change. You may instruct us to
periodically automatically rebalance the amounts in the sub-accounts on an
annual, semi-annual or quarterly basis, by reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have us 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.
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.
Guaranteed Minimum Death Benefit Rider. The optional Rider, if elected, provides
that if you or the joint owner dies, a Guaranteed Minimum Death Benefit will be
paid. If death occurs before the owner's 85th birthday, the Guaranteed Minimum
Death Benefit is the greatest of: (a) the account value; (b) the sum of all
purchase payments, less withdrawals taken and applicable premium tax charges; or
(c) the highest account value on any contract anniversary, plus purchase
payments made, less withdrawals taken and premium tax charges since that
anniversary. If death occurs after the owner's 85th birthday, the Guaranteed
Minimum Death Benefit will be the greatest of: (a) the account value; or (b) the
highest account value on any contract anniversary, plus purchase payments made,
less withdrawals taken and premium tax charges since that anniversary. Please
see the prospectus for a more complete description, including conditions
regarding this Rider.
Guaranteed Minimum Income Benefit Rider. The optional Rider may be elected only
if the Guaranteed Minimum Death Benefit Rider is also elected. If this Rider is
elected, the Guaranteed Minimum Income Benefit, prior to the contract
anniversary on which any owner is 85, will be the settlement option which can be
purchased with the amount which is the greatest of: (a) the account value; (b)
the sum of all purchase payments less withdrawals taken and applicable premium
tax charges; or (c) the highest account value on any contract anniversary plus
purchase payments made, less taken and premium tax charges since that contract
anniversary. The Guaranteed Minimum Income Benefit is different if any owner is
85 years or older. Please see the prospectus for a more complete description,
including conditions regarding this Rider.
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 THE
TRANSAMERICA SERIESsm BOUNTY VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued By
Transamerica Life Insurance
and
Annuity Company
Offering 17 Sub-Accounts within the Variable Account
Designated as Separate Account VA-7
In Addition to:
A Fixed Account
&
A Guarantee Period Account
<TABLE>
<CAPTION>
This prospectus contains
<S> <C> <C>
This prospectus contains Portfolios Associated with Sub-Accounts
information you should Alger American Income and Growth
know before investing. Alliance VPF Growth and Income
Alliance VPF Premier Growth
Please keep this prospectus Dreyfus VIF Capital Appreciation
for future reference. Dreyfus VIF Small Cap
Janus Aspen Balanced
You can obtain more information about Janus Aspen Worldwide Growth
the contract by requesting a copy of the MFS VIT Emerging Growth
Statement of Additional Information MFS VIT Growth with Income
("SAI") dated May 1, 1999. The SAI is MFS VIT Research
available free by writing to Transamerica MSDW UF Fixed Income
Life Insurance and Annuity Company, MSDW UF High Yield
Annuity Service Center, MSDW UF International Magnum
401 N. Tryon St., Suite 700, OCC Accumulation Trust Managed
Charlotte, NC 28202 or OCC Accumulation Trust Small Cap
by calling 800-420-7749. Transamerica VIF Growth
Transamerica VIF Money Market
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.
</TABLE>
The SEC's web site is
http://_Hlt442600725w_Hlt442600725ww.sec.go_Hlt442253592v_Hlt442253592
Transamerica's web site is
http://www.transamerica.com
Neither the SEC nor any state securities commission has approved this investment
offering or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY.....................................................................................................5
CONDENSED FINANCIAL INFORMATION..............................................................................
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT...................................14
Transamerica Life Insurance and Annuity Company...................................................14
Published Ratings.................................................................................14
Insurance Marketplace Standards Association.......................................................15
The Variable Account..............................................................................15
THE PORTFOLIOS.............................................................................................15
THE CONTRACT...............................................................................................21
PURCHASE PAYMENTS..........................................................................................21
Purchase Payments.................................................................................21
Allocation of Purchase Payments...................................................................22
Free Look Option....................................................................................
Investment Option Limit...........................................................................22
ACCOUNT VALUE..............................................................................................23
How Variable Accumulation Units Are Valued........................................................23
TRANSFERS..................................................................................................23
Before the Annuity Date...........................................................................23
Other Restrictions................................................................................24
Telephone Transfers...............................................................................24
Dollar Cost Averaging.............................................................................24
Eligibility Requirement for Dollar Cost Averaging ................................................25
Automatic Asset Rebalancing.......................................................................25
After the Annuity Date............................................................................26
CASH WITHDRAWALS...........................................................................................26
Systematic Withdrawal Option......................................................................27
Automatic Payment Option (APO)....................................................................27
DEATH BENEFIT..............................................................................................28
Payment of Death Benefit..........................................................................28
Designation of Beneficiaries......................................................................29
Death of Owner or Joint Owner Before Annuity Date.................................................29
If Annuitant Dies Before Annuity Date.............................................................30
Death After Annuity Date..........................................................................30
Survival Provision................................................................................30
CHARGES, FEES AND DEDUCTIONS...............................................................................30
Administrative Charges............................................................................30
Mortality and Expense Risk Charge.................................................................31
Guaranteed Minimum Death Benefit Rider............................................................31
Guaranteed Minimum Income Benefit Rider...........................................................31
Premium Tax Charges...............................................................................31
Transfer Fee......................................................................................31
Option and Service Fees...........................................................................31
Taxes.............................................................................................32
Portfolio Expenses................................................................................32
Interest Adjustment...............................................................................32
Sales in Special Situations.......................................................................32
DISTRIBUTION OF THE CONTRACT.................................................................................
SETTLEMENT OPTION PAYMENTS.................................................................................32
Annuity Date......................................................................................33
Annuity Amount....................................................................................33
Guaranteed Minimum Income Benefit Rider...........................................................33
Settlement Option Payments........................................................................33
Election of Settlement Option Forms and Payment Options...........................................34
Payment Options...................................................................................34
Fixed Payment Option..............................................................................34
Variable Payment Option...........................................................................34
Settlement Option Forms...........................................................................34
FEDERAL TAX MATTERS........................................................................................36
Introduction......................................................................................36
Purchase Payments.................................................................................36
Taxation of Annuities.............................................................................37
Qualified Contracts...............................................................................39
Taxation of Transamerica .........................................................................41
Tax Status of Contract............................................................................41
Possible Changes in Taxation......................................................................42
Other Tax Consequences............................................................................42
PERFORMANCE DATA...........................................................................................42
YEAR 2000 ISSUE............................................................................................44
LEGAL PROCEEDINGS..........................................................................................44
LEGAL MATTERS..............................................................................................44
ACCOUNTANTS AND FINANCIAL STATEMENTS.......................................................................45
VOTING RIGHTS..............................................................................................45
AVAILABLE INFORMATION......................................................................................45
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS....................................................46
APPENDIX A.................................................................................................47
The General Account Options.......................................................................47
The Multi-Year Guarantee Period Options...........................................................47
APPENDIX B.................................................................................................49
Example of Variable Accumulation Unit Value Calculations..........................................49
Example of Variable Annuity Unit Value Calculations...............................................49
Example of Variable Annuity Payment Calculations..................................................49
APPENDIX C.................................................................................................50
Condensed Financial Information...................................................................64
APPENDIX D.................................................................................................63
Definitions.......................................................................................63
APPENDIX E.................................................................................................64
Disclosure Statement for Individual Retirement Annuities..........................................50
</TABLE>
<PAGE>
5
<PAGE>
9
SUMMARY
The Contract
The Transamerica Seriessm Transamerica Bountysm Variable Annuity is a flexible
purchase payment deferred annuity. It is designed to aid:
your long-term financial planning needs; and
your long-term 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, an
indirect wholly-owned subsidiary of Transamerica Corporation.
The principal office for Transamerica Life Insurance and Annuity Company is:
401 North Tryon Street
Charlotte, North Carolina
28202
We will issue the contract 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 terms owner and you refer to:
the owner or owners of the individual contract; or
the owner or owners of the certificate.
We 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. This date will be
the annuity date.
You may allocate all or portions of your purchase payments to:
one or more variable sub-accounts; or
the general account options.
Sub-Account Values Will Vary According to Investment Experience. The account
value before 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 you as 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, before the annuity date, you bear 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 $25,000.
Generally each additional purchase payment must be at least $1,000, unless an
automatic purchase payment plan is selected. See Purchase Payments on page 21.
The Variable Account
The variable account is a separate account, designated Separate Account VA-7,
that is subdivided into variable sub-accounts. Assets of each variable
sub-account are invested in a specified mutual fund portfolio. The variable
sub-accounts currently available for investment are:
Alger American Income & Growth Alliance VPF Growth & Income Alliance VPF Premier
Growth Dreyfus VIF Capital Appreciation Dreyfus VIF Small Cap Janus Aspen
Balanced Janus Aspen Worldwide Growth MFS VIT Emerging Growth MFS VIT Growth
with Income MFS VIT Research MSDW UF Fixed Income MSDW UF High Yield MSDW UF
International Magnum OCC Accumulation Trust Managed OCC Accumulation Trust Small
Cap Transamerica VIF Growth Transamerica VIF Money Market
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. For more information see Charges, Fees and Deductions on page 30, The
Portfolios on page 15, and the accompanying portfolio pro-spectuses.
a mortality and expense risk charge of 1.25% 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 we guarantee it
won't exceed a maximum effective annual rate of0.35%. We deduct an account fee
of currently $30 at the end of each contract year and upon surrender. Variable
Account Fee Table
The purpose of this table is to assist you in understanding the various costs
and expenses that you, as 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. You should consider the information below together with the narrative
provided under the heading Charges, Fees and Deductions on page 30 of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
<PAGE>
557
<TABLE>
<CAPTION>
Sales Load
<S> <C>
Sales Load Imposed on Purchase Payments 0%
Maximum Contingent Deferred Sales Load 0%
Contract Expenses
Transfer Fee, first 18 per contract year(1) 0
Fees For Other Services and Options(2) 0
Account Fee(3) 0
Riders, if elected(4)
GMDB 0.20%
GMDB & GMIB 0.40%
Variable Account Annual Expenses(5)
as a percentage of the variable accumulated value
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge(6) 0.15%
Total Variable Account Annual Expenses 1.40%
</TABLE>
Portfolio Expenses
as a percentage of assets after fee waiver and/or expense reimbursement(7)
<TABLE>
<CAPTION>
Total
Management Other Portfolio
Portfolio Fees Expenses Annual
Expenses
<S> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% 0.70%
Alliance VPF Growth & Income 0.63% 0.10% 0.73%
Alliance VPF Premier Growth 0.97% 0.09% 1.06%
Dreyfus VIF Capital Appreciation 0.75% 0.06% 0.81%
Dreyfus VIF Small Cap 0.75% 0.02% 0.77%
Janus Aspen Balanced 0.72% 0.02% 0.74%
Janus Aspen Worldwide Growth 0.65% 0.07% 0.72%
MFS VIT Emerging Growth 0.75% 0.10% 0.85%
MFS VIT Growth with Income 0.75% 0.13% 0.88%
MFS VIT Research 0.75% 0.11% 0.86%
MSDW UF Fixed Income 0.06% 0.64% 0.70%
MSDW UF High Yield 0.15% 0.65% 0.80%
MSDW UF International Magnum 0.15% 1.00% 1.15%
OCC Accumulation Trust Managed 0.78% 0.04% 0.82%
OCC Accumulation Trust Small Cap 0.15% 0.08% 0.88%
Transamerica VIF Growth 0.64% 0.21% 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, we have relied on the figures provided by the portfolios. We have no
reason to doubt the accuracy of that information, but we have not verified those
figures. These figures are for the year ended December 31, 1998. Actual expenses
in future years may be higher or lower than these figures.
Notes to Fee Table:
1. A transfer fee of $10 will be imposed for each transfer in excess of 18 in a
contract year.
2. We currently do not impose fees for any other services, or options.
However, we reserve the right to impose a fee for various services and
options including dollar cost averaging, systematic withdrawals, automatic
payouts, asset allocation and asset rebalancing.
The currentWe reserve the right to impose an account fee of up to $30 per
contract year. This fee will be waived for account values over $50,000.
4. If the owner elects a Rider, the rider fee will be deducted at the rate of
1/12 of the annual fee at the end of each contract month based on the
account value at that time. Note: The GMIB Rider can only be elected
together with the GMDB Rider.
5. The variable account annual expenses do not apply to the general account
options.
6. The current annual administrative expense charge of 0.15% may be increased
to, but no more than 0.35%.
7. 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 1998. 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 1999. Without
such waivers or reimbursements, the annual expenses for 1998 for certain
portfolios would have been, as a percentage of assets, as follows:
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fee Expenses Annual Expense
<S> <C> <C> <C>
Alliance VPF Premier Growth 1.00 0.09 1.09
Janus Aspen Worldwide Growth 0.67 0.07 0.74
MSDW UF Fixed Income 0.40 0.64 1.04
MSDW UF High Yield 0.50 0.65 1.15
MSDW UF International Magnum 0.80 1.00 1.80
Transamerica VIF Growth 0.75 0.21 0.96
Transamerica VIF Money Market 0.35 2.68 3.03
</TABLE>
There were no fee waivers or expense reimbursements during 1998 for the Alger
American Income and Growth Portfolio, Alliance VPF Growth and Income Portfolio,
Dreyfus VIF Capital Appreciation Portfolio, Dreyfus VIF Small Cap Portfolio,
Janus Aspen Balanced Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Growth with Income 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 $50,000 and, therefore, no
deduction 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 on page 31.
Example 1 shows expenses for contracts without the optional Riders based on fee
waivers and reimbursements for the portfolios for 1998. There is no guarantee
that any fee waivers or expense reimbursements will continue in the future.
Since there is no sales load, the expenses are the same whether or not the owner
annuitizes or surrenders the contract at the end of the applicable time period.
<PAGE>
<TABLE>
<CAPTION>
Example 1:
-------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------
--------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $21 $66 $113 $243
Alliance VPF Growth & Income $22 $67 $114 $246
Alliance VPF Premier Growth $25 $77 $131 $280
Dreyfus VIF Capital Appreciation $22 $69 $118 $254
Growth
Dreyfus VIF Small Cap $22 $68 $116 $250
Janus Aspen Balanced $22 $67 $115 $247
Janus Aspen Worldwide Growth $22 $66 $114 $245
MFS Emerging Growth $23 $70 $120 $258
MFS Growth & Income $23 $71 $122 $262
MFS Research $23 $71 $121 $260
MSDW UF Fixed Income $21 $66 $113 $243
MSDW UF High Yield $22 $69 $118 $253
MSDW UF International Magnum $26 $79 $136 $289
OCC Accumulation Trust Managed $23 $69 $119 $255
OCC Accumulation Trust Small Cap $23 $71 $122 $262
Transamerica VIF Growth $23 $70 $120 $258
Transamerica VIF Money Market $20 $63 $108 $233
---------------------------------------------------------------------------------------------------
Example 2: Example 2 shows expenses for contracts with the optional GMDB
Rider based on fee waivers and reimbursements for the portfolios for 1998.
There is no guarantee that any fee waivers or expense reimbursements will
continue in the future. Since there is no sales load, the expenses are the
same whether or not the owner annuitizes or surrenders the contract at the
end of the applicable time period.
-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
--------------------------------------
Alger American Income & Growth $23 $72 $123 $264
Alliance VPF Growth & Income $24 $73 $125 $267
Alliance VPF Premier Growth $27 $83 $141 $299
Dreyfus VIF Capital Appreciation $24 $75 $129 $275
Growth
Dreyfus VIF Small Cap $24 $74 $127 $271
Janus Aspen Balanced $24 $73 $125 $268
Janus Aspen Worldwide Growth $24 $72 $124 $266
MFS Emerging Growth $25 $76 $131 $279
MFS Growth & Income $25 $77 $132 $282
MFS Research $25 $77 $131 $280
MSDW UF Fixed Income $23 $72 $123 $264
MSDW UF High Yield $24 $75 $128 $274
MSDW UF International Magnum $28 $85 $145 $308
OCC Accumulation Trust Managed $25 $75 $129 $276
OCC Accumulation Trust Small Cap $25 $77 $132 $282
Transamerica VIF Growth $25 $76 $131 $279
Transamerica VIF Money Market $22 $69 $118 $253
-------------------------------------------------------------------------------------------------
<PAGE>
Example 3: Example 3 shows expenses for contracts with the optional GMDB
Rider and GMIB Rider based on fee waivers and reimbursements for the
portfolios for 1998. There is no guarantee that any fee waivers or expense
reimbursements will continue in the future. Since there is no sales load,
the expenses are the same whether or not the owner annuitizes or
surrenders the contract at the end of the applicable time period.
-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
--------------------------------------
Alger American Income & Growth $25 $78 $133 $284
Alliance VPF Growth & Income $26 $79 $135 $287
Alliance VPF Premier Growth $29 $89 $151 $319
Dreyfus VIF Capital Appreciation $26 $81 $139 $294
Growth
Dreyfus VIF Small Cap $26 $80 $137 $290
Janus Aspen Balanced $26 $79 $135 $288
Janus Aspen Worldwide Growth $26 $78 $134 $286
MFS Emerging Growth $27 $82 $141 $298
MFS Growth & Income $27 $83 $142 $301
MFS Research $27 $83 $141 $299
MSDW UF Fixed Income $25 $78 $133 $284
MSDW UF High Yield $26 $81 $138 $293
MSDW UF International Magnum $30 $91 $155 $327
OCC Accumulation Trust Managed $27 $81 $139 $295
OCC Accumulation Trust Small Cap $27 $83 $142 $301
Transamerica VIF Growth $27 $82 $141 $298
Transamerica VIF Money Market $24 $75 $128 $274
-------------------------------------------------------------------------------------------------
</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.
-------------------------------------
<PAGE>
5
General Account Options
The multi-year guarantee period options provide specified rates of
interest for specified terms of currently, three, five and seven years.
These rates are subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the
3% minimum rate.
The multi-year guarantee period
options may not be available in all
states. Refer to the contract for
limitations.
Investment Options Limit
Currently, you 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.
Transfers Before the Annuity Date
Before 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 on page 26.
Transfers out of a guarantee period before the end of the term may be
subject to an interest adjustment which may reduce interest credited to
the 3% minimum rate.
We currently impose a transfer fee of $10 for each transfer in excess of
18 made during the same contract year.
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 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.
We may delay payment of any
withdrawal from the general account
options for up to six months.
Withdrawals may be taxable, subject
to withholding and a penalty tax.
Withdrawals from qualified contracts
may be subject to severe
restrictions and, in certain
circumstances, prohibited. See
Federal Tax Matters on page 36.
Other Charges and Deductions
We deduct:
a mortality and expense risk
charge of 1.25% 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 we guarantee it
won't exceed a maximum
effective annual rate of 0.35%.
We do not currently deduct an account fee. However, we reserve the right
to deduct an account fee no more than $30 at the end of each contract
year.
After the annuity date, we will deduct the annual annuity fee of $30 in
equal installments from each periodic payment under the variable payment
option.
For each transfer in excess of 18
during a contract year, we will
impose a transfer fee of $10. See
Transfer Fee on page 31.
We do not currently deduct charges for premium taxes, including
retaliatory premium taxes, except for annuitizations. But we could impose
such charges in some jurisdictions. Depending on the applicability of such
taxes, we could deduct the charges from purchase payments, from amounts
withdrawn, and/or upon annuitization. See Premium Tax Charges on page 31.
In addition, amounts withdrawn or transferred out of a multi-year
guarantee period option before the end of its term may be subject to an
interest adjustment.
Guaranteed Minimum Death Benefit/ Guaranteed Minimum Income Benefit
Riders. If you elect the Guaranteed Minimum Death Benefit (GMDB) Rider or
both the GMDB and the Guaranteed Minimum Income Benefit (GMIB) Riders, we
will deduct the appropriate annual fee at the end of each contract month a
the rate of 1/12 times the annual fee times the account value. The annual
fee for the GMDB is 0.20% of the account value. The annual fee for both
the GMDB/GMIB Riders is 0.40% of the account value. You may elect the GMIB
Rider only if you also elect the GMDB Rider. These riders must be elected
before the contract effective date and cannot be reinstated if cancelled.
These Riders are not available in all states.
Currently, we do not deduct fees for any other services or options under
the contract. However, we reserve the right to impose fees to cover
processing for certain services and options in the future. This may
include dollar cost averaging, systematic withdrawals, automatic payouts,
asset allocation and asset rebalancing.
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 an annuitant's 85th birthday or the
tenth contract anniversary, whichever occurs last. The annuity date may
never be later than an annuitant's 100th birthday. Certain qualified
contracts may have restrictions as to the annuity date and the types of
settlement options available.
Four settlement options are
available under the contract:
1. life annuity;
2. life and contingent annuity;
3. life annuity with period
certain; or
4. joint and survivor annuity.
<PAGE>
9
<PAGE>
7 If the GMIB Rider is elected, a minimum income benefit
is also available. See Guaranteed Minimum Income Benefit Rider on page 33.
life annuity; life and contingent annuity; life annuity with period
certain; or joint and survivor annuity.
Death of Owner Before Annuity Date
If you, as the owner, or the joint owner, die before the annuity date, the
death benefit will be the account value.
If you elected the GMDB Rider, and you or the joint owner die before the
annuity date and before you or a joint owner turn 85, the death benefit
will be the greatest of three amounts:
1. the account value;
2. the sum of all purchase payments less withdrawals taken and
applicable premium tax charges; or
3. the highest account value on
any contract anniversary prior
to the earlier of your or the
joint owner's 85th birthday,
plus purchasepayments made,
less withdrawals taken and
premium tax charges since that
contract anniversary.
If you elected the GMDB Rider, and you or the joint owner die before the
annuity date and after your or the joint owner's 85th birthday, the death
benefit will be the greater of two amounts:
1. the account value; or
2. the highest account value on
any contract anniversary prior
to the earlier of your or the
joint owner's 85th birthday,
plus purchase payments made,
less withdrawals taken and
premium tax charges since that
contract anniversary.
The death benefit will generally be paid within seven days of receipt of
the required proof of death of an owner and election of the method of
settlement or as soon thereafter as we have 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. The death
benefit may be paid as either a lump sum or as a settlement option.
Amounts in the multi-year guarantee period options will not be subject to
interest adjustments in calculating the death benefit. If the owner is not
a natural person, we will treat the annuitant as the owner for purposes of
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. Taxable events, for example, would occur with a withdrawal or
settlement option payment, or as the result of 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. Withholding is
mandatory for certain qualified contracts. In addition, a federal penalty
tax may apply to certain distributions. See Federal Tax Matters on page
36.
Right to Cancel
As the owner, you have the right to examine the contract for a limited
period, known as a "free look period." You may cancel the contract during
this period by delivering or mailing a written notice of cancellation, or
sending a telegram to our Service Center. You must return the contract
before midnight of the tenth day after receipt of the contract, or longer
in some situations or 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 us. Unless otherwise required by law, we will refund the purchase
payments allocated to any general account option, minus any withdrawals,
plus the variable accumulated value as of the date your written notice to
cancel and your contract are received by us. See Purchase Payments on page
21.
Questions
We will answer your questions about procedures or the contract if you
write to:
The Transamerica Annuity Service
Center
P.O. Box 31848
Charlotte, North Carolina
28231-1848
Or call us at: 1- 800-258-4260
All inquiries should include the contract number and the owner's name.
Please 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. Please refer to this prospectus and the
portfolio prospectuses for more detailed information. With respect to
qualified contracts, 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. These limits or restrictions
may be 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 on page 36.
CONDENSED FINANCIAL INFORMATION
You will find condensed financial information on the variable account in
Appendix C on page __. You will find the full financial statements and
report of independent auditors for the variable account in the Statement
of Additional information.
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and
Annuity Company
Transamerica Life Insurance and Annuity Company, or Transamerica, is a
stock life insurance company incorporated under the laws of the State of
California in 1966. The Company moved to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies.
The address of Transamerica is 401 North Tryon Street, Charlotte, North
Carolina 28202.
On February 18, 1999, Transamerica Corporation announced that it had
signed a merger agreement with AEGON N.V., one of the world's leading
international insurance groups, providing for AEGON's acquisition of all
of Transamerica's outstanding common stock for a combination of cash and
AEGON stock worth $9.7 billion. The closing of the transaction is expected
to occur during the summer of 1999.
Transamerica Corporation indirectly
owns the issuing company,
Transamerica Life Insurance and
Annuity Company.
Published Ratings
Transamerica may from time to time publish its ratings in advertisements,
sales literature and reports to owners. We receive ratings and other
information from 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. These ratings should not be considered as bearing on the
investment performance of the variable account. Ratings and investment
performance are unrelated. Each year the A.M. Best Company reviews the
financial status of thousands of insurers, resulting in the assignment of
Best's Ratings. These ratings reflect A.M. Best's 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 provided by the companies named above.
These opinions relate to how well they have determined Transamerica is
prepared, from a financial standpoint, to meet our insurance and annuity
obligations. The terms of our obligations are stated within the general
account options of this contract. These ratings do not reflect the
investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
Insurance Marketplace Standards
Association
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards
of marketplace behavior and enhance credibility with consumers. As a
result, the industry established the Insurance Marketplace Standards
Association (IMSA).
As an IMSA member, we agree to follow a set of standards in our
advertising, sales and service for individual life insurance and annuity
products. The IMSA logo, which you will see on our advertising and
promotional materials, demonstrates that we take our commitment to ethical
conduct seriously.
The Variable Account
Separate Account VA-7 of Transamerica, also referred to as the variable
account was established by Transamerica as a separate account under the
laws of the State of North Carolina following June 11, 1996, resolutions
adopted by Transamerica's Board of Directors. The variable account is
registered with the Securities and Exchange Commission, hereafter referred
to simply as the Commission under the Investment Company Act of 1940 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. This is the case 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 17 variable sub-accounts available
under the contract, each of which invests solely in a specific
corresponding portfolio. At our discretion, we may make changes to the
variable sub-accounts.
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 objective follow. The management fees listed below are
specified in each portfolio adviser's contract 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% of its available capital,
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. It may invest up to
100% of its assets in these same instruments 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, this portfolio may invest in other types of
securities, such as bonds, convertible bonds, preferred stock and
convertible preferred stocks. The portfolio managers will purchase and
sell portfolio securities at times and in amounts as management deems
advisable in light of market, economic and other conditions.
Adviser: Alliance Capital Management
L.P.
Management Fee: 0.63%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund,
Inc., seeks growth of capital by pursuing aggressive investment policies.
Since this portfolio's investments will be made based upon their potential
for capital appreciation, current income will not be a high priority for
this portfolio. The portfolio will invest mainly in the equity securities,
such as common stocks, securities convertible into common stocks and
rights and warrants to subscribe for or purchase common stocks. Equity
investments will be of a limited number of large, carefully selected,
high-quality U.S. companies. In the Adviser's judgement, the companies
chosen will be those which are likely to achieve superior earnings growth.
Approximately 25 companies believed by the Adviser to show superior
potential for capital appreciation will usually constitute approximately
70% of the portfolio's net assets at any one time. 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.
Under normal circumstances the portfolio will 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: 1.00%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund
is a diversified portfolio seeking long-term capital growth and
preservation of principal. Current income is a secondary investment
objective. During periods of strong market momentum, the portfolio will
invest aggressively to increase its holdings in: common stocks of foreign
and domestic issuers, common stocks with warrants attached and debt
securities of foreign governments. Generally, the portfolio will invest in
large cap companies, defined as those with market capitalizations
exceeding $500 million. These companies will also be selected on the basis
of their potential to achieve predictable, above average 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 by investing principally in common stocks of
domestic and foreign issuers. 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.
Each company selected for this portfolio will be characterized by its new
or innovative products or services or processes which are expected to
propel 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 current income.
Normally, this diversified portfolio invests 40-60% of its assets in
securities selected primarily for their growth potential. The balance of
its holdings is invested in securities selected primarily for their
capacity to generate income. Such holdings are likely to consist of bonds
and preferred stocks. Typically, at least 25% of this portfolio is made up
of fixed-income securities.
Adviser: Janus Capital Corporation.
Management Fee: 0.72% 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 origin 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: 0.67% 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 investment policy provides for investing
at least 80% of the trust's assets in common stocks during normal market
circumstances. Companies that the Adviser selects for inclusion are those
which are thought to be capable of becoming major enterprises. These
emerging growth companies will be characterized chiefly by their superior
growth potential. 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. The Adviser will use this strategy
when the values of these securities warrant such purchases. Attractive
prices or certain economic environments may provide strategic
opportunities for such purchases. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment
grade" and commonly known as junk bonds. It may also invest in comparable
unrated securities. The Adviser will purchase these types of securities
when they present an opportunity for greater appreciation then investment
grade securities, and the risk factors are comparable to those of
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% of its net assets in foreign
securities, including emerging market securities and Brady Bonds, which
are not traded on a U.S. exchange. Generally, however, it expects to
invest not more than 15% of its net assets in these securities.
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 and preferred stocks,
bonds, warrants or rights that are convertible into stocks, and depository
receipts. These securities may be listed on securities exchanges, traded
in various over-the-counter markets or have no organized markets.
Consistent with the investment objective and policies described above, the
portfolio may also invest up to 75% of its net assets in foreign
securities, including emerging market securities and Brady Bonds, which
are not traded on a U.S. exchange. Generally, however, it expects to
invest no more than 15% of its net assets in these securities.
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. It will 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
and preferred stocks, bonds, warrants or rights that are convertible into
stocks, and depository receipts. 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 that
are purchased for their income production capability rather than for
growth. Such securities may also offer some growth opportunity in addition
to income. The Adviser selects both growth stocks and income issues on the
basis that they are issued by innovative, well-managed companies which
demonstrate the capability for better than average growth. The portfolio's
non-convertible debt investments, if any, may consist of investment grade
securities. No more than 10% of the portfolio's net assets will consist of
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 MSDW 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
agency bonds, 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 MSDW 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 MSDW Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in equity
securities of non-U.S. issuers domiciled in EAFE countries such as those
of Europe, Australia and the Far East. 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, we refer to these as
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: MSDW Investment 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. 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 necessary to preserve capital. In addition, the portfolio
may also purchase foreign securities. These foreign securities must be
listed on a domestic or foreign securities exchange or represented by
American depository receipts.
Adviser: OpCap Advisers. 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 of stocks
issued by small companies. It will consist 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. The portfolio's holdings may also
include options, warrants, bonds, notes and convertible bonds. In
addition, the portfolio may also purchase foreign securities. Foreign
securities must listed on a domestic or foreign securities exchange or be
represented by American depository receipts.
Adviser: OpCap Advisers. Management
Fee: 0.15% 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 through investment in common stocks of
listed and over the counter issues. 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 dictate otherwise, the manager tries
to keep the Portfolio fully invested in equity securities. attempting to
enter and exit the market at strategic times is not a commonly used
strategy for this portfolio. However, 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.
These include: 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 and
to other insurance companies as well, there is a possibility of a material
conflict. If such a conflict arises between the interests of the variable
account and one or more other separate accounts investing in the
portfolios, the affected insurance companies will take steps to resolve
the matter. These steps may include stopping their separate accounts from
investing in the portfolios. See the portfolios' prospectuses for greater
detail on this subject.
You can find additional information concerning the investment objectives
and policies of all of the portfolios, the investment advisory services
and administrative services and charges in the current prospectuses for
the portfolios which accompany this prospectus.
Read the prospectuses of the portfolios which interest you carefully
before you make any decision concerning how you will invest in, or
transfer monies among, the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or
their advisers, in varying amounts. These payments 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. For this reason, we cannot
guarantee that any of the variable sub-accounts offered under this
contract or any of the portfolios will always be available to you for
investment purposes. We retain 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. We may also substitute shares of another
portfolio or of another investment company for the shares of any
portfolio. We would do this if the shares of the portfolio are no longer
available for investment or if, in our judgment, investment in any
portfolio would be inappropriate in view of the purposes of the variable
account. To the extent required by the 1940 Act, if we substitute shares
in a variable sub-account that you own, we will provide you with advance
notice. We will also seek advance permission from the Commission. This
does not prevent the variable account from purchasing other securities for
other series or classes of variable annuity contracts. Nor does it prevent
the variable account from effecting an exchange between series or classes
of variable contracts on the basis of requests made by owners.
We reserve the right to create new variable sub-accounts for the contracts
when, in our sole discretion, marketing, tax, investment or other
conditions warrant that we do. Any new variable sub-accounts will be made
available to existing owners on a basis to be determined by us. Each
additional variable sub-account will purchase shares in a mutual fund
portfolio or other investment vehicle. We may also eliminate one or more
variable sub-accounts if, in our sole discretion, marketing, tax,
investment or other conditions warrant that we do. So, in the event any
variable sub-account is eliminated, we 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, we may make the changes in the
contract that we deem necessary or appropriate to reflect substitutions or
changes. Furthermore, if we believe it to be in the best interest 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. It may also be de-registered under such Act in the event
that registration is no longer required. Finally, it may also 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. They will
also be described in the individual contract or in the certificate and
group contract. However, we reserve the right to modify the individual
contract and the group contract and its underlying certificates if
required by law. We also reserve the right to give the owner the benefit
of any federal or state statute, 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, also
referred to as 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, also referred to as 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, with no
additional premiums; 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.
Ownership
As the owner, you are entitled to the rights granted by the contract. If
you die, your rights belong to the joint owner, if any, and then to your
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, as opposed to a trust,
corporation or other legal entity, 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. We reserve the right to reject
any change of annuitants 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.
For each contract, a different account will be established and values,
benefits and charges will be calculated separately. The various
admini-strative rules described below will apply separately to each
contract, unless otherwise noted.
Purchase Payments
All purchase payments must be paid to our Service Center. A confirmation
will be issued to you, as the owner, upon the acceptance of each purchase
payment.
The initial purchase payment must be at least $25,000.
Your contract will be issued and your initial purchase payment generally
will be credited within two business days after the receipt of sufficient
information to issue a contract and the initial purchase payment at our
Service Center. For us to issue you a contract, you must provide
sufficient information in a form acceptable to us. We reserve the right to
reject any purchase payment or request for issuance of a contract.
Normally we will not issue contracts to owners, joint owners, or
annuitants more than 90 years old. Nor will we normally accept purchase
payments after any owners', or annuitants' if non-individual owner, 91st
birthday. In our discretion we 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 because the information is
incomplete, or for any other reason, we will contact you. We will explain
the reason for the delay and will refund the initial purchase payment
within five business days. If you consent to us retaining the initial
purchase payment we will credit it to the variable sub-account of your
choice as soon as the requirements are fulfilled.
You may make additional purchase payments at any time before the annuity
date. They must be at least $1,000 each, or at least $100 if made through
an automatic purchase payment plan. If you elect to use this option,
additional purchase payments will be automatically deducted from your bank
account and allocated to the contract. In addition, minimum allocation
amounts apply. See Allocation of Purchase Payments on page 22. Additional
purchase payments are credited to the contract as of the date we receive
payment from you. Total purchase payments for any contract may not exceed
$1,000,000 without our prior approval.
In no event may the sum of all purchase payments for a contract during any
taxable year exceed the limits imposed by any applicable federal or state
law, rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract.
You may allocate purchase payments 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 $1,000 to each multi-year guarantee
period. We 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. You may change the
allocation percentages for additional purchase payments at any time by
submitting a request for such change to our Service Center in a form and
manner acceptable to us. Any changes to the allocation percentages are
subject to the limitations above. Any change will take effect with the
first purchase payment we receive which accompanies your request. If we
receive your request separately, all purchase payments arriving after it
will be subject to its terms. Your request will continue in effect until
you change it again.
Free Look Option
If you exercise the free look option, unless otherwise required by law, we
will refund:
the purchase payment; or
the greater of the purchase payment
allocated to any general
account option, minus any
withdrawals; plus
2. the variable accumulated value as of the date your written notice to
cancel and your contract are received by us.
In certain jurisdictions, under certain conditions, we are legally
required to return either:
1. the purchase payments, minus
any withdrawals; or
2. the greater of purchase payments minus any withdrawals, or the
account value.
Any initial allocation you make 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 allocations you make to the money market
variable sub-account will automatically be transferred at the end of the
free-look period plus 5 days according to your requested allocation. This
transfer will not count against the 18 transfers allowed free of charge
during the first contract year.
Investment Option Limit
Currently, you may not allocate monies 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 and
each duration of a guarantee period under the multi-year guarantee period
options that ever received a transfer or purchase payment allocation
counts as one towards this total of eighteen limit. We may waive this
limit in the future.
For example, if you make an allocation to the money market variable
sub-account and later transfer all of the funds out of this money market
variable sub-account, this would still count as one transfer for the
purposes of the limitation, even if it held no value. If you transfer 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
you select a guarantee period and renew for the same term, the count will
be one; but if you renew 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 how investments within selected
portfolios performed. The variable accumulated value will also reflect
deductions for charges and fees. A valuation period 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.
How Variable Accumulation Units Are
Valued
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 we receive 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 can go either 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 multi-year guarantee
period options.
Transfers among the variable sub-accounts and the general account options
may be made by submitting a request to our Service Center in a form and
manner acceptable to us. The transfer request must specify:
1. the variable sub-accounts
and/or the general account
options from which your
transfer is to be made;
2. the amount of your transfer;
and
3. the variable sub-accounts
and/or general account options
to receive the transferred
amount.
The minimum amount which you may transfer from the variable sub-accounts
and the general account options is $1,000. Transfers among the variable
sub-accounts are also subject to the terms and conditions imposed by the
portfolios.
When a transfer is made from a multi-year guarantee period before the end
of its term, the amount transferred may be subject to an interest
adjustment. 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.
We currently impose a transfer fee of $10 for each transfer in excess of
18 made during the same contract year. We reserve the right to waive the
transfer fee or vary the number of transfers without charge. We may also
choose not to count transfers under certain options or services for
purposes of the allowed number without charge. See Other Restrictions
below for additional limitations regarding transfers. A transfer generally
will be effective on the date the request for transfer is received by our
Service Center.
If a transfer reduces the value in a variable sub-account or multi-year
guarantee period to less than $1,000, then we reserve the right to
transfer the remaining amount along with the amount requested to be
transferred. We will do this according to the transfer instructions
provided by you. Under current law, there will not be any tax liability
for transfers within the contract.
Other Restrictions
We reserve the right without prior notice to modify, restrict, suspend or
eliminate the transfer privileges, including telephone transfers, at any
time and for any reason. For example, restrictions may be necessary to
protect owners from adverse impacts on portfolio management of large
and/or numerous transfers by market timers or others. We have determined
that the movement of significant variable sub-account values from one
variable sub-account to another may prevent the underlying portfolio from
taking advantage of investment opportunities. This is likely to arise when
the volume of transfers is high, since each 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, we reserve the right to
require that all transfer requests be made by the owner and not by a third
party holding a power of attorney. We also require that each transfer you
request be made by a separate communication to us. We also reserve the
right to require that each transfer request be submitted in writing and be
manually signed by owners. We may choose not to allow telephone or
facsimile transfer requests. Telephone Transfers
We will allow telephone transfers if the owner has provided proper
authorization for such transfers in a form and manner acceptable to us. We
reserve the right to suspend telephone transfer privileges at any time,
for some or all contracts, for any reason. Withdrawals are not permitted
by telephone.
We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures, we
will not be liable for any losses due to unauthorized or fraudulent
instructions. In the opinion of certain government regulators, we may be
liable for such losses if it does not follow those procedures. The
procedures we will follow for telephone transfers may include requiring
some form of personal identification before acting on instructions
received by telephone, providing written confirmation of the transaction,
and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Before the annuity date, you as the owner may request that amounts be
automatically transferred on a monthly basis from a source account, which
is currently the money market sub-account, to any of the variable
sub-accounts. You can accomplish this by submitting a request to our
Service Center in a form and manner acceptable to us. Other source
accounts may be available; call our Service Center for information
regarding availability.
You may only dollar cost average from one source account at a time. The
transfers will begin when you request, but no sooner than one week
following, receipt of such request. For new variable annuity contracts,
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 which allows 5 days
for delivery.
Transfers will continue for the number of consecutive months which you
selected unless:
1. you terminate the transfers;
2. we automatically terminate the transfers because there are
insufficient amounts in the source account; or
3. for other reasons that are described in the election form.
You may request that monthly transfers be continued for a specific length
of time. You can do this by giving notice to our Service Center in a form
and manner acceptable to us within 30 days before the last monthly
transfer. If you do not make a request to continue the monthly transfers,
this option will terminate automatically with the last transfer at the end
of the length of time you initially designated.
Eligibility Requirements for Dollar
Cost Averaging
In order to be eligible for dollar cost averaging, the following
conditions must be met:
1. the value of your source
account must be at least $5,000;
2. the minimum amount that you can transfer out of the source account is
$250 per month; and
3. the minimum amount you can transfer 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.
Currently, we do not charge for the dollar cost averaging option nor do
they count toward the number of transfers allowed without charge per
contract year. We may charge in the future for dollar cost averaging.
Dollar cost averaging transfers may not be made to or from any multi-year
guarantee period option.
Dollar cost averaging may not be elected at the same time that automatic
asset rebalancing is in effect.
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
percentages which you initially defined. As the owner, you may instruct us
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 your instructions to us and accepted by us.
You may elect to have the rebalancing done on an annual, semi-annual or
quarterly basis. You 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 multi-year guaranteed period
option cannot be rebalanced.
You may elect to establish, change or terminate the automatic asset
rebalancing by submitting a request to our Service Center in a form and
manner acceptable to us. Automatic asset rebalancing currently will not
count towards the number of transfers without charge in a contract year.
We reserve 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. We may charge for this service in the
future, 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, you may make transfers among
variable sub-accounts after the annuity date by giving a written request
to our 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
If you are the owner of a non-qualified contract you may withdraw all or
part of the cash surrender value at any time before the annuity date by
giving a written request to our 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. The cash surrender value is equal to
the account value, minus any account fee, interest adjustment 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. It must be received along with all
completed forms required at that time by us. 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 our Service Center to
withdraw amounts from specific variable sub-accounts and/or from the
general account options. If you do not specify, the withdrawal will be
taken pro rata from the account value.
A partial withdrawal request cannot be fulfilled if it would reduce your
account value to less than $2,000. In such instances, you will be
notified.
Any withdrawal requests, including surrender requests, generally will be
processed as of the end of the valuation period during which the request
and all completed forms are received. We will pay any cash withdrawal,
settlement option payment or lump sum death benefit due from the variable
account and process of any transfers within seven days from the date we
receive your request. However, we may postpone such payment if:
the New York Stock Exchange is closed for other than usual weekends
or holidays, or trading on the Exchange is otherwise restricted;
an emergency exists as defined
by the Commission, or the
Commission requires that
trading be restricted; or
the Commission permits a delay
for the protection of owners.
The withdrawal request will be effective when we receive all required
withdrawal request forms. Payments to you for any monies derived from a
purchase payment which you made by check may be delayed until your check
has cleared your bank.
When you make a withdrawal from a multi-year guarantee period before the
end of its term, the amount you withdraw may be subject to an interest
adjustment.
We may delay payment of any withdrawal from the general account options
for up to six months after we receive the request for such withdrawal. If
we delay payment for more than 30 days, we will pay interest on the
withdrawal amount up to the date of payment.
Since you as the owner assume the investment risk for all amounts in the
variable account and because certain withdrawals are subject to charges,
the total amount paid upon surrender of your contract may be more or less
than the total purchase payments.
As owner, you 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 before the annuity date. The
tax consequences of a withdrawal or surrender are discussed later in this
prospectus.
Systematic Withdrawal Option
Before the annuity date, you may elect to have withdrawals automatically
made from one or more variable sub-accounts 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-accounts and/or the general
account in the percentage allocations you specify. Unless you specify
otherwise, withdrawals will be pro rata from account value. You cannot
make systematic withdrawals from a variable sub-account from which dollar
cost averaging transfers are being made. Likewise, systematic withdrawals
cannot be used at the same time that the automatic payment option is in
effect. If you take systematic withdrawals from the general account,
applicable interest adjustments may apply to withdrawals from the
guarantee periods.
To be eligible for the systematic withdrawal option, the account value
must be at least $25,000 at the time of election. The minimum monthly
amount that can be withdrawn is $100. Currently you can elect any amount
over $100 to be withdrawn systematically. You may also make partial
withdrawals while receiving systematic withdrawals.
The withdrawals will continue indefinitely unless you terminate them. If
you choose to terminate this option, you may not elect to use it again
until the end of the next 12 full months.
We reserve 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, before age 59 1/2, subject to a
10% federal tax penalty.
Automatic Payout Option
Before the annuity date, for certain qualified contracts, you may elect
the automatic payout option, hereafter referred to simply as APO to
satisfy minimum distribution requirements under the following sections of
the Code:
401(a)(9);
403(b); and
408(b)(3).
For IRAs and SEP/IRAs this option may be elected no earlier than six
months before the calendar year in which you, as the owner, attain age 70
1/2. Payments may not begin earlier than January of such calendar year.
For other qualified contracts, APO can be elected no earlier than six
months before the later of:
a) when you attain age 70 1/2; or
b) when you retire 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
your 84th birthday.
Other Automatic Payout Option Information. Withdrawals will be from the
variable sub-accounts and/or the general account you designate in the
percentage allocations you specify. If you do not indicate otherwise,
withdrawals will be pro rata from account value. You can not make
withdrawals from a variable sub-account from which you have designated
that dollar cost averaging transfers be made. This calculation and APO are
based solely on the value in this contract. If you take APO withdrawals
from the general account, applicable interest adjustments may apply to
withdrawals from the guarantee periods.
To be eligible for this option, you must meet the following conditions:
1. your account value must be at
least $25,000 at the time you
select this option; and
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 you terminate them. 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 death occurs before the annuity date and before the owner's or joint
owner's 85th birthday, the death benefit will be equal to account value.
If the GMDB Rider is elected and if death occurs before the annuity date
and prior to the 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, less withdrawals taken, adjusted as
described below, and the 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 taken,
adjusted as described below,
and applicable premium tax
charges since that contract
anniversary.
If the GMDB Rider is elected and if death occurs before the annuity date
and after either the owner's or joint owner's 85th birthday, the death
benefit will be equal to the greater of:
a) the account value; or
b) 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 taken,
adjusted as described below,
and any applicable premium tax
charges since that contract
anniversary.
The amount of the death benefit under the GMDB Rider will be reduced for
any withdrawal taken. The amount of that reduction will depend upon
whether the account value is more or less than the guaranteed minimum
death benefit on the date of withdrawal. If the account value is equal to
or more than the guaranteed minimum death benefit, the benefit will be
reduced by the dollar amount of any withdrawals. If the account value is
less than the guaranteed minimum death benefit, the benefit will be
reduced proportionately to the reduction in the account value. For
example, if the withdrawal reduces the account value by 20%, then the
guaranteed minimum death benefit will also be reduced by 20%.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death of
an owner. Once we have received this proof, and the beneficiary has
selected a method of settlement, the death benefit generally will be paid
within seven days, or as soon thereafter as we have sufficient information
to make the payment.
The death benefit will be determined as of the end of the valuation period
during which our Service Center receives:
a) proof of death of the owner or
joint owner; and
b) 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 an owner's death. No 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 portfolios. For this reason, 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
As owner, you may select one or more beneficiaries by designating the
person or persons to receive the amounts payable under the contract. The
individuals you designate will receive the percentage you establish if:
you die before the annuity
date and there is no joint
owner; or
you die after the annuity date and settlement option payments have
begun under a selected settlement option that guarantees payments for
a certain period of time.
If a beneficiary dies before the owner, that beneficiary's interest in the
annuity will end upon his or her death.
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 the contract unless the owner
gives us other instructions at the time the beneficiaries are named.
We 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, the contract
will remain in force with the annuitant's surviving spouse as the new
annuitant if:
the contract is owned by a
trust; and
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 persons 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:
The joint owner, if any; or
The beneficiary, if any.
If the owner is not the annuitant:
The joint owner, if any; or
The beneficiary, if any; or
The annuitant; or
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 the
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 than 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 or persons selects another option as provided
below.
In lieu of the automatic form of death benefit specified above, the person
or persons to whom the death benefit is payable may elect to receive it:
In a lump sum; or
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 before 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 the 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.
Administrative Charges
Account Fee. At the end of each contract year and before the annuity date,
we reserve the right to deduct an annual account fee as partial
compensation for expenses relating to the issue and maintenance of the
contract and the variable account. The account fee may be imposed upon 30
days advance written notice, but in no event may it exceed $30 per
contract year. The account fee will be deducted on a pro rata basis, based
on values, from the account value. The fee deductions will be based on
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 multi-year guarantee period option. 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 you, as owner,
surrender the contract.
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. This fee is $2.50 each month if
monthly payments are made. This fee will not be changed. No annuity fee
will be deducted from fixed payments. This fee may be waived.
Administrative Expense Charge. We also make a daily deduction for the
administrative expense charge from the variable account before and after
the contract effective date at an effective current annual rate of 0.15%
of assets held in each variable sub-account to reimburse us for
administrative expenses. We have the ability in most states to increase or
decrease this charge, but the charge is guaranteed not to exceed 0.35%. We
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
We deduct a charge for bearing certain mortality and expense risks under
the contracts. This is a daily charge at an effective annual rate of 1.25%
of the assets in the variable account. We guarantee that this charge of
1.25% 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 us. The
mortality risks assumed by us arise from our 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 before the annuity date.
The expense risk assumed by us is the risk that our 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, we will bear these losses. If this charge is more
than sufficient, any excess will accrue to us. Currently, we expect a
profit from this charge.
The cost of contract distribution will be met from our general corporate
assets which may include amounts, if any, derived from the mortality and
expense risk charge.
Guaranteed Minimum Death Benefit
Rider
If you, as the owner, elected the Guaranteed Minimum Death Benefit (GMDB)
Rider, 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 0.20% of the
account value at that time. The fee is deducted from each variable
sub-account on a pro rata basis 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
adjustments will apply. We reserve the right to waive the interest
adjustment.
Guaranteed Minimum Income Benefit
Rider
You may only elect the Guaranteed Minimum Income Benefit (GMIB) Rider
together with the GMDB Rider. The total fee we will deduct at the end of
each month is 1/12 of 0.40% of the account value at that time. The fee for
the GMDB/GMIB Riders is deducted from each variable sub-account on a pro
rata basis 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 adjustments will
apply. We reserve the right to waive the interest adjustment.
Premium Tax Charges
Currently there is no charge for premium taxes except upon annuitization.
However, we may be required to pay premium or retaliatory taxes currently
ranging from 0% to 5%. We reserve 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 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
We currently impose a fee for each transfer in excess of the first 18 in a
single contract year. We will deduct the charge from the amount
transferred. This fee is $10 and will be used to help cover our costs of
processing transfers. We reserve 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
We reserve 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, we reserve the right to
deduct charges in the future for federal, state, and local taxes or the
economic burden resulting from the application of any tax laws that we
determine to be attributable to the contracts.
Portfolio Expenses
The value of the assets in the
variable account reflects the value
of portfolio shares and therefore
the fees and expenses paid by each
portfolio. A complete description of
the fees, expenses, and deductions
from the portfolios are found in the
portfolios' prospectuses.
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from a multi-year guaranteed period option, see
The General Account Options in Appendix A of this prospectus.
Sales in Special Situations
We may sell the contracts in special situations that are expected to
involve reduced expenses for us. These instances may include:
sales in certain group
arrangements, such as employee
savings plans;
sales to current or former
officers, directors and
employees, and their families,
of Transamerica and its
affiliates;
sales to officers, directors,
and employees, and their
families, and the portfolios'
investment advisers and their
affiliates; or
sales to officers, directors, employees and sales agents also known
as registered representatives, and their families, and broker-dealers
and other financial institutions that have sales agreements with us
to sell the contracts.
In these situations:
1. the mortality and expense risk
charge or administrative
charges may be reduced or
waived; and/or
2. 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.
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 1%, 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.
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 you.
You select the annuity date and you may change the date from time to time
by giving notice to our Service Center in a form and manner acceptable to
us. Notice of each change must be received by our Service Center at least
30 days before 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 an annuitant's
100th 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.
Annuity Amount
Unless you elected the GMIB Rider, the annuity amount is the account
value, minus any interest adjustment and any applicable premium tax
charges.
Guaranteed Minimum Income Benefit
Rider
You may elect the GMIB Rider, but only if you also elect the GMDB Rider.
You may only elect the GMIB Rider before the contract effective date and
only if you and the joint owner are less than 80 years old. No change in
owners or annuitants is allowed while the GMIB Rider is in effect. You may
cancel the GMIB Rider, but after cancellation, it may not be reinstated.
The guaranteed minimum income benefit before the contract anniversary on
which you or the joint owner reaches age 85 will be the settlement option
that can be purchased with the amount that is the greatest of:
(a) the account value;
(b) all purchase payments, less
withdrawals taken and
applicable premium tax charges;
and
(c) the highest account value on
any contract anniversary before
your or the joint owner's 85th
birthday, plus purchase
payments mad
since the last contract
anniversary, and less
withdrawals taken since that
anniversary, and applicable
premium tax charges.
Between the contract anniversary on which you or the joint owner reaches
age 85 and the contract anniversary on which you or the joint owner
reaches age 90, the GMIB is the settlement option which can be purchased
with the amount calculated before either of you reach 85 plus purchase
payments and less withdrawals taken.
After the contract anniversary on which you or the joint owner reaches age
90, the GMIB is the settlement option that can be purchased with the
account value.
The guaranteed minimum death benefit will be reduced each time you take a
withdrawal. The amount of the reduction depends on whether the account
value is more or less than the GMIB amount on the date of withdrawal. If
the account value is equal to or more than the GMIB, the GMIB amount will
be reduced by the dollar amount of the withdrawal. If the account value is
less that the GMIB amount, the GMIB will be reduced proportionately to the
reduction in the account value. For example, the withdrawal reduces the
account value by 20%, the GMIB will also be reduced by 20%.
The settlement option that you may purchase with the GMIB Rider is a life
and 10 year period certain annuity. If the life expectancy of the oldest
owner is less than 10 years as specified by the life expectancy table used
by the IRS, then the settlement option will be a life and period certain
annuity in which the period certain is the life expectancy of the oldest
owner. The actuarial basis for the annuity rates under this option is the
1983 IAM Table, with projection G, with an interest rate of 3% per year
for males, females or unisex, as appropriate.
You may exercise a settlement option under the Rider only during the 30
days following each contract anniversary beginning with the seventh
contract anniversary and only between the oldest owner's 60th and 90th
birthdays.
The GMIB will be determined as of
the end of the valuation period
during which our service center
receives the written notice of the
settlement option elected by you.
Settlement Option Payments
If the amount of the monthly payment from the settlement option you
selected would result in a monthly settlement option payment of less than
$150, or if the annuity amount is less than $5,000, we reserve 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.
You may choose from the settlement options below. We 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 and in some
jurisdictions. We reserve the right to ask for satisfactory proof of the
annuitant's or joint annuitant's age. We 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.
You 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, you may, by
written request, change the settlement option or payment option. The
request for change must be received by our Service Center at least 30 days
before 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, we will make settlement
option payments according to the 120 month period certain and life
settlement option and the applicable provisions of the contract.
Payment Options
You 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
according to the terms of the settlement option you select. If you select
a fixed payment option, the portion of the annuity amount used to provide
that payment option will be transferred to the general account assets of
Transamerica. The amount of payments will be established by the fixed
settlement option which you select and by the age and sex, if sex-distinct
rates are allowed by law, of the annuitants. Payment amounts will not
reflect investment performance after the annuity date. The fixed payment
amounts are determined by applying the fixed settlement option purchase
rate, which is 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-accounts. The variable settlement option purchase rate tables in the
contract reflect an assumed, but not guaranteed, annual interest rate of
5.4%. If the actual net investment performance of the variable
sub-accounts is less than 5.4%, then the dollar amount of the actual
payments will decrease. If the actual net investment performance of the
variable sub-accounts is higher than 5.4%, then the dollar amount of the
actual payments will increase. If the net investment performance exactly
equals the 5.4% rate, then the dollar amount of the actual payments will
remain constant. We may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts you select,
and on the monies which you allocate among them.
For further details as to the
determination of variable payments,
see the Statement of Additional
Information.
Settlement Option Forms
As owner, you may choose any of the settlement option forms described
below. Subject to our approval, you may select any other settlement option
forms offered by us in the future.
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. We will require proof of age for the annuitant and for
the contingent annuitant before payments start.
3. Life Annuity With Period Certain. Payments start on the first day of
the month immediately following the annuity date, if the annuitant is
living. Payments will be made for the longer of:
a) the annuitant's life; or
b) the period certain
The period certain may be 120, 180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment that is paid just before
the annuitant dies. No death 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 you provide
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 as 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 arrangement 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. We will need proof of age for the annuitant and joint
annuitant before payments start.
5. Other Forms of Payment. We can provide benefits under any other
settlement option not described in this section as long as we agree to
these options and they comply with any applicable state or federal law
or regulation. Requests for any other settlement option must be made in
writing to our Service Center at least 30 days before the annuity date.
After the annuity date:
a) you will not be allowed to
make any changes in the
settlement option and payment
option;
b) no additional purchase
payments will be accepted under
the contract; and
c) no further withdrawals will be allowed. As the owner of a
non-qualified contract, you may, at any time after the contract date,
write to us at our Service Center to 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 you.
As the owner of a qualified contract, you 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. If you are concerned about
these tax implications, you 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, or simply, the 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, as a
non-qualified contract, or purchased and used in connection with plans or
arrangements qualifying for special tax treatment as a qualified contract.
Qualified contracts are designed for use in connection with plans or
arrangements entitled to special income tax treatment under Code Sections
401, 403(b), 408 and 408A. 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;
the tax and employment status
of the individual concerned; or
Transamerica's tax status.
In addition, certain requirements must be satisfied when purchasing a
qualified contract with proceeds from a tax qualified retirement plan or
other arrangement. Certain requirements must also be met when 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 individual 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, as prospective
purchaser, you must specify whether you are 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, we may require that the prospective purchaser provide
information with regard to the federal income tax status of the previous
annuity contract. We will require that persons purchase separate contracts
if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate contract would require the
minimum initial purchase payment 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. We will not
accept an additional purchase payment under a contract if the federal
income tax treatment of such purchase payment would be different from that
of the initial purchase payment.
Taxation of Annuities
In General. Code Section 72 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 for example, via
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" 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 later, under Qualified Contracts.
If a partial withdrawal from the multi-year 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 multi-year 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 described in Code Section 408.
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. A federal income tax
penalty equal to 10% of the amount
treated as taxable income may be
imposed. 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, also referred to as 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 Code Section 72(e). 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
that 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 before age 59 1/2, 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:
a) reaches age 70 1/2; or
b) retires and distribution must be made in a specified 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
reaches 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 before the owner's death.
Qualified Pension and Profit Sharing Plans. Code Section 401(a) 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. If you are buying a contract for use with such plans, you should
seek competent advice. Advice you receive should address the suitability
of the proposed plan documents and the contract to your specific needs.
Individual Retirement Annuities (IRA), Simplified Employee Plans (SEP) 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 (IRS). If
you purchase a contract for use with an IRA you will be provided with
supplemental information required by the IRS or other appropriate agency.
You will have the right to cancel your purchase within 7 days of whichever
is earliest:
a) the establishment of your IRA;
or
b) your purchase.
If you intend to make such a purchase, you should seek competent advice as
to the suitability of the contract you are considering purchasing for use
with an IRA.
The contract is designed for use with IRA rollovers and contributory IRAs.
A contributory IRA is a contract to which initial and subsequent purchase
payments are subject to limitations imposed by the Code. Code Section 408
permits eligible individuals to contribute to an individual retirement
program known as an Individual Retirement Annuity or Individual Retirement
Account (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). These contributions 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 before 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, referred to as
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. Code Section 408A permits eligible individuals to contribute to an
individual retirement program known as a Roth IRA, although contributions
are not tax deductible. 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. Distributions from a Roth IRA generally are not taxed, except
that, once total distributions exceed contributions to the Roth IRA,
income tax and a 10% penalty tax may apply to distributions you take:
1. before age 59 1/2, subject to
certain exceptions; or
2. during the five taxable years starting with the year in which you
first contributed to the Roth IRA.
If you intend to purchase such a contract, you 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. There may be other restrictions
that apply to the election, commencement, or distribution of benefits
under qualified contracts, or under the terms of the plans under which
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, we do 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 arising from 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. Code
Section 817(h) 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, as 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,
Code Section 72(s) requires any
non-qualified contract to provide
that:
a) if any owner dies on or after
the annuity date but before 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 before 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.
This interest is distributed over the life of the 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 the owner as a beneficiary. Upon the owner's death, ownership of the
contract passes to the "designated beneficiary." 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 Code Section 72(s), although no
regulations interpreting these requirements have yet been issued. All
provisions in the contract will be interpreted to maintain this 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 the past 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 before 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 through other means of written
communication:
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 before
the time the variable account
commenced operations.
YEAR 2000 ISSUE
Many computer software systems in use today cannot distinguish the year
2000 from the year 1900 because dates are encoded using the standard
six-place format that allows entry of only the last two digits of the
year. This is commonly known as the "Year 2000 Problem".
Regarding our systems and software that administer the contracts, we
believe that our own internal systems will be Year 2000 ready.
Additionally, we require third party vendors that supply software or
administrative services to us in connection with the contract
administration, to certify that such software and/or services will be Year
2000 ready.
The "Year 2000 Problem" could adversely impact the portfolios if the
computer systems used by the portfolios' investment adviser, sub-adviser,
custodian and transfer agent (including service providers' systems) do not
accurately process date information on or after January 1, 2000. The
investment advisers are addressing this issue by testing the computer
systems they use to ensure that those systems will operate properly on or
after January 1, 2000, and seeking assurances from other service providers
they use that their computer systems will be adapted to address the "Year
2000 Problem" in time to prevent adverse consequences on or after January
1, 2000. However, especially when taking into account interaction with
other systems, it is difficult to predict with precision that there will
be no disruption of services in connection with the year 2000.
We continue to believe that we will achieve Year 2000 readiness. However,
the size and complexity of our systems and the need for them to interface
with other systems internally and with those of our customers, vendors,
partners, governmental agencies and other outside parties, creates the
possibility that some systems may experience Year 2000 problems. Although
we believe we will be properly prepared for the date change, we are also
developing contingency plans to minimize any potential disruptions to
operations, especially from externally interfaced systems over which we
have limited or no control.
This issue could also adversely impact the value of the securities that
the portfolios invest in if the issuing companies' systems do not operate
properly on or after January 1, 2000, and this risk could be heightened
for portfolios that invest internationally. Refer to the prospectuses for
the portfolios for more information.
The above information is subject to
the Year 2000 Readiness Disclosure
Act. This act may limit your legal
rights in the event of a dispute.
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
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 AND FINANCIAL
STATMENTS
The consolidated financial statements of Transamerica at December 31, 1998
and 1997, and for each of the three years in the period ended December 31,
1998, and the financial statements of Separate Account VA-7 at December
31, 1998 and for the period then ended appearing in the Statement of
Additional Information have been audited by Ernst & Young LLP, Independent
Auditors, as set forth in their reports appearing in the Statement of
Additional Information. The financial statements audited by Ernst & Young
LLP have been included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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. The shares will be voted
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 before such
meeting in accordance with procedures established by the respective
portfolios.
Shares for which no timely instructions are received and shares held by
Transamerica for 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 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.
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
<TABLE>
<CAPTION>
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
<S> <C>
..............................................................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...............................................................7
Standard Total Return
Calculations...............................................................7
Adjusted Historical
Portfolio Performance
Data.................................................7
Other Performance
Data............................................8
HISTORICAL PERFORMANCE
DATA................................................8
General
Limitations...............................................8
Historical Performance
Data.......................................8
DISTRIBUTION OF THE
CONTRACT...............................................17
SAFEKEEPING OF VARIABLE ACCOUNT
ASSETS.....................................................................17
STATE
REGULATION...........................................................17
RECORDS AND
REPORTS........................................................17
FINANCIAL
STATEMENTS.......................................................18
APPENDIX...................................................................19
</TABLE>
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
(Not available in all states)
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 performance of
Transamerica's general account.
The Multi-Year Guarantee Period
Options
The multi-year guarantee period options provide guaranteed fixed rates of
interest compounded annually for specific guarantee periods. Amounts
allocated to the multi-year guarantee period options will be credited with
interest of no less than 3% per year. Amounts withdrawn from a
guarantee period before 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 we are 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 multi-year guarantee period options.
Each amount allocated or transferred to the multi-year guarantee period
option will establish a new guarantee period of a duration you select from
among those then being offered by us. Every guarantee period we offer 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 multi-year guarantee period will be credited on
the date the payment is received at our service center. Any amount
transferred from another multi-year 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.
Multi-Year Guarantee Period
Each multi-year 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 you choose and the class of that guarantee
period. A guarantee period chosen may not extend beyond the annuity date.
We reserve the right to limit the maximum number of multi-year guarantee
periods that may be in effect at any one time.
We will establish effective annual rates of interest for each multi-year
guarantee period. The effective annual rate of interest we establish for a
multi-year 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 before 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 before
its expiration date, excluding withdrawals for the purpose of paying the
death benefit, the amount 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 we do 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 Multi-Year Guarantee
Period
At least 45 days, but not more than 60 days, before the expiration date of
a guarantee period, we will notify you as to the options available when a
guarantee period expires. You may elect one of the following:
1. transfer the amount held in that guarantee period to a new guarantee
period from among those being offered by us at such time; or
2. transfer the amount held in that guaranteed period to one or more
variable sub-accounts or to another general account option then
available.
We must receive your notice electing one of these at our service center by
the expiration date of the guarantee period. If such election has not been
received by us at our service center, the amount held in that guarantee
period will remain in the guaranteed period account. A new guarantee
period of the same duration as the expiring guarantee period, if offered,
will automatically be established by us with a new guaranteed interest
rate declared by us for that guarantee period. The new guarantee period
will start on the day following the expiration date of the previous
guarantee period.
If we are not currently offering a guarantee period having the same
duration as the expiring guarantee period, the new guarantee period will
be the next longer duration, or if we are 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, we
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
CONDENSED FINANCIAL INFORMATION
he following condensed financial information is derived from the financial
statements of the variable account. You should read the data in
conjunction with the financial statements, related notes, and other
financial information included in the Statement of Additional
Information..
The following table sets forth certain information regarding the
sub-accounts for the period from October 2, 1998, the of the variable
account through December 31, 1998. Although all 17 of the sub-accounts
were available for investment on October 2, 1998, only 7 received
allocations during 1998. The variable accumulation unit values and the
number of variable accumulation units outstanding for each sub-account for
the periods shown are as follows:
<PAGE>
<TABLE>
<CAPTION>
Ending December 31, 1998
Alger American Alliance VPF Alliance VPF Dreyfus VIF Cap Dreyfus VIF
Income & Growth Growth & Income Premier Growth Appreciation Growth Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $12.95 $12.85 $14.03 $12.29 $13.60
Number of Accumulation
Units Outstanding
at End of Period 641.633 617.735 -- -- --
Janus Aspen Janus Aspen MFS MFS MFS
Balanced Worldwide Growth Emerging Growth Growth & Income Research
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $13.16 $13.38 $14.41 $12.10 $12.99
Number of Accumulation
Units Outstanding
at End of Period 634.385 410.412 -- -- 652.600
MSDW MSDW MSDW UF OCC Accumulation OCC Accumulation
UF Fixed Income UF High Yield International Magnum Trust Managed Trust Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $10.60 $10.31 $10.71 $10.54 $8.97
Number of Accumulation
Units Outstanding
at End of Period -- -- -- -- --
Transamerica Transamerica
VIF Growth VIF Money Market
Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $1.00
Accumulation Unit Value
at End of Period $13.50 $1.01
Number of Accumulation
Units Outstanding
at End of Period 14,417.336 64,111.340
</TABLE>
<PAGE>
<PAGE>
Appendix D
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, 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 in 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.
General Account: The assets of
Transamerica that are not allocated
to a separate account.
General Account Options: The
multi-year guarantee period options
offered by us to which the owner may
allocate purchase payments and
transfers.
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, and/or transfers out to the variable account before
the annuity date.
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 Options: An option 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.
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, which is
generally 4:00 p.m. Eastern Time of
the New York Stock Exchange on
consecutive valuation days.
Variable Account: Separate Account VA-7, 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 the
contract before 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.
<PAGE>
Appendix E
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 Account or 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 does not discuss Education IRAs or SIMPLE-IRAs,
except as necessary in the context of discussing other types of IRAs.
Your Transamerica Life Insurance and Annuity Company's Individual
Retirement Annuity, also referred to as a Transamerica Life IRA Contract
has been approved as to form by the IRS. In addition, we are using an IRA
and a Roth IRA Endorsement based on the IRS-approved text. 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 or Roth IRA
Contract in order for us to obtain or maintain IRS approval of its tax
qualification. 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 to a Transamerica Life IRA will be accepted under a SIMPLE
plan established by any employer pursuant to Internal Revenue Code Section
408(p). No transfer or rollover of 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 before the
expiration of the two 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.
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,
the Health Insurance Portability and Accountability Act of 1996, the Tax
Relief Act of 1997 and the IRS Restructuring and Reform Act of 1998.
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, 1999. 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.
Revocation of Your IRA or Roth IRA
You have the right to revoke your Traditional IRA or Roth IRA issued by us
during the seven calendar day period following its establishment. The
establishment of your Traditional IRA or Roth IRA contract will be the
contract effective date. This seven day calendar period may or may not
coincide with the free look period of your contract.
In order to revoke your Traditional IRA or Roth IRA, you must notify us in
writing and you must mail or deliver your revocation to us postage
prepaid, at: 401 North Tryon Street, Charlotte, NC 28202. 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 Traditional IRA or Roth IRA during the seven day period,
an amount equal to your premium will be returned to you without any
adjustment.
Definitions
Code - Internal Revenue Code of 1986, as amended, and regulations issued
thereunder.
Contributions - Purchase payments paid to your contract.
Contract - The annuity policy, certificate or contract which you
purchased.
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
under a decree of divorce or separate maintenance and includable in your
gross income, but does not include deferred compensation or any amount
received as a pension or annuity.
Regular Contributions - In General
As is more fully discussed below, for 1998 and later years, the maximum
total amount that you may contribute for any tax year to your regular IRAs
and your regular Roth IRAs combined is $2,000, or if less, your
compensation for that year. Once you attain age 70 1/2, this limit is
reduced to zero only for your regular IRAs, not for your Roth IRAs, but
the separate limit on Roth IRA contributions can be reduced to zero for
taxpayers with adjusted gross income, also referred to as AGI, above
certain levels, as described below in Part II, Section 1. While your Roth
IRA contributions are never deductible, your regular IRA contributions are
fully deductible, unless you, or your spouse, is an active participant in
some form of tax-qualified retirement plan for the tax year. In the latter
case, any deductible portion of your regular IRA contributions for each
year is subject to the limits that are described below in Part I, Section
2, and any remaining regular IRA contributions for that year must be
reported to the IRS as nondeductible IRA contributions, along with your
Roth IRA contributions.
IRA PART I: TRADITIONAL IRAs
The rules that apply to a Traditional Individual Retirement Account or
Annuity, which is referred to in this Disclosure Statement simply as an
"IRA" or as a "Traditional IRA" and which includes a regular or Spousal
IRA and a rollover IRA, generally also apply to IRAs under Simplified
Employee Pension plans or SEP-IRAs, unless specific rules for SEP-IRAs are
stated.
1. Contributions
(a) Regular IRA. Regular IRA contributions must be in cash and are subject
to the limits described above. Such contributions are also subject to the
minimum amount under the Transamerica IRA contract. In addition, any of
your regular contributions to an IRA for a tax year must be made by the
due date, not including extensions, for your federal tax return for that
tax year. See also Part II, Section 4 below about recharacterizing IRA and
Roth IRA contributions by such date.
(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 separate regular IRA, and Roth IRA, and may make
contributions to such IRAs for your spouse that are not limited by your
spouse's lower amount of compensation. Instead, the limit for the total
contribution to spousal IRAs that can be made by you or your spouse for
the tax year is:
1. $2,000; or
2. if less, the total combined compensation for both you and your spouse
reduced by any deductible IRA contributions and any Roth IRA
contributions for such year.
As with any regular IRA contributions, those for your spouse cannot be
made for any tax year in which your spouse has attained age 70 1/2, must
be in cash, and 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 to a Traditional IRA are
unlimited in dollar amount. These can include rollover contributions of
eligible distributions received by you from another Traditional IRA or
tax-qualified retirement plan. Generally, any distribution from a
tax-qualified retirement plans, such as a pension or profit sharing plan,
Code Section 401(k) plan, H.R. 10 or Keogh plan, or a Traditional IRA can
be rolled over to a Traditional IRA unless it is a required minimum
distribution as discussed below in Part I, Section 4(a) or it is part of a
series of payments to be paid to you over your life, life expectancy or a
period of at least 10 years. In addition, 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, are not
eligible to be rolled over to an IRA. If a distribution from a
tax-qualified plan or a Traditional IRA is paid to you and you want to
roll over all or part of the eligible distributed amount to a Transamerica
Life Traditional IRA, the rollover must be accomplished within 60 days of
the date you receive the amount to be rolled over. However, you may roll
over any amount from one Traditional IRA into another Traditional IRA only
once in any 365-day period.
A timely rollover of an eligible distributed amount that has been paid to
you directly will prevent its being taxable to you at the time of
distribution; that is, none of it will be includable in your gross income
until you withdraw some amount from your rollover IRA. However, any such
distribution directly to you from a tax-qualified retirement plan is
generally subject to a mandatory 20% withholding tax.
By contrast, a direct transfer from a tax-qualified retirement plan to a
Traditional IRA is considered a "direct" rollover and is not subject to
any mandatory withholding tax, or other federal income tax, upon the
direct transfer. If you elect to make such a "direct" rollover from a
tax-qualified plan to a Transamerica Life Traditional IRA, the transferred
amount will be deposited directly into your rollover IRA.
Strict limitations apply to rollovers, and you should seek competent tax
advice in order to comply with all the rules governing rollovers.
(d) Direct Transfers from another Traditional IRA. You may make an initial
or subsequent contribution to your Transamerica Life Traditional IRA by
directing the fiduciary or issuer of any of your existing IRAs to make a
direct transfer of all or part of such IRAs in cash to your Transamerica
Life Traditional IRA. Such a direct transfer between Traditional IRAs is
not considered a rollover , e.g., for purposes of the 1-year waiting
period or withholding.
(e) Simplified Employee Pension Plan, or SEP-IRA. If an IRA is established
that meets the requirements of a SEP-IRA, generally your employer may
contribute an amount not to exceed the lesser of 15% of your includable
compensation ($160,000 for 1999, adjusted for inflation thereafter) or
$30,000, even after you attain age 70 1/2. The amount of such contribution
is not includable in your income for federal income tax purposes. In the
case of a SEP-IRA that has a grandfathered qualifying form of salary
reduction, referred to as a SARSEP, that was established by an employer
before 1997, generally any employee, including a self-employed individual,
who:
1. has worked for the employer
for 3 of the last 5 preceding
tax years;
2. is at least age 21; and
3. has received from the employer compensation of at least $400 for the
current tax year, adjusted for inflation after 1999.
is eligible to make a before tax salary reduction contribution to the
SARSEP for the current tax year of up to $10,000, adjusted for inflation
after 1998, subject to the overall limits for SEP-IRA contributions.
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 these
rules are not met, any SEP-IRA contributions by the employer could be
treated as taxable to the employees and could result in adverse tax
consequences to the participating employee. For further details about
SARSEPs and SEP-IRAs, e.g., for computing contribution limits for
self-employed individuals, see IRS Publication 590, as indicated below.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers to
any 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 to your Traditional IRA, 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 your Transamerica Life Traditional IRA.
2. Deductibility of Contributions
for a Regular IRA
(a) General Rules. The deductible portion of the contributions made to the
regular IRAs for you, or your spouse, for a tax year depends on whether
you, or your spouse, is an "active participant" in some type of a
tax-qualified retirement plan for such year, as described in Section 2(b)
immediately below.
If you and your spouse file a joint return for a tax year and neither of
you is an active participant for such year, then the permissible
contributions to the regular IRAs for each of you are fully deductible up
to $2,000 each, i.e., your combined deductible IRA contribution limit for
the tax year could be $4,000.
Similarly, if you are not married, or treated as such, for the tax year
and you are not an active participant for such year, the permissible
contributions to your regular IRAs for the tax year are fully deductible
up to $2,000. For instance, if you and your spouse file separate returns
for the tax year and you did not live together at any time during such tax
year, then you are treated as unmarried for such year, and if you were not
an active participant for the tax year, then your deductible limit for
your regular IRA contribution is $2,000, even if your spouse was an active
participant for such year.
If you are an active participant for the tax year, then your $2,000 limit
is subject to a phase-out rule if your AGI for such year exceeds a
Threshold Level, depending on your tax filing status and the calendar
year. If, however, you are not an active participant for the tax year but
your spouse is, then your $2,000 limit is subject to the phase-out rule
only if your AGI exceeds a higher Threshold Level. See Part I, Section
2(c), below.
(b) Active Participant. You are an "active participant" for a year if you
participate in some type of tax-qualified retirement plan. For example, if
you participate in a qualified pension or profit sharing plan, a Code
Section 401(k) plan, certain government plans, a tax-sheltered arrangement
under Code Section 403, a SIMPLE plan 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, also referred to as 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 you can make a deductible contribution under the same
rules as a person who is not an active participant.
If you are an active participant for the tax year, then 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:
<PAGE>
Married Filing Jointly
Unmarried
Taxable Threshold
Taxable Threshold
Year Level
Year Level
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
-------------------------------------
<PAGE>
Beginning in 1998, if you are not an active participant for the tax year
but your spouse is, and you are not treated as unmarried for filing
purposes, then your Threshold Level
is $150,000.
If your AGI is less than $10,000 above your Threshold Level, or $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, even for Spousal IRAs. 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.
You must round up any computation of the Deduction Limit to the next
highest $10 level, that is, to 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
compensation.
3. Nondeductible Contributions to
Regular IRAs
The amounts of your regular IRA contributions which are not deductible
will be nondeductible contributions to such IRAs. You may also choose to
make a nondeductible contribution to your regular IRA, even if you could
have deducted part or all of the contribution. Interest or other earnings
on your regular IRA contributions, 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, e.g., on Form 8606.
4. Distributions
(a) Required Minimum Distributions, or simply, RMD. Distributions from
your Traditional IRAs 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 RMDs from any Traditional IRA
you maintain, but not from any Roth IRA, as long as:
a) distributions begin when
required;
b) distributions are made at
least once a year; and
c) the amount to be distributed
is not less than the minimum
required under current federal
tax law.
If you own more than one Traditional IRA, you can choose whether to take
your RMD from one Traditional IRA or a combination of your Traditional
IRAs. A distribution may be made at once in a lump sum, as qualifying
partial withdrawals or as qualifying settlement option payments.
Qualifying partial withdrawals and settlement option payments must be made
in equal or substantially equal amounts over:
a) your life or the joint lives
of you and your beneficiary; or
b) 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 your designated beneficiary, other than
your spouse, is more than ten years younger than you.
If qualifying settlement option payments start before 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 RMD provisions, above, and the death benefit
provisions, below.
If you die before the entire interest in your Traditional IRAs is
distributed to you, but after your required beginning date, the entire
interest in your Traditional IRAs must be distributed to your
beneficiaries at least as rapidly as under the method in effect at your
death. If you die before your required beginning date and if you have a
designated beneficiary, distributions to your designated beneficiary can
be 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 the year of your death. Otherwise, if
you die before your required beginning date and your surviving spouse is
not your designated beneficiary, distributions must be completed by
December 31 of the calendar year that is five years after the year of your
death.
If your designated beneficiary is your surviving spouse, and you die
before your required beginning date, your surviving spouse can become the
new owner/annuitant and can continue the Transamerica Life Traditional IRA
on the same basis as before your death. If your surviving spouse does not
wish to continue the contract as his or her IRA, he or she may elect to
receive the death benefit in the form of qualifying settlement option
payments in order to avoid the 5-year rule. Such payments must be made in
substantially 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 later of
the following dates:
a) December 31 of the year
following the year you died; or
b) 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 RMD is taken in a timely manner and that the correct
amount is distributed.
(b) Taxation of IRA Distributions. Because nondeductible Traditional IRA
contributions are made using income which has already been taxed, that is,
they are not deductible contributions, the portion of the Traditional IRA
distributions consisting of nondeductible contributions will not be taxed
again when received by you. If you make any nondeductible contributions to
your Traditional IRAs, each distribution from any of your Traditional 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 any of your Traditional IRAs and
you previously made deductible and nondeductible contributions to such
IRAs, you may not take a Traditional IRA distribution which is entirely
tax-free. The following formula is used to determine the nontaxable
portion of your distributions for a taxable year.
Remaining nondeductible contributions
Divided by
Year-end total adjusted
Traditional IRA balances
Multiplied by
Total distributions
for the year
Equals:
Nontaxable distributions
for the year
To figure the year-end total adjusted Traditional IRA balance, you must
treat all of your Traditional IRAs as a single Traditional IRA. This
includes all regular IRAs, as well as SEP-IRAs, SIMPLE IRAs and Rollover
IRAs, but not Roth IRAs. You also add back to your year-end total
Traditional IRA balances, specifically the distributions taken during the
year from your Traditional IRAs. Please refer to IRS Publication 590,
Individual Retirement Arrangements for instructions, including worksheets,
that can assist you in these calculations. Transamerica Life Insurance and
Annuity Company will report all distributions from your Transamerica
Traditional IRA to the IRS as fully taxable income to you.
Even if you withdraw all of the assets in your Traditional IRAs in a lump
sum, you will not be entitled to use any form of lump sum treatment or
income averaging to reduce the federal income tax on your distribution.
Also, no portion of your distribution qualifies as a capital gain.
Moreover, any distribution made before you reach age 59 1/2, may be
subject to a 10% penalty tax on early distributions, as indicated below.
(c) Withholding. Unless you elect not to have withholding apply, federal
income tax will be withheld from your Traditional 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 were
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. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year the total
regular IRA contributions you made to your Traditional IRAs and your Roth
IRAs, 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. Such penalty tax cannot exceed 6% of the value of your IRAs at the
end of such year.
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, nor otherwise be includible in your
gross income if you have not taken a deduction for the excess amount.
However, the earnings withdrawn will be taxable income to you and may be
subject to the 10% penalty tax on early distributions. Alternatively,
excess contributions for one year may be withdrawn in a later year or may
be carried forward as regular IRA contributions in the following year to
the extent that the excess, when aggregated with your regular IRA
contributions, 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 subsequent
year they are neither returned to you nor applied as permissible regular
IRA contributions for such year.
(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 tax 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 certain qualifying first-time homebuyer expenses of you or certain
family members, or for certain qualifying 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 any usual or reasonable settlement, financing or other 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) Failure To Satisfy RMD. If the RMD rules described above in Part I,
Section 4(a) 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 excess of the amount
required to be distributed over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary
engage in any prohibited transaction, such as any sale, exchange or
leasing of any property between you and the Traditional IRA, or any
interference with the independent status of such IRA, the Traditional IRA
will lose its tax exemption and be treated as having been distributed to
you. The value of the entire Traditional 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, as described above in Part I, Section 5(b).
If you borrow from or pledge your Traditional IRA, or your benefits under
the contract, as security for a loan, the portion borrowed or 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 borrowed or pledged as security in your income that year for
federal tax purposes. You may also be subject to the 10% penalty tax on
early distributions.
(e) Overstatement or Understatement of Nondeductible Contributions. If you
overstate your nondeductible Traditional IRA contributions on your federal
income tax return, without reasonable cause, you may be subject to a
reporting penalty. Such 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 ordinary income or penalty taxes,
interest, and penalties for which you may be liable if you underreport
income upon receiving a distribution from your Traditional IRA. See Part
I, Section 4(b) above for the tax treatment of such distributions.
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,
below. Such contributions are also subject to the minimum amount under the
Transamerica Life Roth IRA contract. Such contribution must 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 Roth IRA
contributions after reaching age 70 1/2 to the extent that your AGI does
not exceed the levels described below.
(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, below.
Such contributions must 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, below.
(d) Transfer Roth IRA. You may make an initial or subsequent contribution
to your Transamerica Life Roth IRA by directing a fiduciary or issuer of
any of your existing Roth IRAs to make a direct transfer of all or a
portion of the assets from such Roth IRAs to your Transamerica Life Roth
IRA.
(e) Conversion Roth IRA. You may make contributions to a Conversion Roth
IRA within 60 days of receiving a distribution from an existing
Traditional IRA or by instructing the fiduciary or issuer of any of your
existing Traditional IRAs to make a direct transfer of all or a portion of
the assets from such a Traditional IRA to your Transamerica Life Roth IRA,
subject to certain restrictions and subject to income tax on some or all
of the converted amounts. If your AGI, not including the conversion
amount, is greater than $100,000 for the tax year, or if you are married
and you and your spouse file separate tax returns, you may not convert or
transfer any amount from a Traditional IRA to a Roth IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers or
conversions to a 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
Life Insurance and Annuity Company 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 for any
calendar year, subject to AGI phase-out rules described below in Section
3(a). Rollover, transfer and conversion contributions, if properly made,
do not count towards your maximum annual contribution limit, nor do
employer contributions to a SEP-IRA or SIMPLE IRA.
(a) Regular Roth IRAs. The maximum amount you may contribute to a regular
Roth IRA will depend on the amount of your AGI for the calendar year. Your
maximum $2,000 contribution limit begins to phase out when your AGI
reaches $95,000 as unmarried or $150,000 when married filing jointly.
Under this phase out, your maximum regular Roth IRA contributions
generally will not be less than $200; however, no contribution is allowed
if your AGI exceeds $110,000 as unmarried or $160,000 when married filing
jointly. If you are married and you and your spouse file separate tax
returns, your maximum regular Roth IRA contribution phases out between $0
and $10,000. 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. You should
consult your tax adviser to determine your maximum contribution.
You may make contributions to a regular Roth IRA after age 70 1/2, subject
to the phase-out rules. Regular Roth IRA contributions for a tax year
should be reported on your tax return for that year, specifically, on Form
8606.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's
Spousal Roth IRA may not exceed the lesser of:
1. 100% of both spouses' combined compensation minus any Roth IRA or
deductible Traditional IRA contribution for the spouse with the
higher compensation for the year; or
2. $2,000, as reduced by the phase-out rules described above for regular
Roth IRAs.
A maximum of $4,000 may be contributed to both spouses' Roth IRAs.
Contributions can be divided between the spouses' Roth IRAs as you and
your spouse wish, but no more than $2,000 in regular Roth IRA
contributions can be contributed to either individual's Roth IRA each
year.
(c) Rollover Roth IRAs. There is no limit on the amounts that you may
rollover from one Roth IRA into another Roth IRA, including your
Transamerica Life 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 limit on amounts that you may transfer
directly from one Roth IRA into another Roth IRA, including your
Transamerica Life Roth IRA. Such a direct transfer does not constitute a
rollover for purposes of the 1-year waiting period.
(e) Conversion Roth IRAs. There is no limit on amounts that you may
convert from your Traditional IRA into your Transamerica Life Roth IRA if
you are eligible to open a Conversion Roth IRA as described in Part II,
Section 1(e), above. In the case of a conversion from a SIMPLE-IRA, the
conversion may only be done after the expiration of your 2-year
participation period described in Code Section 72(t)(6). 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 Roth IRA within 60 days.
You can also make contributions to a Roth IRA by instructing the fiduciary
or issuer, custodian or trustee of your existing Traditional IRAs to
transfer the assets in your Traditional IRAs to the Roth IRA, which can be
a successor to your existing Traditional IRAs. The transfer will be
treated as a distribution from your Traditional IRAs, 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% early distribution penalty tax.
If you converted from a Traditional IRA to a Roth IRA during 1998, the
income reportable upon distribution from the Traditional IRA may be
reportable entirely for 1998 or reportable ratably over four years
beginning in 1998.
4. Recharacterization of IRA
Contributions
(a) Eligibility. By making a timely transfer and election, you generally
can treat a contribution made to one type of IRA as made to a different
type of IRA for a taxable year. For example, if you make contributions to
a Roth IRA and later discover that you are not eligible to make Roth IRA
contributions, you may recharacterize all or a portion of the contribution
as a Traditional IRA contribution by the filing due date, including
extensions, for the applicable tax year.
You may not recharacterize amounts paid into a Traditional IRA that
represented tax-free rollovers or transfers, or employer contributions.
(b) Election. You may elect to recharacterize a contribution amount made
to one type of IRA by simply making a trustee-to-trustee transfer of such
amount, plus net income attributable to it, to a second type of IRA on or
before the federal income tax due date, including extensions, for the tax
year for which the contribution was initially made. After the
recharacterization has been made, you may not revoke or modify the
election.
(c) Taxation of a Recharacterization. For federal income tax purposes, a
recharacterized contribution will be treated as having been contributed to
the transferee IRA, rather than to the transferor IRA, on the same date
and for the same tax year that the contribution was initially made to the
transferor IRA. A recharacterized transfer is not considered a rollover
for purposes of the 1-year waiting period.
The transfer of the contribution amount being recharacterized must include
the net income attributable to such amount. If such amount has experienced
net losses as of the time of the recharacterization transfer, the amount
transferred, the original contribution amount less any losses, will
generally constitute a transfer of the entire contribution amount. You
must treat the contribution amount as made to the transferee IRA on your
federal income tax return for the year to which the original contribution
amount related.
For reconversions following a
recharacterization, see Publication
590 and Treasury Regulation Section
1.408A-5.
5. Distributions
(a) Required Minimum Distribution, or simply, RMD. Unlike a Traditional
IRA, there are no rules that require that any 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 beneficiary may elect to take
distributions in the form of qualifying settlement option payments 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 can become the new
owner/annuitant and can continue the Transamerica Life Roth IRA on the
same basis as before your death. If your surviving spouse does not wish to
continue the Transamerica Life Roth IRA as his or her Roth IRA, he or she
may elect to receive the death benefit in the form of qualifying
settlement option payments in order to avoid the 5-year distribution
requirement. Such payments must be made in substantially 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 later of the following dates:
a) December 31 of the year
following the year you died; or
b) December 31 of the year in which you would have reached age 70 1/2.
Your beneficiary is responsible for assuring that the RMD 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. For federal income tax purposes, all
of your Roth IRAs are aggregated and Roth IRA distributions are treated as
made first from Roth IRA contributions and second from earnings.
Distributions that are treated as made from Roth IRA contributions are
treated as made first from regular Roth IRA contributions, which are
always tax-free, and second from conversion or rollover Roth IRA
contributions on a first-in, first-out basis. A distribution allocable to
a particular conversion or rollover Roth IRA contribution is treated as
consisting first of the portion, if any, of the conversion contribution
that was previously includible in gross income by reason of the
conversion.
In any event, 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,
including a contribution rolled over, transferred or converted from a
Traditional IRA, will generally be treated as an early distribution
subject to regular income tax and to the 10% penalty tax described below
in Section 6(b).
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 to the Roth IRA, including a rollover or transfer
contribution or conversion from a Traditional IRA, where the withdrawal is
made:
a) upon your death or
disability; or
b) to pay qualified first-time homebuyer expenses of you or certain
family members.
No portion of your Roth IRA distribution qualifies as a capital gain.
There is also a separate 5-year rule for the recapture of the 10% penalty
tax that is described below in Section 6(b) and that applies to any Roth
IRA distribution made before age 59 1/2 if any conversion or rollover
contribution has been made to any Roth IRA owned by the individual within
the 5 most recent taxable years, even if this current distribution from
the Roth IRA is otherwise tax-free under the rules described in this
Subsection 5(b).
(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 were
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 amount 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 Life Insurance and Annuity Company 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.
6. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year your total
regular Roth IRA contributions, other than rollovers, transfers or
conversions, exceed the maximum allowable contributions for that year,
taking into account Traditional IRA contributions, the excess contribution
amount will be subject to a nondeductible 6% excise penalty tax. Such
penalty tax cannot exceed 6% of the value of your Roth IRAs at the end of
such year. 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 the 10% penalty 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 regular Roth
IRA contributions, 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 subsequent year they are neither
returned to you nor applied as permissible regular Roth IRA contributions
for such year.
(a) 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 constitutes an early distribution subject to
the 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 IRS tables in the income tax regulations.
Also, the 10% penalty tax 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.
The 10% penalty tax also will not apply to an early distribution made to
pay for certain qualifying first-time homebuyer expenses for you or
certain family members, or for certain qualifying 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 any usual or reasonable
settlement, financing or other 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.
There is also a separate 5-year recapture rule for the 10% penalty tax in
the case of a Roth IRA distribution made before age 59 1/2 that is made
within 5 years after a conversion or rollover contribution from a
Traditional IRA. This recapture rule exists because such a prior Roth IRA
contribution avoided the 10% penalty tax when it was rolled over or
converted from the Traditional IRA. Under this 5-year recapture rule, any
Roth IRA distribution made before age 59 1/2 that is attributable to any
conversion or rollover contribution from a Traditional IRA made within the
previous 5 years to any of the individual's Roth IRAs is generally subject
to the 10% penalty tax, and its exceptions, to the extent that such prior
Roth IRA contribution was subject to ordinary tax upon the conversion or
rollover, even if the Roth IRA distribution is otherwise tax-free.
Under the distribution ordering rules for a Roth IRA, all of an
individual's Roth IRAs and distributions therefrom are treated as made:
first from regular Roth IRA contributions; then from conversion or
rollover Roth IRA contributions on a first-in, first-out basis; and last
from earnings. However, whenever any Roth IRA distribution amount is
attributable to any conversion or rollover contribution made within the 5
most recent tax years, this distributed amount is attributed first to the
taxable portion of such prior contribution, for purposes of determining
the amount of this Roth IRA distribution that is subject to the recapture
of the 10% penalty tax, unless some exception to the penalty tax applies
to the current Roth IRA distribution, such as age 59 1/2, disability or
certain health, education or homebuyer expenses, as described above in
this Subsection 6(b).
(c) Failure to Satisfy RMDs Upon Death. If the RMD rules described above
in Part II, Section 4(a) apply to the beneficiary of your Roth IRA after
your death and if the amount distributed 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 excess of the amount
required to be distributed over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any 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 591/2 you may also be subject to the 10% penalty tax on early
distributions, as described above in Part II, Section 5(b). If you borrow
from or pledge your Roth IRA, or your benefits under the contract, as a
security for a loan, the portion borrowed or 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.
IRA PART III: OTHER INFORMATION
(1) Federal Estate and Gift Taxes
Any amount in or distributed from your Traditional and/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
that would pay a survivor an annuity at or after your death should not be
considered a transfer for federal gift tax purposes.
(2) Tax Reporting
You must report contributions to, and distributions from, your Traditional
IRA and Roth IRA, including the year-end aggregate account balance of all
Traditional IRAs and Roth IRAs, on your federal income tax return for the
year specifically on IRS Form 8606. For Traditional IRAs, you must
designate on the return how much of your annual contribution is deductible
and how much is nondeductible. You need not file IRS Form 5329 with your
income tax return for a particular year unless for that year you are
subject to a penalty tax because there has been an excess contribution to,
an early distribution from, or insufficient RMDs from your Traditional IRA
or Roth IRA, as applicable.
(3) Vesting
Your interest in your Traditional IRA or Roth IRA is nonforfeitable at all
times.
(4) Exclusive Benefit
Your interest in your Traditional
IRA or Roth IRA is for the exclusive
benefit of you and your
beneficiaries.
(5) IRS Publication 590
Additional information about your Traditional IRA or Roth IRA or about
SEP-IRAs and SIMPLE-IRAs can be obtained from any district office of the
IRS or by calling 1-800-TAX-FORM for a free copy of IRS Publication 590,
Individual Retirement Arrangements.
<PAGE>
Please forward, without charge, a copy of the Statement of Additional
Information concerning the Transamerica Seriessm - Transamerica Bountysm
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 SERIESsm
TRANSAMERICA BOUNTYsm VARIABLE
ANNUITY
Contract Form 4-705 Certificate Form
TCG-317 Group Annuity Contract Form
TGP-717
The contract is not available in all states.
Issued by Transamerica Life
Insurance and Annuity Company
401 North Tryon Street, Suite 700,
Charlotte, North Carolina, 28202
VIM 186-599
<PAGE>
4 2
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm
TRANSAMERICA BOUNTYsm
VARIABLE ANNUITY
Separate Account VA-7
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects
discussed in the May 1, 1999, prospectus for the Transamerica Bounty sm Variable
Annuity ("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-7. You 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.
Dated May 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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.....................................................................7
Standard Total Return Calculations.......................................................................7
Adjusted Historical Portfolio Performance Data...........................................................7
Other Performance Data...................................................................................8
HISTORICAL PERFORMANCE DATA.......................................................................................8
General Limitations......................................................................................8
Historical Sub-Account Performance Data..................................................................8
DISTRIBUTION OF THE CONTRACT.....................................................................................16
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................................16
STATE REGULATION.................................................................................................17
RECORDS AND REPORTS..............................................................................................17
FINANCIAL STATEMENTS.............................................................................................18
APPENDIX - Accumulation Transfer Formula.........................................................................18
</TABLE>
<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 or minus the per-share amount of any
dividend or capital gain distributions if the "ex-dividend" date occurs
in the valuation period; plus or minus a per-share charge or credit as
we 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 0.003403% (1.25% 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.
VARIABLE PAYMENT OPTIONS
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. We 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, you may transfer variable annuity units from
one sub-account to another, subject to certain limitations. See "Transfers" page
23 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. We reserve 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 36 of the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in our profits or surplus earnings.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated, 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. Where
required by law, rule or regulation, we may only consider the age of the
annuitant and/or other measuring life. Any overpayments or underpayments by us
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, we 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
We 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 us unless made in
writing and given to us at our Service Center. We are not responsible for the
adequacy of any assignment. Your 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, you 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.
Entire Contract
We have 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. You have 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 us or to make any change in the individual contract or the
group contract or individual certificates thereunder and then only in writing.
We will not be bound by any promise or representation made by any other persons.
We 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 we 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.
We may delay payment of any withdrawal from any general account options
for a period of not more than six months after we receive the request for such
withdrawal. If we delay payment for more than 30 days, we will pay interest on
the withdrawal amount up to the date of payment. See "Cash Withdrawals" page 26
of the prospectus.
Notices and Directions
We will not be bound by any authorization, direction, election or
notice which is not, in a form and manner acceptable to us, and received at our
Service Center.
Any written notice requirement by us to you will be satisfied by our
mailing of any such required written notice, by first-class mail, to 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, we are
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 and income other than
investment income) 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 us 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.
<PAGE>
Other Sub-Account Yield Calculations
We 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.
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
We 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.
Adjusted Historical Portfolio Performance Data
We may also disclose "adjusted historical" 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.
Other Performance Data
We 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%.
We may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account
recurring charges for the period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one,
five, or ten-year period at the end of the one, five,
or ten-year period (or fractional portion 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.
HISTORICAL 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. We have no reason to doubt
the accuracy of the figures provided by the portfolios. We have not verified
these figures.
Historical Sub-Account Performance Data
The charts below show historical performance data for the sub-accounts
for the periods indicated. This data include "adjusted historical" performance
for periods prior to the October 2, 1998 inception of the variable account,
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. The dates next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio. These figures are not
an indication of the future performance of the 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.
Historical Performance Data Charts
1. Average Annual Total Returns - Assuming no Riders
2. Average Annual Total Returns - Assuming Guaranteed Minimum Death
Benefit (GMDB) Rider
3. Average Annual Total Returns - Assuming Guaranteed Minimum Death
Benefit and Guaranteed Minimum Income
Benefit (GMIB) Riders
4. Cumulative Returns - Assuming no Riders
5. Cumulative Returns - Assuming Guaranteed Minimum Death Benefit Rider
6. Cumulative Returns - Assuming Guaranteed Minimum Death Benefit and
Guaranteed Minimum Income Benefit Riders
<PAGE>
<TABLE>
<CAPTION>
1. Historical average annual total returns for periods since inception of the
portfolio, for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum and administrative expense charge of
0.15% per annum but do not reflect any fee deduction for any optional Riders.
These performance numbers assume an average annual account value of over $50,000
and, therefore, no deduction has been made to reflect the $30 account fee.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
For the period from
SUB-ACCOUNT For the For the 3-year For the For the 10-year commencement of
(date of commencement of 1-year period period ending 5-year period period ending portfolio
operation of ending 12/31/98 ending 12/31/98 operations to
corresponding portfolio) 12/31/98 12/31/98 12/31/98
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Aspen Worldwide 27.12% 24.89% 19.62% NA 22.27%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 7.44% NA NA NA 6.64%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.79% 8.01% 11.30% NA 35.30%
(8/31/90) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -10.30% 8.16% 7.01% 11.63% 11.27%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.37% 22.42% NA NA 24.73%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 45.91% 32.57% 26.06% NA 23.66%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.30% 26.12% 21.82% NA 19.90%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 21.58% 20.28% NA NA 20.76%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.28% 37.00% 32.80% 24.70% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 30.54% 27.44% 20.06% 14.00% 13.89%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 19.20% 22.81% 19.49% NA 14.37%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.62% 23.72% NA NA 24.16%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 32.41% 22.23% 17.44% NA 17.81%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 5.63% 15.52% 17.49% 17.68% 17.32%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield (1/2/97) 3.34% NA NA NA 7.56%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 6.39% NA NA NA 7.40%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA 3.49%*
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
*Non-annualized, year-to date return
2. Historical average annual total returns for periods since inception of the
portfolio for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum, administrative expense charge of
0.15% per annum and the optional Guaranteed Minimum Death Benefit Rider fee of
0.20% per annum. These performance numbers assume an average annual account
value of over $50,000 and, therefore, no deduction has been made to reflect the
$30 account fee.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
For the period from
SUB-ACCOUNT For the For the 3-year For the For the 10-year commencement of
(date of commencement of 1-year period period ending 5-year period period ending portfolio
operation of ending 12/31/98 ending 12/31/98 operations to
corresponding portfolio) 12/31/98 12/31/98 12/31/98
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 26.92% 24.69% 19.42% NA 22.07%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
7.24% NA NA NA 6.44%
MSDW UF International
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-4.99% 7.81% 11.10% NA 35.10%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-10.50% 7.96% 6.81% 11.43% 11.07%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
32.17% 22.22% NA NA 24.53%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
45.71% 32.37% 25.86% NA 23.46%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
28.10% 25.92% 21.62% NA 19.70%
Dreyfus VIF Capital
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
We currently deduct an annual account fee of $30 (the fee is waived for
account values over $50,000). We deduct insurance and administrative
charges of 1.40% per year from your average daily value in the
variable account.
If you elect the Guaranteed Minimum Death Benefit Rider, we will deduct a
monthly fee equal to 1/12 of 0.20% of the account value.
If you elect the Guaranteed Minimum Income Benefit Rider with the
Guaranteed Minimum Death Benefit Rider, we will deduct a monthly fee
equal to 1/12 of 0.40% of the account value.
The first 18 transfers each year are free (then we 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).
- ---------------------------------------------------------------------------------------------------------------------
21.38% 20.08% NA NA 20.56%
MFS VIT Research
(7/26/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
41.08% 36.80% 32.60% 24.50% NA
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
30.34% 27.24% 19.86% 13.80% 13.69%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.00% 22.61% 19.29% NA 14.17%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.42% 23.52% NA NA 23.96%
MFS VIT Growth w/ Income
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
32.21% 22.03% 17.24% NA 17.61%
Janus Aspen Balanced
(9/13/93)
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
5.43% 15.32% 17.29% 17.48% 17.12%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
3.14% NA NA NA 7.36%
MSDW UF High Yield (1/2/97)
<PAGE>
6.19% NA NA NA 7.20%
MSDW UF Fixed Income
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NA NA NA NA 3.29%*
Transamerica VIF Money
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
*Non-annualized, year-to date return
3. Historical average annual total returns for periods since inception of the
portfolio for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum, administrative expense charge of
0.15% per annum and the optional Guaranteed Minimum Death Benefit (GMDB) and
Guaranteed Minimum Insurance Benefit (GMIB) and Rider fees of 0.40% per annum.
These performance numbers assume an average annual account value of over $50,000
and, therefore, no deduction has been made to reflect the $30 account fee.
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
For the period from
SUB-ACCOUNT For the For the 3-year For the For the 10-year commencement of
(date of commencement of 1-year period period ending 5-year period period ending portfolio
operation of ending 12/31/98 ending 12/31/98 operations to
corresponding portfolio) 12/31/98 12/31/98 12/31/98
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 26.72% 24.49% 19.22% NA 21.87%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
7.04% NA NA NA 6.24%
MSDW UF International
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-5.19% 7.61% 10.90% NA 34.90%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-10.70% 7.76% 6.61% 11.23% 10.87%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
31.97% 22.02% NA NA 24.33%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
45.51% 32.17% 25.66% NA 23.26%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
27.90% 25.72% 21.42% NA 19.50%
Dreyfus VIF Capital
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.18% 19.88% NA NA 20.36%
MFS VIT Research (7/29/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
40.88% 36.60% 32.40% 24.30% NA
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
30.14% 27.04% 19.66% 13.60% 13.49%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
18.80% 22.41% 19.09% NA 13.97%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
20.22% 23.32% NA NA 23.76%
MFS VIT Growth w/ Income
(10/9/95)
32.01% 21.83% 17.04% NA 17.41%
Janus Aspen Balanced
(9/13/93)
5.23% 15.12% 17.09% 17.28% 16.92%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
2.94% NA NA NA 7.16%
MSDW UF High Yield (1/2/97)
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
5.99% NA NA NA 7.00%
MSDW UF Fixed Income
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NA NA NA NA 3.09%*
Transamerica VIF Money
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
*Non-annualized, year-to date return
4. Historical cumulative total returns for periods since inception of the
portfolio for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum, and administrative expenses charge
of 0.15% per annum but, do not reflect any fee deduction for any optional Rider.
These performance numbers assume an average annual account value of over $50,000
and, therefore, no deduction has been made to reflect the $30 account fee.
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
For the period from
SUB-ACCOUNT For the 3-year For the For the 10-year commencement of
(date of commencement of For the 1-year period ending 5-year period period ending portfolio
operation of period ending 12/31/98 ending 12/31/98 operations to
corresponding portfolio) 12/31/98 12/31/98 12/31/98
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 27.12% 94.80% 144.91% NA 190.46%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
7.44% NA NA NA 13.69%
MSDW UF International
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-4.79% 25.99% 70.76% NA 1145.49%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-10.30% 26.55% 40.35% 200.41% 204.31%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
32.37% 83.46% NA NA 114.02%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
45.91% 132.98% 218.37% NA 299.47%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
28.30% 100.61% 168.33% NA 183.68%
Dreyfus VIF Capital
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.58% 74.00% NA NA 91.29%
MFS VIT Research (7/26/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
41.28% 157.15% 313.02% 809.00% #N/A
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
30.54% 106.99% 149.42% 270.69% 273.53%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.20% 85.21% 143.58% NA 191.49%
Alliance VPF Growth &
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.62% 89.40% NA NA 101.32%
MFS VIT Growth w/ Income
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
32.41% 82.61% 123.41% NA 138.49%
Janus Aspen Balanced
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
5.63% 54.17% 123.87% 409.55% 428.84%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
3.34% NA NA NA 15.68%
MSDW UF High Yield
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
6.39% NA NA NA 15.33%
MSDW UF Fixed Income
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Inquiries.Transamerica VIF Money NArket (1/2/98) NA NA NA 3.49%
- ---------------------------------------------------------------------------------------------------------------------
5. Historical cumulative total returns for periods since inception of the
portfolio for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum, administrative expense charge of
0.15% per annum and the optional GMDB Rider fee of 0.20% per annum. These
performance numbers assume an average annual account value of over $50,000 and,
therefore, no deduction has been made to reflect the $30 account fee.
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
For the period from
commencement of
SUB-ACCOUNT For the For the 5-year For the portfolio
(date of commencement of For the 1-year 3-year period period ending 10-year period operations to
operation of period ending ending 12/31/98 ending 12/31/98 12/31/98
corresponding portfolio) 12/31/98 12/31/98
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 26.92% 93.86% 142.87% NA 187.95%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 7.24% NA NA NA 13.27%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.99% 25.29% 69.23% NA 1130.21%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -10.50% 25.85% 39.04% 195.07% 198.66%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.17% 82.56% NA NA 112.84%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 45.71% 131.92% 215.86% NA 295.28%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.10% 99.65% 166.13% NA 180.97%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 21.38% 73.13% NA NA 90.20%
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.08% 156.03% 309.92% 794.52% #N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 30.34% 106.02% 147.35% 264.23% 266.94%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 19.00% 84.30% 141.55% NA 187.45%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.42% 88.48% NA NA 100.27%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 32.21% 81.71% 121.52% NA 136.35%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 5.43% 53.37% 121.97% 400.96% 419.52%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 3.14% NA NA NA 15.25%
(1/8/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 6.19% NA NA NA 14.90%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA 3.29%
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
6. Historical cumulative total returns for periods since inception of the
portfolio for each sub-account are as follows. These figures include mortality
and expense risk charge of 1.25% per annum, administrative expenses charge of
0.15% per annum and the optional GMDB and GMIB Riders fee of 0.40% per annum.
These performance numbers assume an average annual account value of over $50,000
and, therefore, no deduction has been made to reflect the $30 account fee.
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
For the period from
commencement of
SUB-ACCOUNT For the For the 5-year For the portfolio
(date of commencement of For the 1-year 3-year period period ending 10-year period operations to
operation of period ending ending 12/31/98 ending 12/31/98 12/31/98
corresponding portfolio) 12/31/98 12/31/98
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 26.72% 92.93% 140.84% NA 185.46%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 7.04% NA NA NA 12.84%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -5.19% 24.59% 67.71% NA 1115.10%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -10.70% 25.15% 37.74% 189.81% 193.10%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 31.97% 81.66% NA NA 111.66%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 45.51% 130.87% 213.35% NA 291.12%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 27.90% 98.70% 163.95% NA 178.28%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 21.18% 72.27% NA NA 89.12%
Transamerica VIF Growth 40.88% 154.91% 306.83% 780.24% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 30.14% 105.05% 145.29% 257.88% 260.45%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 18.80% 83.40% 139.53% NA 183.46%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.22% 87.56% NA NA 99.23%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 32.01% 80.82% 119.63% NA 134.22%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 5.23% 52.57% 120.09% 392.49% 410.34%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 2.94% NA NA NA 14.82%
(1/8/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 5.99% NA NA NA 14.47%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA 3.09%
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the contracts under a Distribution Agreement with Transamerica.
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 an indirect
wholly-owned subsidiary of Transamerica Insurance 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 year 1998, $36,643,441 in 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 plus compensation based on a percentage of account
value. Both percentages may be up to 1.00% 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.
<PAGE>
STATE REGULATION
We are subject to the insurance laws and regulations of all the states
where we are 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 us or by our 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
This Statement of Additional Information contains the financial
statements of the variable account as of and for the period ended December 31,
1998.
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>
W04990044-RA
Audited Financial Statements
Separate Account VA-7 of
Transamerica Life Insurance
and Annuity Company
Period from November 2, 1998
(commencement of
operations) to
December 31, 1998 with
Report of Independent
Auditors
<PAGE>
Separate Account VA-7 of
Transamerica Life Insurance
and Annuity Company
Audited Financial Statements
Period from November 2, 1998 (commencement of operations) to December 31, 1998
Contents
Report of Independent Auditors.......................1
Audited Financial Statements
Statement of Assets and Liabilities..................2
Statement of Operations..............................3
Statement of Changes in Net Assets...................4
Notes to Financial Statements........................5
<PAGE>
7
W04990044-RA
Report of Independent Auditors
Unitholders of Separate Account VA-7
of Transamerica Life Insurance and Annuity Company
Board of Directors, Transamerica Life Insurance and Annuity Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VA-7 of Transamerica Life Insurance and Annuity Company (comprised of
the Alliance Premier Growth and Income, Transamerica VIF Growth, Transamerica
VIF Money Market, MFS Growth and Income, Alger American Income and Growth, Janus
Aspen Worldwide Growth, Janus Aspen Balanced Sub-accounts) as of December 31,
1998, the related statements of operations and changes in net assets for the
period from November 2, 1998 (commencement of operations) to December 31, 1998.
The financial statements are the responsibility of the Separate Account VA-7's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the fund manager. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts comprising Separate Account VA-7 of Transamerica Life Insurance and
Annuity Company at December 31, 1998, the results of their operations and the
changes in their net assets for the period from November 2, 1998 (commencement
of operations) to December 31, 1998 in conformity with generally accepted
accounting principles.
Charlotte, North Carolina
April 21, 1999
<PAGE>
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
Alliance Alger Janus
Premier Transamerica Transamerica MFS American Aspen Janus
Growth and VIF VIF Money Growth and Income and Worldwide Aspen
Income Growth Market Income Growth Growth Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
------------- --------------- -------------- -------------- ------------ ------------- -----------
Assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at fair value $7,945 $194,692 $64,591 $7,911 $8,320 $5,490 $8,345
Receivable for units sold - - - - - - -
Due from Transamerica Life 7 - 131 5 5 3 4
------------- --------------- -------------- -------------- ------------ ------------- -----------
Total assets 7,952 194,692 64,722 7,916 8,325 5,493 8,349
Liabilities:
Payable for units redeemed - - - - - - -
Due to Transamerica Life 16 9 38 17 17 - -
------------- --------------- -------------- -------------- ------------ ------------- -----------
Total liabilities 16 9 38 17 17 - -
------------- --------------- -------------- -------------- ------------ ------------- -----------
Net assets $7,936 $194,683 $64,684 $7,899 $8,308 $5,493 $8,349
============= =============== ============== ============== ============ ============= ===========
Accumulation units outstanding 617.735 14,417.336 64,111.340 652.600 641.633 410.412 634.385
============= =============== ============== ============== ============ ============= ===========
Net asset value and redemption
price per unit $12.846933 $13.503397 $1.008932 $12.103898 $12.948222 $13.384115 $13.160774
============= =============== ============== ============== ============ ============= ===========
Investment sub-account information:
Number of mutual fund shares 363.800 10,056.436 64,591.360 393.389 634.163 188.756 370.900
Net asset value per share $21.84 $19.36 $1.00 $20.11 $13.12 $29.09 $22.50
Investment cost $7,265 $197,091 $64,566 $7,223 $7,249 $4,874 $7,338
</TABLE>
See accompanying notes.
<PAGE>
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
Statement of Operations
Period from November 2, 1998 (commencement of operations) to December 31, 1998
<TABLE>
<CAPTION>
Alliance Alger
Premier Transamerica Transamerica MFS American Janus Janus
Growth and VIF VIF Money Growth and Income and Aspen Aspen
Income Growth Market Income Growth Worldwide Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account Growth Sub-account
Sub-account
------------ -------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income $ - $16,198 $ 101 $ - $ - $ 7 $ 91
Expenses:
Mortality and expense risk change 16 197 44 23 23 15 23
------- -------------- --------------- ------------ ------------ ------------ ------------
Net investment income (loss) (16) 16,001 57 (23) (23) (8) 68
Net realized and unrealized gain (loss) on investments:
Realized (loss) on investment
transactions (5) - - - - - -
Unrealized appreciation
(depreciation) of investments 680 (2,398) 25 688 1,071 616 1,007
-------------- --------------- ------------ ------------ ------------ ------------
-------
Net gain (loss) on investments 675 (2,398) 25 688 1,071 616 1,007
----------- -------------- --------------- ------------ ------------ ------------ ------------
Increase in net assets resulting from
operations $ 659 $13,603 $ 82 $665 $1,048 $608 $1,075
=========== ============== =============== ============ ============ ============ ============
See accompanying notes.
<PAGE>
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
Statement of Changes in Net Assets
Period from November 2, 1998 (commencement of operations) to December 31, 1998
Alliance Alger
Premier Transamerica Transamerica MFS American Janus Janus
Growth and VIF VIF Money Growth and Income and Aspen Aspen
Income Growth Market Income Growth Worldwide Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account Growth Sub-account
Sub-account
------------ --------------- -------------- ------------ ------------ ------------ ------------
Increase in net assets:
Operations:
Net investment income (loss) $ (16) $ 16,001 $ 57 $ (23) $ (23) $ (8) $ 68
Realized (loss) on investment
transactions (5) - - - - - -
Unrealized appreciation
(depreciation) of investments 680 (2,398) 25 688 1,071 616 1,007
------------ --------------- -------------- ------------ ------------ ------------ ------------
Increase in net assets resulting
from operations 659 13,603 82 665 1,048 608 1,075
Changes from accumulation unit
transactions 7,277 181,080 64,602 7,234 7,260 4,885 7,274
---------- --------------- -------------- ------------ ------------ ------------ ------------
Total increase in net assets 7,936 194,683 64,684 7,899 8,308 5,493 8,349
Net assets at beginning of period - - - - - - -
---------- --------------- -------------- ------------ ------------ ------------ ------------
Net assets at end of period $7,936 $194,683 $64,684 $7,899 $8,308 $5,493 $8,349
========== =============== ============== ============ ============ ============ ============
</TABLE>
See accompanying notes.
<PAGE>
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
Notes to Financial Statements
December 31, 1998
1. Organization
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
("Separate Account") was established by Transamerica Life Insurance and Annuity
Company ("Transamerica Life") as a separate account under the laws of the State
of North Carolina on October 2, 1998. The Separate Account is registered with
the Securities and Exchange Commission (the "Commission") under the Investment
Company Act of 1940 as a unit investment trust and is designed to provide
annuity benefits pursuant to deferred annuity contracts ("Contract") issued by
Transamerica Life. The Separate Account commenced operations when initial
deposits were received on November 2, 1998.
In accordance with the terms of the Contract, all payments allocated to the
Separate Account by contract owners must be allocated to purchase units of any
or all of the Separate Account's seventeen sub-accounts, each of which invests
exclusively in a specific corresponding mutual fund portfolio. The mutual fund
portfolios are: Alliance Premier Growth, Alliance Growth and Income, Oppenheimer
Managed, Oppenheimer Small Cap, Transamerica VIF Growth, Transamerica VIF Money
Market, MFS Research, MFS Growth and Income, MFS Emerging Growth, Morgan Stanley
International, Magnum Morgan Stanley Fixed Income, Morgan Stanley High Yield,
Alger American Income and Growth, Janus Aspen Worldwide Growth, Janus Aspen
Balanced, Dreyfus Capital Appreciation, and Dreyfus Small Cap, (together "the
Funds"). The funds are open-end, diversified investment companies registered
under the Investment Company Act of 1940. During 1998, only seven sub-accounts
shown in the accompanying financial statements had activity.
2. Significant Accounting Policies
The accompanying financial statements of the Separate Account have been prepared
in accordance with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein. The
accounting principles followed and the methods of applying those principles are
presented below:
<PAGE>
Separate Account VA-7 of Transamerica Life Insurance and Annuity Company
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Investment Valuation--Investments in the Funds' shares are carried at fair
(net asset) value. Realized investment gains or losses on investments are
determined on a specific identification basis which approximates average
cost. Investment transactions are accounted for on the date the order to buy
or sell is executed (trade date).
Investment Income--Investment income consists of dividend income (both
ordinary and capital gains) and is recognized on the ex-dividend date. All
distributions received are reinvested in the respective sub-accounts.
Federal Income Taxes--Operations of the Separate Account are part of, and
will be taxed with, those of Transamerica Life, which is taxed as a "life
insurance company" under The Internal Revenue Code. Under current federal
income tax law, income from assets maintained in the Separate Account for
the exclusive benefit of participants is generally not subject to federal
income tax.
3. Expenses and Charges
Mortality and expense risk charges are deducted from each sub-account of the
Separate Account on a daily basis which is equal, on an annual basis, to 1.25%
of the daily net asset value of the sub-account. This amount can never increase
and is paid to Transamerica Life. An administrative expense charge is also
deducted by Transamerica Life from each sub-account on a daily basis which is
equal, on an annual basis, to .15% of the daily net asset value of the
sub-account. This amount may change, but it is guaranteed not to exceed a
maximum effective annual rate of .35%.
The following charges are deducted from a contract holder's account by
Transamerica Life and not directly from the Separate Account. An annual contract
fee is deducted at the end of each contract year prior to the annuity date.
Currently, this charge is $30. This charge may change but is guaranteed not to
exceed $60. After the annuity date this charge is referred to as the Annuity
Fee. The Annuity Fee is $30. Additionally, there is a $10 fee for each transfer
in excess of 18 in any contract year.
<PAGE>
4. Remuneration
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
5. Accumulation Units
The changes in accumulation units and amount are as follows:
<TABLE>
<CAPTION>
Alliance Alger
Premier Transamerica American Janus Aspen Janus
Growth and Transamerica VIF Money MFS Growth Income and Worldwide Aspen
Income VIF Growth Market and Income Growth Growth Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
------------- -------------- ------------- ------------- ------------- ------------- -------------
Period from November 2, 1998
to December 31, 1998
- ------------------------------
Accumulation units:
<S> <C> <C> <C> <C> <C> <C> <C>
Units sold 617.735 14,417.336 64,111.340 652.600 641.633 410.412 634.385
Units redeemed - - - - - - -
Units transferred - - - - - - -
============= ============== ============= ============= ============= ============= =============
Net increase 617.735 14,417.336 64,111.340 652.600 641.633 410.412 634.385
============= ============== ============= ============= ============= ============= =============
Amounts:
Sales $ 7,277 $181,080 $64,602 $ 7,234 $ 7,260 $ 4,885 $ 7,274
Redemptions - - - - - - -
Transfers - - - - - - -
============= ============== ============= ============= ============= ============= =============
Net increase $ 7,277 $181,080 $64,602 $ 7,234 $ 7,260 $ 4,885 $ 7,274
============= ============== ============= ============= ============= ============= =============
6. Investment Transactions
The aggregate costs of the purchases and the proceeds from the sales of investments for the period from November 2, 1998
to December 31, 1998 were:
Alliance Alger
Premier Transamerica MFS Growth American Janus Aspen Janus
Growth and Transamerica VIF Money and Income Income and Worldwide Aspen
Income VIF Growth Market Sub-account Growth Growth Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
------------- -------------- -------------- -------------- -------------- -------------- --------------
Amounts:
Aggregate purchases $ 7,271 $ 197,081 $ 64,471 $ 7,229 $ 7,262 $4,971 $ 7,265
============= ============== ============== ============== ============== ============== ==============
Aggregate proceeds from
sales $ - $ 198 $ 6 $ 6 $ 6 $ 15 $ 23
============= ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE>
Audited Consolidated Financial Statements
Transamerica Life Insurance and Annuity Company and Subsidiary
December 31, 1998
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Audited Consolidated Financial Statements
December 31, 1998
Audited Consolidated Financial Statements
Report of Independent Auditors................................. 1
Consolidated Balance Sheet..................................... 2
Consolidated Statement of Income............................... 3
Consolidated Statement of Shareholder's Equity................. 4
Consolidated Statement of Cash Flows........................... 5
Notes to Consolidated Financial Statements..................... 6
<PAGE>
25
04/21/99 3:19 PM
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Life Insurance and Annuity Company
We have audited the accompanying consolidated balance sheet of Transamerica Life
Insurance and Annuity Company and Subsidiary as of December 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica Life
Insurance and Annuity Company and subsidiary at December 31, 1998 and 1997, and
the consolidated results of their operations and cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
January 22, 1999
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31
1998 1997
--------------------- --------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 13,823,793 $ 14,691,836
Equity securities available for sale 105,846 119,078
Mortgage loans on real estate 352,422 365,454
Policy loans 20,023 19,433
Other long-term investments 14,626 8,215
Short-term investments 439,381 76,806
--------------------- ---------------------
14,756,091 15,280,822
Cash 17,189 8,544
Accrued investment income 217,031 242,606
Other receivables 106,428 11,695
Reinsurance recoverable on paid and unpaid losses 70,513 48,487
Deferred policy acquisitions costs 188,598 244,485
Other assets 19,727 28,233
Separate account assets 4,587,035 2,668,885
--------------------- ---------------------
$ 19,962,612 $ 18,533,757
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy and contract liabilities:
Policyholder contract deposits $ 10,092,759 $ 10,885,993
Reserves for future policy benefits 3,301,615 3,230,216
Policy claims and other 35,574 30,362
--------------------- ---------------------
13,429,948 14,146,571
Income tax liabilities 188,793 257,252
Accounts payable and other liabilities 379,447 125,322
Separate account liabilities 4,587,035 2,668,885
--------------------- ---------------------
18,585,223 17,198,030
Shareholder's equity:
Common stock ($100 par value):
Authorized--50,000 shares
Issued and outstanding--15,300 shares 1,530 1,530
Additional paid-in capital 209,257 209,257
Retained earnings 897,182 723,051
Net unrealized investment gains 269,420 401,889
--------------------- ---------------------
1,377,389 1,335,727
--------------------- ---------------------
$ 19,962,612 $ 18,533,757
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1998 1997 1996
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 140,826 $ 146,516 $ 219,381
Net investment income 1,104,037 1,076,951 1,037,417
Net realized investment gains 161,282 23,333 8,333
--------------- --------------- ---------------
TOTAL REVENUES 1,406,145 1,246,800 1,265,131
Benefits:
Benefits paid or provided 959,817 938,170 937,084
Increase (decrease) in policy reserves and
liabilities (36,003) (13,815) 51,508
---------------- ---------------- ---------------
923,814 924,355 988,592
Expenses:
Amortization of deferred policy
acquisition costs 31,353 32,930 16,949
Salaries and salary related expenses 44,371 48,834 46,261
Other expenses 57,131 44,764 63,993
--------------- --------------- ---------------
132,855 126,528 127,203
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 1,056,669 1,050,883 1,115,795
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 349,476 195,917 149,336
Provision for income taxes 125,345 64,964 50,568
--------------- --------------- ---------------
NET INCOME $ 224,131 $ 130,953 $ 98,768
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Net
Unrealized
Additional Compre-hensive Investment
Common Stock Paid-in Retained Gains
Shares Amount Capital Income Earnings (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 15,300 $ 1,530 $ 241,561 $ 533,330 $ 351,090
Comprehensive income:
Net income $ 98,768 98,768
Other comprehensive income, net of
tax:
Unrealized losses from
investments marked at fair
value (157,426) (157,426)
Reclassification adjustment
for gains included in net
income (5,416) (5,416)
--------------
Comprehensive income $ (64,074)
==============
Capital contributions from parent
230
Balance at December 31, 1996 15,300 1,530 241,791 632,098 188,248
Comprehensive income:
Net income $ 130,953 130,953
Other comprehensive income, net of
tax:
Unrealized gains from
investments marked at fair
value 228,807 228,807
Reclassification adjustment
for gains included in net
income (15,166) (15,166)
-------------
Comprehensive income $ 344,594)
=============
Capital transactions with parent (32,534)
Dividends declared (40,000)
Balance at December 31, 1997 15,300 1,530 209,257 723,051 401,889
Comprehensive income:
Net income $ 224,131 224,131
Other comprehensive income, net of
tax:
Unrealized losses from
investments marked at fair
value (27,636) (27,636)
Reclassification adjustment
for gains included in net
income (104,833) (104,833)
--------------
Comprehensive income $ 91,662
=============
Dividends declared (50,000)
Balance at December 31, 1998 15,300 $ 1,530 $ 209,257 $ 897,182 $ 269,420
========== ========== ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
---------------- --------------- -----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 224,131 $ 130,953 $ 98,768
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (22,026) (26,383) (2,939)
Other receivables 1,549 35,566 (27,760)
Policy and contract liabilities 537,939 582,297 589,476
Other assets, accrued investment income, accounts payable
and other liabilities, and income taxes
356,248 (95,530) 66,536
Policy acquisition costs deferred (65,107) (64,316) (57,498)
Amortization of deferred policy acquisition costs 80,820 31,998 16,969
Realized gains on investment transactions (210,749) (22,401) (8,353)
Other (80,991) 1,893 (18,875)
------------------ ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 821,814 574,077 656,324
INVESTMENT ACTIVITIES
Purchases of securities (2,965,845) (5,166,388) (4,044,338)
Purchases of other investments (64,411) (26,067) (114,058)
Sales of securities 3,463,976 4,350,361 2,669,548
Sales of other investments 70,918 61,616 117,881
Maturities of securities 374,140 279,040 247,411
Net change in short-term investments (362,575) (43,016) 12,187
Other 76 (2,097) (5,614)
----------------- ----------------- -----------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 516,279 (546,551) (1,116,983)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,234,075 4,162,515 4,254,998
Withdrawals from policyholder contract deposits (7,513,523) (4,145,865) (3,812,392)
Dividends paid to parent (50,000) (40,000) -
----------------- ----------------- -----------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (1,329,448) (23,350) 442,606
------------------ ----------------- -----------------
INCREASE (DECREASE) IN CASH 8,645 4,176 (18,053)
Cash at beginning of year 8,544 4,368 22,421
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 17,189 $ 8,544 $ 4,368
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Life Insurance and Annuity Company ("TALIAC") and its
subsidiary (collectively, "the Company") engage in providing life insurance,
pension and annuity products, structured settlements and investments, which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Reclassifications: Certain prior year amounts have been reclassified to conform
with current year presentation.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In 1997, the Financial Accounting Standards Board
issued a new standard on reporting comprehensive income, which establishes
standards for reporting and displaying comprehensive income and its components
in the financial statements. This standard is effective for 1998; 1997 and 1996
have been reclassified to reflect the 1998 presentation. Application of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's consolidated results of operations or
financial position.
In 1998, the Financial Accounting Standards Board issued a new standard on
accounting for derivative instruments and hedging activities. This standard is
effective all quarters of fiscal years beginning after June 15, 1999 (effective
for year 2000 for the company). Application of the statement is not expected to
have a material impact on the Company's combined financial position or results
of operations.
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TALIAC and its subsidiary, Transamerica
Assurance Company, both of which operate primarily in the life insurance
industry. TALIAC is a wholly owned subsidiary of Transamerica Occidental Life
Insurance Company (TOLIC) which is an indirect wholly owned subsidiary of
Transamerica Corporation. All significant intercompany balances and transactions
have been eliminated in consolidation.
Investments: Investments are shown on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note L - Financial Instruments.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, and certain variable
sales, underwriting and issue and field office expenses, all of which vary with
and are primarily related to the production of such business, have been
deferred. DPAC for non-traditional life and investment-type products are
amortized over the life of the related policies in relation to estimated future
gross profits. DPAC for traditional life insurance products are amortized over
the premium-paying period of the related policies in proportion to premium
revenue recognized, using principally the same assumptions used for computing
future policy benefit reserves. DPAC related to non-traditional and
investment-type products is adjusted as if the unrealized gains or losses on
securities available for sale were realized. Changes in such adjustments are
included in net unrealized investment gains or losses on an after tax basis as a
separate component of shareholder's equity and, accordingly, have no effect on
net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of variable annuity contracts and other pension deposit contracts. The
assets held in these Separate Accounts are invested primarily in fixed
maturities, mutual funds, equity securities, other marketable securities, and
short-term investments. The Separate Account assets are stated at fair value and
are not subject to liabilities arising out of any other business the Company may
conduct. Substantially all investment risks associated with fair value changes
are borne by the contract holders. Accordingly, investment income and realized
gains and losses attributable to Separate Accounts are not reported in the
Company's results of operations.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, funding
agreements, and other deposit contracts that do not have mortality or morbidity
risk. Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 2.8% to 9.8% in 1998, 3.0% to 9.7% in 1997 and 3.2% to 9.5% in 1996.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include limited-payment life insurance policies, annuities with life
contingencies and term life insurance policies. The reserves for future policy
benefits for traditional life insurance products have been provided on a
net-level premium method based upon estimated investment yields, withdrawals,
mortality, and other assumptions which were appropriate at the time the policies
were issued. Such estimates are based upon past experience with a margin for
adverse deviation. Interest assumptions range from 2.5% to 12.0%. Reserves for
future policy benefits are evaluated as if unrealized gains or losses on
securities available for sale were realized and adjusted for any resultant
premium deficiencies. Changes in such adjustments are included in net unrealized
investment gains or losses on an after tax basis as a separate component of
shareholder's equity and, accordingly, have no effect on net income.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: The Company is included in the consolidated federal income tax
return of TOLIC which, with its domestic subsidiaries and affiliates, is
included in the consolidated federal income tax returns filed by Transamerica
Corporation, which by the terms of a tax sharing agreement generally requires
the Company to accrue and settle income tax obligations in amounts that would
result if the Company filed separate tax returns with federal taxing
authorities.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities and equity securities available for
sale are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1998
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 148,371 $ 53,714 $ 34 $ 202,050
Obligations of states and political
subdivisions 95,539 8,020 - 103,559
Foreign governments 22,060 5,181 - 27,241
Corporate securities 9,166,572 583,792 161,806 9,588,558
Public utilities 1,650,936 156,965 1,171 1,806,730
Mortgage-backed securities 1,801,143 175,600 2,868 1,973,876
Redeemable preferred stocks 119,888 9,410 7,519 121,779
----------------- ---------------- ----------------- -----------------
Total fixed maturities $ 13,004,509 $ 992,682 $ 173,398 $ 13,823,793
================= ================ ================= =================
Equity securities $ 23,775 $ 83,836 $ 1,765 $ 105,846
================= ================ ================ =================
December 31, 1997
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 134,940 $ 38,105 $ - $ 173,045
Obligations of states and political
subdivisions 84,372 4,450 3 88,819
Foreign governments 30,050 4,642 - 34,692
Corporate securities 9,413,812 502,196 29,974 9,886,034
Public utilities 1,658,497 128,976 300 1,787,173
Mortgage-backed securities 2,455,496 206,585 664 2,661,417
Redeemable preferred stocks 48,069 21,396 8,809 60,656
----------------- ---------------- ----------------- -----------------
Total fixed maturities $ 13,825,236 $ 906,350 $ 39,750 $ 14,691,836
================= ================ ================= =================
Equity securities $ 30,954 $ 90,542 $ 2,418 $ 119,078
================= ================ ================ =================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE B--INVESTMENTS (Continued)
The cost and fair value of fixed maturities available for sale at December 31,
1998, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
<TABLE>
<CAPTION>
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1999 $ 500,302 $ 524,047
Due in 2000-2003 1,871,240 1,952,753
Due in 2004-2008 3,057,731 3,152,398
Due after 2008 5,654,205 6,098,940
---------------- ----------------
11,083,478 11,728,138
Mortgage-backed securities 1,801,143 1,973,876
Redeemable preferred stock 119,888 121,779
---------------- ----------------
$ 13,004,509 $ 13,823,793
================ ================
</TABLE>
As of December 31, 1998, the Company held total investments in each of the
following issuers, other than the United States Government or a United States
Government agency or authority, which exceeded 10% of total shareholder's equity
(in thousands) (See Note I.):
Name of Issuer Carrying Value
Hill Street Funding LP $ 698,255
TA CBO I Inc. 233,292
Secured Bond Trust 228,945
Olive Street Funding II 171,833
The carrying value of assets on deposit with public officials in compliance with
regulatory requirements was $15.4 million at December 31, 1998 and $15.3 million
at December 31, 1997.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Net investment income (expense) by major investment category is summarized as
follows (in thousands):
1998 1997 1996
--------------- --------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 1,059,868 $ 1,047,214 $ 1,003,698
Equity securities 6,066 2,115 1,915
Mortgage loans on real estate 32,769 33,681 33,432
Policy loans 1,004 988 841
Other long-term investments 6,910 31 221
Short-term investments 8,290 4,277 4,685
--------------- --------------- ---------------
1,114,907 1,088,306 1,044,792
Investment expenses (10,870) (11,355) (7,375)
---------------- --------------- ---------------
$ 1,104,037 $ 1,076,951 $ 1,037,417
=============== =============== ===============
Significant components of net realized investment gains are as follows (in
thousands):
1998 1997 1996
----------------- ---------------- -----------
Net gains (losses) on disposition of investment in:
Fixed maturities $ (25,569) $ (6,928) $ 6,247
Equity securities 209,888 39,075 7,023
Other 475 1,524 (175)
---------------- ---------------- ----------------
184,794 33,671 13,095
Provision for impairment 25,955 (11,270) (4,742)
Accelerated amortization of DPAC (49,467) 932 (20)
----------------- ---------------- ----------------
$ 161,282 $ 23,333 $ 8,333
================ ================ ================
The components of net gains (losses) on disposition of investment in fixed
maturities are as follows (in thousands):
1998 1997 1996
----------------- ---------------- ----------
Gross gains $ 25,233 $ 43,422 $ 22,962
Gross losses (50,802) (50,350) (16,715)
---------------- ----------------- ----------------
$ (25,569) $ (6,928) $ 6,247
================ ================= ================
</TABLE>
Proceeds from disposition of investments in fixed maturities available for sale
were $3,400.5 million in 1998, $4,260.1 million in 1997 and $2,652.5 million in
1996.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE B--INVESTMENTS (Continued)
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997
--------------- ----------
<S> <C> <C>
Fixed maturities $ 35,185 $ 31,869
Mortgage loans on real estate 12,031 12,031
--------------- ---------------
$ 47,216 $ 43,900
=============== ===============
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1998 1997
-------------------- -------------
Unrealized gains on investment in:
Fixed maturities $ 819,284 $ 866,600
Equity securities 82,071 88,124
-------------------- --------------------
901,355 954,724
Fair value adjustments to:
DPAC (95,608) (55,434)
Reserves for future policy benefits (377,000) (281,000)
Reserves for Guaranteed Index Fund (14,255) -
--------------------- --------------------
(486,863) (336,434)
Related deferred taxes (145,072) (216,401)
--------------------- ---------------------
$ 269,420 $ 401,889
==================== ====================
</TABLE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
<TABLE>
<CAPTION>
Significant components of changes in DPAC are as follows (in thousands):
1998 1997 1996
-------------------- -------------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 244,485 $ 248,442 $ 198,349
Amounts deferred:
Commissions 47,925 42,960 39,736
Other 17,182 21,356 17,762
Amortization attributed to:
Net gain on disposition of investments (49,467) 932 (20)
Operating income (31,353) (32,930) (16,949)
Fair value adjustment (40,174) (36,275) 9,564
--------------------- --------------------- --------------------
Balance at end of year $ 188,598 $ 244,485 $ 248,442
==================== ==================== ====================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
<TABLE>
<CAPTION>
NOTE D--POLICY AND CONTRACT LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
December 31
1998 1997
------------------ ------------
Liabilities for investment type products:
Guaranteed investment contracts and funding
<S> <C> <C>
agreements $ 5,519,448 $ 6,508,037
Annuity investment contracts 4,221,513 4,061,013
Liabilities for non-traditional life insurance products 351,798 316,943
------------------ ------------------
$ 10,092,759 $ 10,885,993
================== ==================
</TABLE>
Obligations under guaranteed investment contracts and funding agreements are
recorded as liabilities at the face value of the agreement, adjusted for draws
paid and interest credited in the account.
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $377 million as of December 31, 1998, $281 million as of
December 31, 1997 and $195 million as of December 31, 1996.
NOTE E--COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
The components of comprehensive income in the statement of shareholder's equity
are shown net of the following tax provision (benefit) (in thousands):
1998 1997 1996
------------------ ------------------ -----------
<S> <C> <C> <C>
Unrealized investment gains (losses) $ (14,880) $ 123,204 $ (84,768)
Reclassification adjustment for (gains)
losses included in net income (56,449) (8,167) (2,917)
------------------- ------------------- -------------------
Income tax affect on comprehensive
income $ (71,329) $ 115,037 $ (87,685)
=================== ================== ===================
</TABLE>
NOTE F--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997
------------------ ------------
<S> <C> <C>
Current tax liabilities $ 40,969 $ 19,613
Deferred tax liabilities 147,824 237,639
------------------ ------------------
$ 188,793 $ 257,252
================== ==================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE F--INCOME TAXES (Continued)
<TABLE>
<CAPTION>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1998 1997
------------------ ------------
<S> <C> <C>
Deferred policy acquisition costs $ 85,943 $ 93,754
Unrealized investment gains 145,072 216,401
------------------ ------------------
Total deferred tax liabilities 231,015 310,155
------------------ ------------------
Life insurance policy liabilities (66,162) (56,648)
Provision for impairment of investments (16,526) (15,365)
Other-net (503) (503)
------------------- ------------------
Total deferred tax assets (83,191) (72,516)
------------------- -------------------
$ 147,824 $ 237,639
================== ==================
</TABLE>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
<TABLE>
<CAPTION>
Components of provision for income taxes are as follows (in thousands):
1998 1997 1996
------------------ ------------------ ------------
<S> <C> <C> <C>
Current tax expense $ 143,832 $ 56,857 $ 34,627
Deferred tax expense (18,487) 8,107 15,941
------------------- ------------------ ------------------
$ 125,345 $ 64,964 $ 50,568
================== ================== ==================
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1998 1997 1996
------------------ ------------------ ------------
Income before income taxes $ 349,476 $ 195,917 $ 149,336
Tax rate 35% 35% 35%
----------------- ----------------- ----------------
Federal income taxes at statutory rate 122,317 68,571 52,268
Income not subject to tax (1,078) (1,374) (855)
Adjustment to deferred tax asset - - -
Prior years return true up 4,313 - -
Other (207) (2,233) (845)
------------------ ----------------- -----------------
$ 125,345 $ 64,964 $ 50,568
================= ================= =================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE F--INCOME TAXES (Continued)
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1998 was $20.3 million.
At December 31, 1998, $872 million was available for payment of dividends
without such tax consequences. No income taxes has been provided on the
policyholders' surplus account since the conditions that would cause such taxes
are remote.
Income taxes of $122.5 million, $38.2 million and $39.9 million, were paid
principally to the parent in 1998, 1997 and 1996, respectively.
NOTE G--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses; however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE G--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from the Net
Amount Companies Parent Amount
1998
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 29,999,632 $ 25,982,844 $ - $ 4,016,788
=================== =================== =================== ==================
Premiums and other
considerations $ 289,057 $ 195,250 $ 47,019 $ 140,826
=================== =================== =================== ==================
Benefits paid or
provided $ 588,903 $ 122,449 $ 493,363 $ 959,817
=================== =================== =================== ==================
1997
Life insurance in force,
at end of year $ 31,178,888 $ 26,957,773 $ - $ 4,221,115
=================== =================== =================== ==================
Premiums and other
considerations $ 214,654 $ 114,369 $ 46,231 $ 146,516
=================== =================== =================== ==================
Benefits paid or
provided $ 526,892 $ 43,665 $ 454,943 $ 938,170
=================== =================== =================== ==================
1996
Life insurance in force,
at end of year $ 25,452,566 $ 5,773,367 $ - $ 19,679,199
=================== =================== =================== ==================
Premiums and other
considerations $ 140,479 $ 34,965 $ 113,867 $ 219,381
=================== =================== =================== ==================
Benefits paid or
provided $ 663,344 $ 68 $ 273,808 $ 937,084
=================== =================== =================== ==================
</TABLE>
NOTE H--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly listed stocks and
bonds.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE H--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
The Company's total pension costs (benefits) recognized for all plans were
$(0.06) million in 1998, $0.4 million in 1997 and $(1.5) million in 1996, all of
which related to the plan sponsored by Transamerica Corporation. The plans
sponsored by the Company are not material to the consolidated financial position
of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1998, 1997 and 1996.
NOTE I--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its affiliates in the normal course of operations. These transactions include
reinsurance (see Note G), administration of pension funds, loans and advances, a
fixed maturity investment in a special purpose subsidiary of Transamerica,
investments in a money market fund managed by an affiliated company, rental of
space, and other specialized services, including administration of pension
funds. At December 31, 1998, pension funds administered for these related
companies aggregated $1,969 million. The investment in the special purpose
subsidiary was $233.3 million, and the investment in an affiliated money market
fund, included in short-term investments, was $13.0 million.
During 1998, the Company entered into a reinsurance arrangement whereby a block
of bank owned life insurance policies were reinsured with its parent,
Transamerica Occidental Life Insurance Company. The total amount reinsured was
$108.6 million.
During 1997, equity securities with a fair value of $50 million (cost of $2.6
million) were received from Transamerica Corporation in payment of a $50 million
note. The excess of fair value over cost ($47.4 million) was reclassified from
additional paid-in capital to unrealized gain. The Company also received a
capital contribution of $14.9 million from its parent.
NOTE J--REGULATORY MATTERS
TALIAC and its subsidiary are subject to state insurance laws and regulations,
principally those of the Company's state of incorporation. Such regulations
include the risk-based capital requirement and the restriction on the payment of
dividends. Generally, dividends during any year may not be paid, without prior
regulatory approval, in excess of the greater of 10% of the Company's statutory
capital and surplus as of the preceding year end or the Company's statutory net
income from
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE J--REGULATORY MATTERS (Continued)
operations for the preceding year. The insurance department of the domiciliary
state recognizes these amounts as determined in conformity with statutory
accounting practices prescribed or permitted by the insurance department, which
vary in some respects from generally accepted accounting principles. The
Company's statutory net income and statutory capital and surplus which are
represented by TALIAC's net income and capital and surplus are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 208,941 $ 128,897 $ 75,836
Statutory capital and surplus, at
end of year 830,829 707,487 596,526
</TABLE>
NOTE K--COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guarantee, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1998, commitments to maintain liquidity for
benefit payments on notional amounts of $5.2 billion were outstanding ($3.3
billion in 1997).
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by the National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1998 and 1997, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE K--COMMITMENTS AND CONTINGENCIES (Continued)
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $8.6
million in 1998, $4.3 million in 1997 and $6.9 million in 1996. The following is
a schedule by years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1998 (in thousands):
Year ending December 31:
1999 $ 449
2000 238
2001 108
2002 37
2003 4
Later years -
$ 836
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions against its subsidiary similar to those faced by
many other major life insurers which allege damages related to sales practices
for universal life policies sold between January 1981 and June 1996. In one such
action, the subsidiary and plaintiffs' counsel entered into a settlement which
was approved on June 26, 1997. The settlement required prompt notification of
affected policyholders. Administrative and policy benefit costs associated with
the settlement are not material to the Company. Additional costs related to the
settlement are not currently determinable and are not expected to be material
and will be incurred over a period of years. In the opinion of management, any
ultimate liability which might result from other litigation would not have a
materially adverse effect on the consolidated financial position of the Company
or the results of its operations.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE L--FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
December 31
--------------------------------------------
1998 1997
----------------------------------- --------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 13,823,793 $ 13,823,793 $ 14,691,836 $ 14,691,836
Equity securities available for sale 105,846 105,846 119,078 119,078
Mortgage loans on real estate 352,422 395,310 365,454 404,437
Policy loans 20,023 20,023 19,433 19,433
Short-term investments 439,381 439,381 76,806 76,806
Cash 17,189 17,189 8,544 8,544
Accrued investment income 217,031 217,031 242,606 242,606
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 3,913,557 3,746,646 3,971,539 3,695,431
Single premium immediate annuities 307,956 325,366 89,474 92,469
Guaranteed investment contracts 2,808,424 2,838,570 2,811,890 2,843,680
Funding agreements and other 2,711,024 2,720,571 3,696,147 3,739,713
Off-balance-sheet assets (liabilities):
Interest rate swap agreements
hedges of liabilities in a:
Receivable position - 16,420 - 7,416
Payable position - (2,933) - (3,643)
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE L--FINANCIAL INSTRUMENTS (Continued)
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment income. The
differential to be paid or received on those interest rate swap agreements that
are designated as hedges of financial liabilities is recorded on an accrual
basis as a component of benefits paid or provided. While the Company is not
exposed to credit risk with respect to the notional amounts of the interest rate
swap agreements, the Company is subject to credit risk from potential
nonperformance of counterparties throughout the contract periods. The amounts
potentially subject to such credit risk are much smaller than the notional
amounts. The Company controls this credit risk by entering into transactions
with only a selected number of high quality institutions, establishing credit
limits and maintaining collateral when appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE L--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
December 31, 1998 Amount Fixed Rate Fair Value
Interest rate swap agreements designated as
hedges of securities available for sale,
where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 320,535 5.56% $ (83,692)
Floating rate interest 451,729 4.09% 23,002
Floating rate interest based on one
index and receives floating rate
interest based on another index - - -
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 28,600 5.55% 177
Floating rate interest 1,738,800 5.41% 13,310
Floating rate interest based on one
index and receives floating rate
interest based on another index
Interest rate floor agreements 160,500 16,675
Swaptions 1,770,000 5.35% 38,728
Other 4,866 - 2,552
December 31, 1997
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 237,868 7.20% $ (586)
Floating rate interest 275,905 6.46% 2,751
Floating rate interest based on one
index and receives floating rate
interest based on another index 311,538 - (162)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest - - -
Floating rate interest 1,429,834 6.25% 5,334
Floating rate interest based on one
index and receives floating rate
interest based on another index 304,820 - (1,565)
Interest rate floor agreements 160,500 7.00% 13,434
Swaptions 1,826,030 4.90% 27,495
Other 4,466 - 1,449
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE L--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Activities with respect to the notional amounts are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Beginning End
of Year Additions Maturities Terminations of Year
1998:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C>
securities available for sale $ 825,311 $ 306,025 $ 176,364 $ $
182,708 772,264
Interest rate swap agreements
designated as hedges of
financial liabilities 1,734,654 2,354,096 200,194 2,121,156 1,767,400
Interest rate floor agreements 160,500 - - - 160,500
Swaptions 1,826,030 - 56,030 - 1,770,000
Other 4,466 400 - - 4,866
--------------- -------------- --------------- ---------------- ---------------
$ 4,550,961 $ 2,660,521 $ 432,588 $ 2,303,864 $ 4,475,030
=============== ============== =============== ================ ===============
1997:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 798,058 $ 144,011 $ 91,858 $ 24,900 $ 825,311
Interest rate swap agreements
designated as hedges of
financial liabilities 1,442,538 1,263,016 955,900 15,000 1,734,654
Interest rate floor agreements 160,500 - - - 160,500
Swaptions 1,827,570 - - 1,540 1,826,030
Other - 4,466 - - 4,466
--------------- -------------- --------------- ---------------- ---------------
$ 4,228,666 $ 1,411,493 $ 1,047,758 $ 41,440 $ 4,550,961
=============== ============== =============== ================ ===============
1996:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 350,173 $ 516,497 $ 53,554 $ 15,058 $ 798,058
Interest rate swap agreements
designated as hedges of
financial liabilities 1,034,678 1,411,285 902,225 101,200 1,442,538
Interest rate floor agreements 160,500 - - - 160,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,117,140 820,000 109,570 - 1,827,570
--------------- -------------- --------------- ---------------- ---------------
$ 2,912,491 $ 2,747,782 $ 1,315,349 $ 116,258 $ 4,228,666
=============== ============== =============== ================ ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE L--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, derivatives,
fixed maturities, mortgage loans on real estate and reinsurance recoverables.
The Company places its temporary cash investments and enters into derivative
transactions with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1998, the Company had no significant concentration of credit risk.
NOTE M--SUBSEQUENT EVENT (UNAUDITED)
On February 18, 1999, Transamerica Corporation announced that it had signed an
agreement with AEGON N.V. (AEGON) providing for AEGON's acquisition of
Transamerica Corporation for cash and stock worth $9.7 billion. In addition,
AEGON N.V. will assume on a consolidated basis approximately $1.1 billion of
Transamerica Corporation's debt. Transamerica Corporation's corporate and
insurance operations will merge with AEGON USA's operations immediately after
closing, which is expected to occur during the summer of 1999.
NOTE N--YEAR 2000 (UNAUDITED)
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar business
activities.
Based upon recent assessments, the Company has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Company presently believes that with modifications and replacements of
existing software and certain hardware, disruptions to business activities
caused by the Year 2000 Issue can be mitigated. However, if such modifications
and replacements are not made, or are not completed on time, the Year 2000 Issue
could have an impact on the operations of the Company.
The Company's plan to address the Year 2000 Issue involves the following four
phases: (1) problem determination, (2) planning and resource acquisition, (3)
remediation, and (4) testing and acceptance. The Company has completed phase one
and phase two. A significant portion of the remediation phase was completed as
of December 31, 1998, and remediation is expected to be substantially complete
by March 1999. As of December 31, 1998, Year 2000 readiness testing was well
underway and is expected to be substantially complete by June 1999.
The Company's Year 2000 project also addresses issues related to non-information
technology, embedded software and equipment, the readiness of key business
partners, and updating business continuity plans.
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
All required financial statements are included in Parts A and B of
this Registration Statement.
(b) Exhibits:
(1) Resolutions of Board of Directors of Transamerica Life Insurance and Annuity
Company (the "Company") authorizing the creation of Separate Account VA-7 (the
"Separate Account"). 1/
(2) Not Applicable.
(3) Form of Underwriting Agreement between the Company, the Separate Account and
Transamerica Securities Sales Corporation. 1/
(4) Forms of Flexible Premium Deferred Variable Annuity Contracts.
A) Form of Flexible Premium Deferred Variable Annuity Contract for Transamerica
Bounty Variable Annuity. Guaranteed Minimum Death Benefit Rider and Guaranteed
Minimum Income Rider. 1/
(5) Form of Application for Flexible Premium Variable Annuity. 1/
(6) (a) Articles of Incorporation of Transamerica Life Insurance and Annuity
Company. 1/
(b) By-Laws of Transamerica Life Insurance and Annuity Company. 1/
(7) Not Applicable.
(8) Form of Participation Agreements.
(a) re The Alger American Fund 1
(b) re Alliance Variable Products Series Fund, Inc. 1
(c) re Dreyfus Variable Investment Fund 1
(d) re Janus Aspen Series 1
(e) re MFS Variable Insurance Trust 1
(f) re Morgan Stanley Universal Funds, Inc. 1
(g) re OCC Accumulation Trust 1
(h) re Transamerica Variable Insurance Fund, Inc. 1
(9) Opinion and Consent of Counsel. 1/
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors. 1/ 3/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations.
(14) Not Applicable.
(15) Powers of Attorney. 1/ 3/
- ----------------------------
1/ Filed herewith.
2/ Incorporated by reference to the like-numbered exhibit to Pre-Effective
Amendment No. 1 to the Form N-4 Registration Statement, File No. 33-55152
(September 3, 1998).
3/ Filed herewith.
Items 25. Directors and Officers of the Depositor.
The names of Directors and Executive Officers of the Company, their
positions and offices with the Company, and their other affiliations are as
follows. The address of Directors and Executive Officers is 1150 South Olive
Street, Los Angeles, California 90015-2211, unless indicated by asterisk.
List of Directors of Transamerica Life Insurance and Annuity Company
Frank Beardsley Richard N. Latzer
Thomas J. Cusack Karen MacDonald
James W. Dederer Gary U. Rolle'
Paul E. Rutledge III
George A. Foegele T. Desmond Sugrue
David E. Gooding Edgar H. Grubb Nooruddin Veerjee
Frank C. Herringer Robert A. Watson
<PAGE>
<TABLE>
<CAPTION>
List of Officers for Transamerica Life Insurance and Annuity Company
<S> <C>
Thomas J. Cusack Chairman
Frank Beardsley President - Asset Management
Paul E. Rutledge III President - Reinsurance Division
Nooruddin S. Veerjee FSA President
James W. Dederer CLU General Counsel and Secretary
Nicki Bair FSA Senior Vice President
Roy Chong-Kit Senior Vice President and Chief Actuary
Karen MacDonald Senior Vice President and Corporate Actuary
Thomas O'Neill Senior Vice President
Larry H. Roy Senior Vice President
Ron F. Wagley, CLU Senior Vice President
William R. Wellnitz FSA Senior Vice President and Actuary
Virgina M. Wilson Senior Vice President and Controller
Richard N. Latzer Chief Investment Officer
Gary U. Rolle' CFA Chief Investment Officer
Stephen J. Ahearn Investment Officer
John M. Casparian Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Heidi Y. Hu Investment Officer
Matthew W. Kuhns Investment Officer
Michael G. Luongo Investment Officer
Dennis J. McNamara Investment Officer
Matthew A. Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
Lawrence M. Agin FSA Vice President & Associate Actuary
Michael Barnhart RegionalVice President
Nancy Blozis Vice President and Controller
Jim Bowman Vice President
Rose Ann Bremser Vice President
Sandy Brown Vice President
Wonjoon Cho Vice President
Matt Coben Vice President
Ken Cochrane Vice President
Catherine Collinson Vice President
Glen Cunningham Vice President
Roberto Demarco Vice President
John Dohmen Vice President
Thomas P. Dolan Vice President
J. Peter Donlon Vice President
Harry Dunn Vice President & Chief Actuary
Steven Fenic Vice President
Jerry Gable Vice President
Diana Geraci Vice President
Paul Hankowitz MD Vice President & Chief Medical Director
Meheriar Hasan Vice President
Tom Hauptli Vice President
Joy Heckendorf Vice President
Paul Henry Vice President
Suzette Hoyt Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil Vice President & Associate Actuary
Michael Kappos Vice President
Patrick Kelleher Vice President and Reinsurance Financial Officer
Ken Kilbane Vice President
Carl Macero Vice President and Chief Reinsurance Underwriter
Susan Mack Vice President and Associate General Counsel
Maureen McCarthy Vice President
Philip McHale Vice President and Chief Underwriter
Vic Modugno Vice President & Associate Actuary
Paul L. Norris FSA Vice President & Actuary
Donald P. Radisich Vice President
William N. Scott FLMI Vice President
Christina Stiver Vice President
Karen Stout Vice President
James O. Strand Vice President
Alice Su Vice President
Bill Tate Vice President
Barry Tobin Vice President
Emily Urbano Vice President
Colleen Vandermark Vice President
Richard L. Weinstein FSA Vice President & Associate Actuary
Timothy Weis Vice President
Ronald Wolfe Regional Vice President
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Sandra Bailey-Whichard Second Vice President
Daniel J. Bohmfalk Second Vice President and Associate Actuary
Barry Buner Second Vice President
Reid A. Evers Second Vice President & Assistant General Counsel
David Fairhall FSA Second Vice President & Associate Actuary
Toni Forge Second Vice President
Selma Fox Second Vice President
Linda Goodwin M.D. Second Vice President and Reinsurance Medical Director
Andrew G. Kanelos Second Vice President
Catherine A. Lenton Second Vice President
Liwen Lien Second Vice President
Danny Mahoney Second Vice President
Clay Moye Second Vice President
Daniel A. Norwick Second Vice President
Paul W. Reisz Second Vice President
Beverly Rockecharlie Second Vice President
Stacy Schultz Second Vice President
Frank Snyder Second Vice President
Boning Tong Second Vice President and Associate Actuary
Joan Ward Second Vice President
Kamran Haghighi Tax Officer
Kim A. Tursky Assistant Secretary
Susan Vivino Assistant Secretary
James Wolfenden Statement Officer
</TABLE>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Registrant is a separate account of Transamerica Life Insurance and Annuity
Company, is controlled by the Contract Owners, and is not controlled by or under
common control with any other person. The Depositor, Transamerica Life Insurance
and Annuity Company, is wholly owned by Transamerica Occidental Life Insurance
Company, which is wholly owned by Transamerica Insurance Corporation of
California (Transamerica-California). Transamerica-California may be deemed to
be controlled by its parent, Transamerica Corporation.
The following chart indicates the persons controlled by or under common
control with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation - DE
ARC Reinsurance Corporation - HI
Transamerica Management, Inc. - DE
Criterion Investment Management Company - TX
Inter-America Corporation - CA
Mortgage Corporation of America - CA
Pyramid Insurance Company, Ltd. - HI
Pacific Cable Ltd. - Bmda.
TC Cable, Inc. - DE
RTI Holdings, Inc. - DE
Transamerica Airlines, Inc. - DE
Transamerica Business Technologies Corporation - DE
Transamerica CBO I, Inc. - DE
Transamerica Corporation (Oregon) - OR
Transamerica Delaware, L.P. - DE
Transamerica Finance Corporation - DE
TA Leasing Holding Co., Inc. - DE
Trans Ocean Ltd. - DE
Trans Ocean Container Corp. - DE
SpaceWise Inc. - DE
TOD Liquidating Corp. - CA
TOL S.R.L. - Itl.
Trans Ocean Container Finance Corp. - DE
Trans Ocean Leasing Deutschland GmbH - Ger.
Trans Ocean Leasing PTY Limited - Aust.
Trans Ocean Management Corporation - CA
Trans Ocean Management S.A. - SWTZ
Trans Ocean Regional Corporate Holdings - CA
Trans Ocean Tank Services Corporation - DE
Transamerica Leasing Inc. - DE
Better Asset Management Company LLC - DE
Transamerica Leasing Holdings Inc. - DE
Greybox Logistics Services Inc. - DE
Greybox L.L.C. - DE
Transamerica Trailer Leasing S.N.C. - Fra.
Greybox Services Limited - U.K.
Intermodal Equipment, Inc. - DE
Transamerica Leasing N.V. - Belg.
Transamerica Leasing SRL - Itl.
Transamerica Distribution Services Inc. - DE
Transamerica Leasing Coordination Center - Belg.
Transamerica Leasing do Brasil Ltda. - Braz.
Transamerica Leasing GmbH - Ger.
Transamerica Leasing Limited - U.K.
ICS Terminals (UK) Limited - U.K.
Transamerica Leasing Pty. Ltd. - Aust.
Transamerica Leasing (Canada) Inc. - Can.
Transamerica Leasing (HK) Ltd. - H.K.
Transamerica Leasing (Proprietary) Limited - S.Afr.
Transamerica Tank Container Leasing Pty. Limited - Aust.
Transamerica Trailer Holdings I Inc. - DE
Transamerica Trailer Holdings II Inc. - DE
Transamerica Trailer Holdings III Inc. - DE
Transamerica Trailer Leasing AB - Swed.
Transamerica Trailer Leasing AG - SWTZ
Transamerica Trailer Leasing A/S - Denmk.
Transamerica Trailer Leasing GmbH - Ger.
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
Transamerica Commercial Finance Corporation, I - DE
BWAC Credit Corporation - DE
BWAC International Corporation - DE
BWAC Twelve, Inc. - DE
TIFCO Lending Corporation - IL
Transamerica Insurance Finance Corporation - MD
Transamerica Insurance Finance Company (Europe) - MD
Transamerica Insurance Finance Corporation, California - CA
Transamerica Insurance Finance Corporation, Canada - ON
Transamerica Business Credit Corporation - DE
Direct Capital Equity Investment, Inc. - DE
TA Air East, Corp. -
TA Air III, Corp. - DE
TA Air II, Corp. - DE
TA Air IV, Corp. - DE
TA Air I, Corp. - DE
TBC III, Inc. - DE
TBC II, Inc. - DE
TBC IV, Inc. -
TBC I, Inc. - DE
TBC Tax III, Inc. -
TBC Tax II, Inc. -
TBC Tax IV, Inc. -
TBC Tax IX, Inc. -
TBC Tax I, Inc. -
TBC Tax VIII, Inc. -
TBC Tax VII, Inc. -
TBC Tax VI, Inc. -
TBC Tax V, Inc. -
TBC Tax XII, Inc. -
TBC Tax XI, Inc. -
TBC V, Inc. -
The Plain Company - DE
Transamerica Distribution Finance Corporation - DE
Transamerica Accounts Holding Corporation - DE
Transamerica Commercial Finance Corporation - DE
Inventory Funding Trust - DE
Inventory Funding Company, LLC - DE
TCF Asset Management Corporation - CO
Transamerica Joint Ventures, Inc. - DE
Transamerica Inventory Finance Corporation - DE
BWAC Seventeen, Inc. - DE
Transamerica Commercial Finance Canada, Limited - ON
Transamerica Commercial Finance Corporation, Canada - Can.
BWAC Twenty-One, Inc. - DE
Transamerica Commercial Finance Limited - U.K.
WFC Polska Sp. Zo.o -
Transamerica Commercial Holdings Limited - U.K.
Transamerica Commercial Holdings, Inc. -
Transamerica Trailer Leasing Limited - NY
Transamerica Commercial Finance France S.A. - Fra.
Transamerica GmbH Inc. - DE
Transamerica Retail Financial Services Corporation - DE
Transamerica Consumer Finance Holding Company - DE
Metropolitan Mortgage Company - FL
Easy Yes Mortgage, Inc. - FL
Easy Yes Mortgage, Inc. - GA
First Florida Appraisal Services, Inc. - FL
First Georgia Appraisal Services, Inc. - GA
Freedom Tax Services, Inc. - FL
J.J. & W. Advertising, Inc. - FL
J.J. & W. Realty Corporation - FL
Liberty Mortgage Company of Ft. Myers, Inc. - FL
Metropolis Mortgage Company - FL
Perfect Mortgage Company - FL
Whirlpool Financial National Bank - DE
Transamerica Vendor Financial Services - DE
Transamerica Distribution Finance Corporation de Mexico -
Transamerica Corporate Services de Mexico -
Transamerica Federal Savings Bank -
Transamerica HomeFirst, Inc. - CA
Transamerica Home Loan - CA
Transamerica Lending Company - DE
Transamerica Financial Products, Inc. - CA
Transamerica Foundation - CA
Transamerica Insurance Corporation of California - CA
Arbor Life Insurance Company - AZ
Plaza Insurance Sales, Inc. - CA
Transamerica Advisors, Inc. - CA
Transamerica Annuity Service Corporation - NM
Transamerica Financial Resources, Inc. - DE
Financial Resources Insurance Agency of Texas - TX
TBK Insurance Agency of Ohio, Inc. - OH
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- AL
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - MA
Transamerica International Insurance Services, Inc. - DE
Home Loans and Finance Ltd. - U.K.
Transamerica Occidental Life Insurance Company - CA
NEF Investment Company - CA
Transamerica China Investments Holdings Limited - H.K.
Transamerica Life Insurance and Annuity Company - NC
Transamerica Assurance Company - CO
Transamerica Life Insurance Company of Canada - Can.
Transamerica Life Insurance Company of New York - NY
Transamerica South Park Resources, Inc. - DE
Transamerica Variable Insurance Fund, Inc. - MD
USA Administration Services, Inc. - KS
Transamerica Products, Inc. - CA
Transamerica Leasing Ventures, Inc. - CA
Transamerica Products II, Inc. - CA
Transamerica Products IV, Inc. - CA
Transamerica Products I, Inc. - CA
Transamerica Securities Sales Corporation - MD
Transamerica Service Company - DE
Transamerica Intellitech, Inc. - DE
Transamerica International Holdings, Inc. - DE
Transamerica Investment Services, Inc. - DE
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- - MD
Transamerica LP Holdings Corp. - DE
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - DE
Bankers Mortgage Company of California - CA
Pyramid Investment Corporation - DE
The Gilwell Company - CA
Transamerica Affordable Housing, Inc. - CA
Transamerica Minerals Company - CA
Transamerica Oakmont Corporation - CA
Ventana Inn, Inc. - CA
Transamerica Senior Properties, Inc. - DE
Transamerica Senior Living, Inc. - DE
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contract Owners
Bounty None
Item 28. Indemnification
Transamerica Life Insurance and Annuity Company's Articles of Incorporation
provide in Article VIII as follows:
To the full extent from time to time permitted by law, no person who is
serving or who has served as a director of the Corporation shall be personally
liable in any action for monetary damages for breach of his or her duty as a
director, whether such action is brought by or in the right of the corporation
or otherwise. Neither the amendment or repeal of this Article nor inconsistent
with this Article, shall eliminate or reduce the protection afforded by this
Article to a director of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article would
have accrued or arising prior to such amendment, repeal or adoption.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling person of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liability (other than the payment by the registrant of expenses incurred or paid
by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Life Insurance and Annuity
Company are covered under a Directors and Officers liability program which
includes direct coverage to directors and officers (Coverage A) and corporate
reimbursement (Coverage B) to reimburse the Company for indemnification of its
directors and officers. Such directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers. In general, the term "loss" means any amount which the
insureds are legally obligated to pay for a claim for Wrongful Acts. In general,
the term "Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
Item 29. Principal Underwriter
(a) Transamerica Securities Sales Corporation, the principal underwriter, is
also the underwriter for: Transamerica Investors, Inc.; Transamerica Variable
Insurance Fund, Inc.; Transamerica Occidental Life Insurance Company's Separate
Accounts: VA-2; VA-2L; VA-5; VL; VUL-1 and VUL-2; Transamerica Life Insurance
and Annuity Company's Separate Accounts VA-1, VA-6 and VA-7; Transamerica Life
Insurance Company of New York Separate Accounts VA-2LNY, VA-5NLNY and VA-6NY.
The Underwriter is wholly-owned by Transamerica Insurance Corporation of
California.
(b) The following table furnishes information with respect to each director
and officer of the principal Underwriter currently distributing securities of
the registrant:
Barbara Kelley Director & President
Regina Fink Director & Secretary
Nooruddin Veerjee Director
Dan Trivers Senior Vice President
Nicki Bair Vice President
Chris Shaw Second Vice President
Ben Tang Treasurer
(c) The following table lists the amounts of commissions paid to the
co-underwriter during the last fiscal year.
<TABLE>
<CAPTION>
Name of
Principal Net Underwriting Compensation on Brokerage
Underwriter Discounts & Commission Redemption Commissions Compensation
<S> <C>
TSSC $1,598,853.86
</TABLE>
Item 30. Location of Accounts and Records
Physical possession of each account, book, or other document required to be
maintained is kept at the Company's offices at 101401 North Tryon Street,
Charlotte, North Carolina 28202.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information;
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
(d) Transamerica hereby represents that the fees and the charges deducted
under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the
risks assumed by Transamerica.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Transamerica Life
Insurance and Annuity Company certifies that this Post-Effective Amendment No. 1
to the Registration Statement meets all of the requirements for effectiveness
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned in the City of Los Angeles, State of California
on this 28th day of April, 1999.
SEPARATE ACCOUNT VA-7 OF
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(REGISTRANT)
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(DEPOSITOR)
----------------------------------
David M. Goldstein Vice President
<TABLE>
<CAPTION>
As required by the Securities Act of 1933, this Registration Statement has been
signed below on April 28, 1999 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
Signatures Titles Date
<S> <C> <C>
______________________* Director and President April 28, 1999
Nooruddin S. Veerjee
______________________* Director April 28, 1999
Frank Beardsley
______________________* Director and Chairman April 28, 1999
Thomas J. Cusack
______________________* Director April 28, 1999
James W. Dederer
______________________* Director April 28, 1999
George A. Foegele
______________________* Director April 28, 1999
David E. Gooding
______________________* Director April 28, 1999
Edgar H. Grubb
______________________* Director April 28, 1999
Frank C. Herringer
______________________* Director April 28, 1999
Richard N. Latzer
______________________* Director April 28, 1999
Karen MacDonald
______________________* Director April 28, 1999
Gary U. Rolle'
______________________* Director April 28, 1999
Paul E. Rutledge III
______________________* Director April 28, 1999
T. Desmond Sugrue
______________________* Director April 28, 1999
Robert A. Watson
</TABLE>
_________________________ On April 28, 1999 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney filed herewith.
<PAGE>
Exhibit 10(b)
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Accountants and
Financial Statements" in Post-Effective Amendment No. 1 under the Securities Act
of 1993 and Post-Effective Amendment No. 2 under the Investment Company Act of
1940 to the Registration Statement (Form N-4 No. 333-57697) and the related
Prospectus and Statement of Additional Information of Separate Account VA-7 of
Transamerica Life Insurance and Annuity Company and to the use of our report
dated January 21, 1999 with respect to the consolidated financial statements of
Transamerica Life Insurance and Annuity Company and our report dated April 21,
1999 with respect to the financial statement of Separate Account VA-7, both
included in the Statement of Additional Information.
<PAGE>
Exhibit 15
<PAGE>
Power of Attorney
POWER OF ATTORNEY
The undersigned director Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints James W. Dederer, David M. Goldstein, David E. Gooding, and William M.
Hurst and each of them (with full power to each of them to act alone), his true
and lawful attorney-in-fact and agent, with full power of substitution to each,
for him and on his behalf and in his name, place and stead, to execute and file
any of the documents referred to below relating to registrations under the
Securities Act of 1933 and under the Investment Company Act of 1940 with respect
to any life insurance and annuity policies: registration statements on any form
or forms under the Securities Act of 1933 and under the Investment Company Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and his or their substitutes being empowered
to act with or without the others or other, and to have full power and authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
24th day of February, 1999.
------------------------------
Frank Beardsley
