As filed with the Securities and Exchange Commission on July 5, 2000
Registration No. 333-32664
No. 811-09859
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. |_|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1
SEPARATE ACCOUNT VA-8
---------------------
(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.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<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>
<TABLE>
<CAPTION>
Prospectus for the
TRANSMARK OPTIMUM CHOICE VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued By
Transamerica Life Insurance
and
Annuity Company
Offering 19 Sub-Accounts within the Variable Account
Designated as Separate Account VA-8
In Addition to:
A Fixed Account
<S> <C>
o This prospectus contains Portfolios Associated with Sub-Accounts
---------------------------------------
information you should Alger American Income & Growth
know before investing. Alliance VP Growth and Income
Alliance VP Premier Growth
o Please keep this prospectus Dreyfus VIF Appreciation
for future reference. Dreyfus VIF Small Cap
Janus Aspen Series Balanced
o You can obtain more information about Janus Aspen Series Worldwide Growth
the contract by requesting a copy of the MFS VIT Emerging Growth
Statement of Additional Information ("SAI") MFS VIT Growth with Income
dated August 1, 2000. The SAI is available MFS VIT Research
free by writing to Transamerica Life MS UIF Emerging Markets Equity
Insurance and Annuity Company, MS UIF Fixed Income
Annuity Service Center, MS UIF High Yield
9735 Landmark Pkwy. Dr., MS UIF International Magnum
St. Louis, Missouri 63127 or OCC Accumulation Trust Managed
by calling 800-317-2688. OCC Accumulation Trust Small Cap
PIMCO VIT StocksPLUS Growth & Income
The current SAI has been filed with the Transamerica VIF Growth
Securities and Exchange Commission and Transamerica VIF Money Market
is incorporated by reference into this prospectus.
The table of contents of the SAI is included at the
end of this prospectus.
o The SEC's web site is http://www.sec.gov
o Transamerica's web site is
http://www.transamerica.com
</TABLE>
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.
Please note that the contract and the portfolios are not bank deposits, are not
federally insured, are not endorsed by any bank or government agency, are not
guaranteed to achieve their goals and are subject to risks, including the loss
of purchase payments.
August 1, 2000
Table of Contents
Summary.....................................................................5
Transamerica Life Insurance and Annuity Company and the Variable Account...16
Transamerica Life Insurance and Annuity Company...................16
Published Ratings.................................................16
Insurance Marketplace Standards Association.......................16
The Variable Account..............................................16
The Portfolios.............................................................17
Portfolios Not Publicly Available.................................21
Addition, Deletion, or Substitution...............................21
The Contract...............................................................21
Ownership.........................................................22
Purchase Payments..........................................................22
Allocation of Purchase Payments...................................23
Free Look Option..................................................23
Investment Option Limit...........................................23
Account Value..............................................................24
How Variable Accumulation Units Are Valued........................24
Transfers...................................................................24
Before the Annuity Date............................................24
Telephone Transfers................................................25
Other Restrictions.................................................25
Dollar Cost Averaging............................................25
Eligibility Requirements for Dollar Cost Averaging .................25
Special Dollar Cost Averaging Option...............................26
Automatic Asset Rebalancing.........................................26
After the Annuity Date..............................................26
Cash Withdrawals.............................................................26
Systematic Withdrawal Option........................................27
Automatic Payment Option (APO)......................................28
TSA LOANS....................................................................28
Amounts and Conditions..............................................28
Interest............................................................29
Terms and Repayment.................................................29
Default.............................................................29
Partial Withdrawals................................................29
Cash Surrender.....................................................29
Annuitization.......................................................30
Death...............................................................30
Termination.....................................................30
Death Benefit...............................................................30
Payment of Death Benefit...........................................30
Designation of Beneficiaries.......................................31
Death of Owner or Joint Owner Before the Annuity Date..............31
If the Annuitant Dies Before the Annuity Date.......................32
Death After the Annuity Date.......................................32
Survival Provision.................................................32
Charges, Fees and Deductions...............................................32
Contingent Deferred Sales Load/Surrender Charge.....................32
Free Withdrawals - Allowed Amount...................................32
Other Free Withdrawals..............................................33
Administrative Charges..............................................33
Mortality and Expense Risk Charge...................................34
Guaranteed Minimum Income Benefit (GMIB) Rider Fee..................34
Premium Tax Charges.................................................34
Taxes...............................................................34
Portfolio Expenses.................................................34
Sales in Special Situations........................................34
DISTRIBUTION OF THE CONTRACT...........................................35
Settlement Option Payments................................................35
Annuity Date......................................................35
Annuity Amount...................................................35
Guaranteed Minimum Income Benefit Rider..........................36
Settlement Option Payments.......................................37
Election of Settlement Option Forms and Payment Options...........37
Payment Options....................................................37
Variable Fixed Payment Option......................................37
Variable Payment Option............................................38
Settlement Option Forms..........................................38
Federal Tax Matters........................................................39
Introduction......................................................39
Purchase Payments..................................................40
Taxation of Annuities..............................................40
Qualified Contracts.................................................42
Contracts Purchased by Nonresident Aliens and Foreign Corporations.43
Taxation of Transamerica .........................................44
Tax Status of Contract............................................44
Possible Changes in Taxation......................................45
Other Tax Consequences............................................45
Performance Data...........................................................45
Legal Proceedings..........................................................46
Legal Matters.............................................................47
Accountants AND FINANCIAL STATEMENTS......................................47
Voting Rights.............................................................47
Available Information.....................................................47
Statement of Additional Information - Table of Contents...................48
Appendix A - The Fixed account.............................................49
The Fixed Account ................................................49
Appendix B..................................................................51
Example of Variable Accumulation Unit Value Calculations..........51
Example of Variable Annuity Unit Value Calculations...............51
Example of Variable Annuity Payment Calculations..................51
APPENDIX C.................................................................52
Definitions......................................................52
APPENDIX D................................................................54
Disclosure Statement for Individual Retirement Annuities..........54
<PAGE>
Summary
This summary provides you with a brief overview of some of the more important
aspects of the TransMark Optimum Choice Variable Annuity contract. The remainder
of the prospectus and the contract will provide you further details.
The contract is a flexible purchase payment deferred annuity and it has two
phases, the accumulation phase and the annuitization phase. During the
accumulation phase, your earnings accumulate on a tax-deferred basis for
individuals. Tax deferral is not available for non-qualified contracts owned by
corporations and some trusts.
As long as the contract is in effect, you may make additional purchase payments
before the annuity date and before any owner's, joint owner's or annuitant's
91st birthday, transfer money among the investment options and withdraw some or
all of the account value.
On a future date you select, the annuity date, the annuitization phase begins.
During this phase, we apply the account value, after certain adjustments, to a
settlement option that provides periodic payments to you. The dollar amount of
the payments will depend on the amount of money invested and earned during the
accumulation phase, and on other factors, such as the annuitant's age and sex
and if variable payouts are elected.
If you or a joint owner die during the accumulation phase, we will pay a death
benefit to the beneficiary you designate in an amount at least equal to the
account value.
Sub-Account Values Will Vary According to Investment Experience. Except for
amounts in the fixed account, the account valuebefore will vary depending on the
investment experience of each of the variable sub-accounts you select. 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.
What is the Contract's Objective?
We designed the contract to assist individuals in long-term financial planning
for retirement or other purposes. You may use the contract as:
a) a non-qualified annuity; or
b) a qualified annuity as:
o a rollover or regular individual retirement annuity, or IRA, under Section
408(b) of the Internal Revenue Code, or Code; or
o a tax sheltered annuity, or TSA, qualified under Code Section 403(b).
Generally, qualified contracts contain restrictive provisions limiting the
timing and amount of purchase payments to, and distributions from, the qualified
contract. Some qualified contracts may not be available in all states or in all
situations.
Who Should Purchase the Contract?
The contract is designed for people seeking long-term tax deferred accumulation
of assets, generally for retirement or other long-term purposes, and for persons
who have maximized their use of other retirement savings methods, such as 401(k)
plans and individual retirement accounts. The tax-deferred feature is most
attractive to people in high federal and state tax brackets. You should not buy
this contract if you are looking for a short-term investment or if you cannot
take the risk of losing money that you put in.
There are various additional fees and charges associated with variable
annuities. You should consider whether the features and benefits unique to
variable annuities, such as the opportunity for lifetime income payments, a
guaranteed death benefit and the guaranteed level of certain charges are
appropriate for your needs. Because qualified plans also provide tax-deferral
outside of variable annuities, the tax deferral features of variable annuities
are unnecessary when purchased to fund a qualified plan.
How Much Can I Invest and How Often?
To purchase a contract, you must make an initial purchase payment of at least:
o $5,000 for a non-qualified contract; or
o $5,000 for an IRA contract issued as the result of a transfer or rollover
from an IRA or other qualified plan;
o $2,000 for a contract issued as the result of a transfer or rollover from
another TSA contract or for a regular IRA contract; or
o $50 for a TSA contract if you elect to have your employer make purchase
payment payroll reductions of at least $50 per month.
Once we receive the initial purchase payment, we establish and maintain an
account for each contract.
Any time before the annuity date and before you, a joint owner or any annuitant
reach age 91, and while the contract is in effect, you may make additional
purchase payments. The minimum amount of each additional purchase payment is:
o $1,000; or
o $50 per month if payments are made through your employer by payroll
reduction for a TSA, or by electronic funds transfer, or EFT, for other
contracts.
Additional purchase payments for qualified contracts are subject to certain
limitations and restrictions. See PURCHASE PAYMENTS on page 22.
Where Should Additional Purchase Payments
Be Made?
You can give your check made payable to Transamerica Life Insurance and Annuity
Company to your financial representative or use the form included in your last
confirmation statement. Please call the Annuity Service Center with any
questions.
How Can I Allocate My Money?
You may choose to allocate all or part of your purchase payments to:
o one or more of the 19 variable sub-accounts described in THE PORTFOLIOS on
page 17 (but to no more than 17 over the life of your contract); and/or
o the fixed account.
Can I Examine the Contract?
Yes. As the owner, you have the right to examine the contract for a limited
period, or 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. During the free look period the entire
initial purchase payment will be held in the money market sub-account. Unless
otherwise required by law, we will: a) refund the greater of the purchase
payments made, minus withdrawals; or b) the account value as of the date we
receive your written notice to cancel and your contract. See PURCHASE PAYMENTS
on page 22.
What Charges, Expenses and Fees Will
I Incur?
The following table assists you in understanding the various costs and expenses
that you will incur directly and indirectly. The table reflects expenses of the
variable account and the mutual fund portfolios, as well as contract expenses
and the fees for any optional riders. 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 32 of this prospectus, and with the prospectuses for the
portfolios. In addition to the expenses listed below, premium tax charges may
apply.
<PAGE>
47
Sales Load(1)
Sales Load Imposed on Purchases 0%
Maximum Contingent Deferred Sales Load(2) 9%
as a percentage of purchase payments withdrawn
Range of Contingent Deferred Sales Load Over Time:
<TABLE>
<CAPTION>
Contingent Deferred
Complete Years Since Sales Load
Purchase Payment Receipt as a percentage of purchase payments
------------------------ ------------------------------------
withdrawn
<S> <C> <C>
Less than 1 year 9%
1 year but less than 2 years 9%
2 years but less than 3 years 8%
3 years but less than 4 years 8%
4 years but less than 5 years 6%
5 years but less than 6 years 6%
6 years but less 7 years 4%
7 or more years 0%
</TABLE>
<PAGE>
Other Contract Expenses
Account Fee(3) $25
Variable Account Annual Expenses(4)
-----------------------------------
as a percentage of the variable accumulated value
Mortality and Expense Risk Charge 1.60%
Administrative Expense Charge 0.15%
Total Variable Account Annual Expenses 1.75%
Guaranteed Minimum Income Benefit Rider Fee, if elected(5) 0.35%
Portfolio Expenses
as a percentage of assets after fee waiver and/or expense reimbursement(6)
<TABLE>
<CAPTION>
Total
Portfolio
Annual
Management Other Rule Expenses
Portfolio Fees Expenses 12b-1 Fees
<S> <C> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% - 0.70%
Alliance VP Growth & Income - Class B 0.63% 0.09% 0.25% 0.97%
Alliance VP Premier Growth - Class B 1.00% 0.04% 0.25% 1.29%
Dreyfus VIF Appreciation 0.75% 0.03% - 0.78%
Dreyfus VIF Small Cap 0.75% 0.03% - 0.78%
Janus Aspen Series Balanced - Service Shares(7) 0.65% 0.02% 0.25% 0.92%
Janus Aspen Series Worldwide Growth - Service 0.65% 0.05% 0.25% 0.95%
Shares(7)
MFS VIT Emerging Growth 0.75% 0.09% - 0.84%
MFS VIT Growth with Income 0.75% 0.13% - 0.88%
MFS VIT Research 0.75% 0.11% - 0.86%
MS UIF Emerging Markets Equity 0.42% 1.37% - 1.79%
MS UIF Fixed Income 0.14% 0.56% - 0.70%
MS UIF High Yield 0.19% 0.61% - 0.80%
MS UIF International Magnum 0.29% 0.87% - 1.16%
OCC Accumulation Trust Managed(8) 0.77% 0.06% - 0.83%
OCC Accumulation Trust Small Cap 0.80% 0.09% - 0.89%
PIMCO VIT StocksPLUS Growth & Income(9) 0.40% 0.25% - 0.65%
Transamerica VIF Growth 0.70% 0.15% - 0.85%
Transamerica VIF Money Market 0.00% 0.60% - 0.60%
</TABLE>
The portfolios have provided us with expense information regarding 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, 1999. Actual expenses
in future years may be higher or lower than these figures.
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Notes to Fee Table:
1. The contingent deferred sales load applies to each contract, regardless of
how the account value is allocated between the variable account and the
fixed account.
2. A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load. After a purchase
payment has been in the contract at least seven years, it may be withdrawn
free of any contingent deferred sales load. No contingent deferred sales
load is imposed on the withdrawal of any purchase payment after the
contract has been in effect for 14 contract years. See CHARGES, FEES AND
DEDUCTIONS on page 32.
3. The account fee is deducted at the end of each contract year and at
surrender. The fee is deducted on a pro rata basis from the account value.
After the annuity date, an annual fee of $30 is deducted proportionately
from each settlement option payment if a variable payout option is
selected.
4. The variable account annual expenses do not apply to the fixed account.
5. If you elect the optional GMIB rider, we deduct a daily charge at an
effective annual rate of 0.35% of the variable accumulated value, not
including amounts in the money market sub-account. The charge for the GMIB
rider is reflected in the variable annuity unit values for each variable
sub-account, except the money market sub-account.
6. 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 1999. 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 2000. Without
such waivers or reimbursements, the annual expenses for 1999 for the
following portfolios would have been, as a percentage of assets:
Management Other Total Portfolio
Fee Expenses Annual Expense
MS UIF Emerging Markets Equity 1.25% 1.37% 2.62%
MS UIF Fixed Income 0.40% 0.56% 0.96%
MS UIF High Yield 0.50% 0.61% 1.11%
MS UIF International Magnum 0.80% 0.87% 1.67%
Transamerica VIF Growth 0.75% 0.15% 0.90%
Transamerica VIF Money Market 0.35% 1.04% 1.39%
7. Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee. All expenses
are shown without the effect of expense offset arrangements.
8. The Adviser is contractually obligated to waive that portion of the
advisory fee and assume any necessary expense to limit total operating
expenses of the portfolio to 1.00% of average net assets (net of expenses
offset) on an annual basis.
9. PIMCO has contractually agreed to reduce total annual portfolio operating
expenses to the extent these expenses would exceed 0.65% of average daily
net assets due to the payment of organizational expenses and Trustees'
fees. Without such reductions, total operating expenses for the fiscal year
ended December 31, 1999 were 0.65%. Under the Expense Limitation Agreement,
PIMCO may recoup these waivers and reimbursements in future periods, not
exceeding three years, provided total expenses, including such recoupment,
do not exceed the annual expense limit. Fees expressed are restated as of
April 1, 2000.
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Examples
The following tables for examples 1 through 3 show the total expenses you would
incur in various situations using the following assumptions:
o a $1,000 investment;
o a 5% annual return on assets;
basedon an account value of $40,000, a deduction of 0.063% to reflect the $25
account fee;
o all amounts are allocated to the variable sub-account indicated; and
o no optional rider fees, other option or service fees or premium tax charges
are reflected. Premium tax charges may apply. See Premium Tax Charges on
page 34.
These examples show expenses for contracts based on total portfolio expenses
after fee waivers and reimbursements, if applicable, for the portfolios for
1999. There is no guarantee that any fee waivers or expense reimbursements will
continue. For annuitizations before the first contract anniversary, and for
annuitizations under a form that does not include life contingencies, the
contingent deferred sales load may apply. The Year 1 column in expense example 3
illustrates this occurrence.
Example 1: If you surrender the contract at the end of the applicable time
period:
-------------------------------------------------------------
1 Year 3 Years
-------------------------------------------------------------
Alger American Income & Growth $106 $150
Alliance VP Growth & Income - Class B $107 $151
Alliance VP Premier Growth - Class B $110 $161
Dreyfus VIF Appreciation $107 $153
Dreyfus VIF Small Cap $107 $153
Janus Aspen Series Balanced - Service $106 $149
Shares
Janus Aspen Series Worldwide Growth - $106 $150
Service Shares
MFS VIT Emerging Growth $108 $154
MFS VIT Growth with Income $108 $156
MFS VIT Research $108 $155
MS UIF Emerging Markets Equity $117 $182
MS UIF Fixed Income $106 $150
MS UIF High Yield $107 $153
MS UIF International Magnum $111 $164
OCC Accumulation Trust Managed $108 $154
OCC Accumulation Trust Small Cap $108 $156
PIMCO VIT StocksPLUS Growth & Income $106 $149
Transamerica VIF Growth $108 $155
Transamerica VIF Money Market $105 $147
-------------------------------------------------------------------------
Example 2: If you do not surrender and do not annuitize the contract:
------------------------------------------------------------
1 Year 3 Years
------------------------------------------------------------
Alger American Income & Growth $25 $78
Alliance VP Growth & Income - Class B $26 $79
Alliance VP Premier Growth - Class B $29 $89
Dreyfus VIF Appreciation $26 $81
Dreyfus VIF Small Cap $26 $81
Janus Aspen Series Balanced - Service $25 $77
Shares
Janus Aspen Series Worldwide Growth - $25 $78
Service Shares
MFS VIT Emerging Growth $27 $82
MFS VIT Growth with Income $27 $84
MFS VIT Research $27 $83
MS UIF Emerging Markets Equity $36 $110
MS UIF Fixed Income $25 $78
MS UIF High Yield $26 $81
MS UIF International Magnum $30 $92
OCC Accumulation Trust Managed $27 $82
OCC Accumulation Trust Small Cap $27 $84
PIMCO VIT StocksPLUS Growth & Income $25 $77
Transamerica VIF Growth $27 $83
Transamerica VIF Money Market $24 $75
------------------------------------------------------------------------
Example 3: If you elect to annuitize at the end of the applicable period under a
Settlement Option with life contingencies:
------------------------------------------------------------
1 Year 3 Years
------------------------------------------------------------
Alger American Income & Growth $106 $78
Alliance VP Growth & Income - Class B $107 $79
Alliance VP Premier Growth - Class B $110 $89
Dreyfus VIF Appreciation $107 $81
Dreyfus VIF Small Cap $107 $81
Janus Aspen Series Balanced - Service $106 $77
Shares
Janus Aspen Series Worldwide Growth - $106 $78
Service Shares
MFS VIT Emerging Growth $108 $82
MFS VIT Growth with Income $108 $84
MFS VIT Research $108 $83
MS UIF Emerging Markets Equity $117 $110
MS UIF Fixed Income $106 $78
MS UIF High Yield $107 $81
MS UIF International Magnum $111 $92
OCC Accumulation Trust Managed $108 $82
OCC Accumulation Trust Small Cap $108 $84
PIMCO VIT StocksPLUS Growth & Income $106 $77
Transamerica VIF Growth $108 $83
Transamerica VIF Money Market $105 $75
--------------------------------------------------------------------------
<PAGE>
The following tables for examples 4 through 6 show the total expenses you would
incur in various situations during the accumulation period using the following
assumptions:
o a $1,000 investment;
o a 5% annual return on assets;
o based on an account value of $40,000, a deduction of 0.063% to reflect the
$25 account fee;
o all amounts are allocated to the variable sub-account indicated;
o the fee for the optional Guaranteed Minimum Income Benefit Rider is
reflected; and
o premium tax charges are not reflected. Premium tax charges may apply. See
Premium Tax Charges on page 34.
These examples show expenses for contracts based on total portfolio expenses
after fee waivers and reimbursements, if applicable, for the portfolios for
1999. There is no guarantee that any fee waivers or expense reimbursements will
continue in the future. For annuitizations before the first contract
anniversary, and for annuitizations under a form that does not include life
contingencies, the contingent deferred sales load may apply. The Year 1 column
in expense example 6 illustrates this occurrence.
Example 4: If you surrender the contract at the end of the applicable time
period:
----------------------
1 Year 3 Years
---------------------
----------------------------------------------------
Alger American Income & Growth $110 $161
Alliance VP Growth & Income - Class B $110 $161
Alliance VP Premier Growth - Class B $113 $171
Dreyfus VIF Appreciation $111 $163
Dreyfus VIF Small Cap $111 $163
Janus Aspen Series Balanced - Service Shares $110 $160
Janus Aspen Series Worldwide Growth - Service $110 $161
Shares
MFS VIT Emerging Growth $111 $165
MFS VIT Growth with Income $112 $166
MFS VIT Research $112 $165
MS UIF Emerging Markets Equity $121 $192
MS UIF Fixed Income $110 $161
MS UIF High Yield $111 $164
MS UIF International Magnum $115 $174
OCC Accumulation Trust Managed $111 $165
OCC Accumulation Trust Small Cap $112 $166
PIMCO VIT StocksPLUS Growth & Income $109 $159
Transamerica VIF Growth $111 $165
Transamerica VIF Money Market $105 $147
--------------------------------------------------------------------------
Example 5: If you do not surrender and do not annuitize the contract:
----------------------
1 Year 3 Years
----------------------
Alger American Income & Growth $29 $89
Alliance VP Growth & Income - Class B $29 $89
Alliance VP Premier Growth - Class B $32 $99
Dreyfus VIF Appreciation $30 $91
Dreyfus VIF Small Cap $30 $91
Janus Aspen Series Balanced - Service Shares $29 $88
Janus Aspen Series Worldwide Growth - Service $29 $89
Shares
MFS VIT Emerging Growth $30 $93
MFS VIT Growth with Income $31 $94
MFS VIT Research $31 $93
MS UIF Emerging Markets Equity $40 $120
MS UIF Fixed Income $29 $89
MS UIF High Yield $30 $92
MS UIF International Magnum $34 $102
OCC Accumulation Trust Managed $30 $93
OCC Accumulation Trust Small Cap $31 $94
PIMCO VIT StocksPLUS Growth & Income $28 $87
Transamerica VIF Growth $30 $93
Transamerica VIF Money Market $24 $75
--------------------------------------------------------------------------
Example 6: If you elect to annuitize at the end of the applicable period under a
Settlement Option with life contingencies:
-----------------------
1 Year 3 Years
---------------------------------------------------------
Alger American Income & Growth $110 $89
Alliance VP Growth & Income - Class B $110 $89
Alliance VP Premier Growth - Class B $113 $99
Dreyfus VIF Appreciation $111 $91
Dreyfus VIF Small Cap $111 $91
Janus Aspen Series Balanced - Service Shares $110 $88
Janus Aspen Series Worldwide Growth - Service $110 $89
Shares
MFS VIT Emerging Growth $111 $93
MFS VIT Growth with Income $112 $94
MFS VIT Research $112 $93
MS UIF Emerging Markets Equity $121 $120
MS UIF Fixed Income $110 $89
MS UIF High Yield $111 $92
MS UIF International Magnum $115 $102
OCC Accumulation Trust Managed $111 $93
OCC Accumulation Trust Small Cap $112 $94
PIMCO VIT StocksPLUS Growth & Income $109 $87
Transamerica VIF Growth $111 $93
Transamerica VIF Money Market $105 $75
--------------------------------------------------------------------------
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 and any optional riders you elect. 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>
Condensed Financial Information
Because the variable account did not commence operations during 1999, no
financial statements are available for the variable account.
What Are My Investment Choices?
The contract gives you the opportunity to select from a number of investment
options. Investment options include variable sub-accounts and the fixed account.
Currently, you may not elect more than a total of 17 investment options over the
life of the contract.
Variable Sub-Account Options
The variable account is a separate account, designated Separate Account VA-8,
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 VP Growth & Income - Class B Alliance VP
Premier Growth - Class B Dreyfus VIF Appreciation Dreyfus VIF Small Cap Janus
Aspen Series Balanced - Service Shares Janus Aspen Series Worldwide Growth -
Service
Shares
MFS VIT Emerging Growth
MFS VIT Growth with Income
MFS VIT Research
MS UIF Emerging Markets Equity MS UIF Fixed Income MS UIF High Yield MS UIF
International Magnum OCC Accumulation Trust Managed OCC Accumulation Trust Small
Cap PIMCO VIT StocksPLUS Growth & Income Transamerica VIF Growth Portfolio
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 32, THE
PORTFOLIOS on page 17, and the accompanying portfolio prospectuses.
Fixed Account
We credit interest on the amounts in the fixed account at a rate of not less
than 3% annually. We may credit interest at a rate in excess of 3% at our
discretion for any class. Each interest rate will be guaranteed to be credited
for at least 12 months.
The fixed account may not be available in all states. Refer to the contract for
limitations.
Can I Make Transfers Among the Sub-Accounts and the Fixed Account?
Before the annuity date, you may transfer values between the variable
sub-accounts and the fixed account. For transfers after the annuity date, see
After the Annuity Date on page 26.
What If I Need My Money?
You may withdraw all or part of the cash surrender value before the annuity
date. The cash surrender value of your contract is the account value less any
account fee, and less any contingent deferred sales load and applicable premium
tax charges. We may delay payment of any withdrawal from the fixed account for
up to six months.
Withdrawals may be taxable and subject to withholding and a penalty tax.
Withdrawals from qualified contracts, including TSA contracts, may be subject to
severe restrictions and, in certain circumstances, prohibited. See FEDERAL TAX
MATTERS on page 39.
What Charges Will I Incur on a Withdrawal?
We do not deduct a sales charge when purchase payments are made, although
premium tax charges may be deducted. However, if any part of the account value
is withdrawn, we may deduct a contingent deferred sales load, or surrender
charge, of up to 9% of purchase payments withdrawn. See Contingent Deferred
Sales Load/Surrender Charge on page 32.
We do not assess the contingent deferred sales load on payment of death
benefits, on transfers within the contract, or on certain annuitizations.
Also,beginning 30 days from the contract effective date, you may withdraw any
portion of the allowed
amount each contract year without imposition of any contingent deferred sales
load/surrender charge.
For the first contract year, the allowed amounteach is equal to the greater of:
a) accumulated earnings not previously withdrawn; or
b) 10% of the total purchase payments received as of the date of withdrawal,
less any withdrawals during that contract year.
After the first contract year, the allowed amount is equal to the greater of:
a) accumulated earnings not previously withdrawn; or
b) 10% of the total purchase payments received less than seven years old as of
the last contract anniversary, less any withdrawals during that contract
year.
Withdrawals will be made first from earnings and then from purchase payments on
a first-in/first-out basis. The allowed amount may vary depending on the state
in which your contract is issued. If an allowed amount is not withdrawn during a
contract year, it does not carry over to the next contract year.
Purchase payments not previously withdrawn that have been held at least seven
full years from the date we received them, and accumulated earnings not
previously withdrawn, may be withdrawn without charge. Also, after the contract
has been in effect for fourteen years, you may withdraw any purchase payment
without charge.
We will waive the contingent deferred sales load/surrender charge on a
withdrawal if you or a joint owner:
o receive extended medical care in a qualifying institution for at least 60
consecutive days;
o receive medically required hospice or in-home care for at least 60
consecutive days and such care is certified by a qualified medical
professional; or
o are diagnosed as terminally ill after the first contract year and are
reasonably expected to die within 12 months.
Other conditions must also be met. See Contingent Deferred Sales Load/Surrender
Charge on page 32 and CASH WITHDRAWALS on page 26.
What Are the Other Charges and Deductions?
We deduct:
o a mortality and expense risk charge of 1.60% annually of the assets in the
variable account;
o an administrative expense charge of 0.15% annually of these assets; and
o an account fee of currently $25 at the end of each contract year and upon
surrender.
After the annuity date, we will deduct an annual annuity fee of $30 in equal
installments from each periodic payment under the variable payment option.
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 34.
Guaranteed Minimum Income Benefit Rider. If you elect the Guaranteed Minimum
Income Benefit, or GMIB, Rider, we will deduct a daily charge at an effective
annual rate of 0.35% of the variable accumulated value at time, not including
amounts in the money market sub-account. The charge for the GMIB Rider is
reflected in the variable annuity unit values for each variable sub-account,
except the money market sub-account.
How and When are Settlement Option
Payments Made?
You may elect to receive settlement option payments on a fixed basis, a variable
basis or a combination of a fixed and variable basis. You have flexibility in
choosing the annuity date, but it may generally not be a date later than an
annuitant's 95th birthday. Certain qualified contracts may have restrictions as
to the annuity date and the types of settlement options available.
Five settlement options are available under the contract:
1. life annuity;
2. life and contingent annuity;
3. life annuity with period certain;
4. joint and survivor annuity; and
5. period certain only.
The settlement option that you may purchase under the GMIB Rider is a life
annuity with 10 year period certain. See Guaranteed Minimum Income Benefit Rider
on page 36.
What Happens If I Die Before the Annuity
Date?
If you or a joint owner die before the annuity date and both you and a joint
owner (if any) are age 70 or less, the guaranteed minimum death benefit will be
the greatest of three amounts:
a) the account value;
b) the sum of all purchase payments, less previous withdrawals taken, and less
any contingent deferred sales loads and premium tax charges applicable to
those withdrawals; and
c) the highest account value on any contract anniversary before the earlier of
your or a joint owner's 70th birthday, plus purchase payments made since
that contract anniversary, less withdrawals taken since that contract
anniversary, adjusted as described in Withdrawal Adjustments on page 30,
and less any contingent deferred sales loads and premium tax charges
applicable to those withdrawals.
If you or a joint owner die before the annuity date and after either your or a
joint owner's 71st birthday, the death benefit will be the greater of:
a) the account value; and
b) the guaranteed minimum death benefit at age 70, plus the total of all
purchase payments made since age 70, less withdrawals taken after age 70,
adjusted as described in Withdrawal Adjustments on page 30, and less any
contingent deferred sales loads and premium tax charges applicable to those
withdrawals.
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. If no
settlement method is elected, the death benefit will be distributed within five
years after the owner's death. No contingent deferred sales load is imposed. The
death benefit may be paid as either a lump sum or as a settlement option.
If the owner is not a natural person, we will treat the annuitant as the owner
for purposes of the death benefit.
What Are the 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. A taxable
event would occur, for example, with a withdrawal or a 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
39.
Who Do I Contact if I Have Questions?
You can ask your financial representative if you have questions about the
TransMark Optimum Choice contract.
We will answer your questions about procedures or the contract if you write to
our Service Center at:
Transamerica Annuity Service Center
9735 Landmark Pkwy. Dr.
St. Louis, Missouri 63127
Or call us at: 1-800-317-2688
All inquiries should include the contract number and the owner's name.
Please Note: The above 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. For 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, or
ERISA, 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 39.
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 a wholly-owned
subsidiary of AEGON, N.V. and 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.
Published Ratings
We may from time to time publish our 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 our financial strength and/or
claims-paying ability. These ratings should not be considered as bearing on the
investment performance or safety 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, our claims-paying ability, 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 we are prepared, from a financial standpoint, to meet
our insurance and annuity obligations. The terms of our obligations are stated
within the fixed account 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, or 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-8 of Transamerica, or 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, or 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.
We own the assets of the variable account, but they are held separately from our
other assets. 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 our other income, gains or losses. Therefore, the investment
performance of the variable account is entirely independent of the investment
performance of our general account assets or any other separate account
maintained by us.
The variable account currently has 19 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. You can only
invest in 17 sub-accounts over the life of your contract.
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 & Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. The portfolio invests in dividend paying equity securities, such
as common or preferred stocks, preferably those which the Manager believes also
offer opportunities for capital appreciation.
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 the 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 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 in a limited number of
large, carefully selected, high-quality U.S. companies. In the Adviser's
judgement, the companies chosen will be those that 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 Appreciation Portfolio of the Dreyfus Variable Investment Fund seeks
long-term capital growth consistent with the preservation of capital; current
income is a secondary goal. To pursue these goals, the portfolio invests in
common stocks focusing on "blue chip" companies with total market values of more
than $5 billion at the time of purchase.
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. To pursue this goal, the portfolio generally
invests at least 65% of its assets in the common stock of U.S. and foreign
companies. The portfolio focuses on small-cap companies with total market values
of less than $1.5 billion.
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: 0.65%.
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: 0.65%.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks long-term
growth of capital. The series may invest up to 25% of its net assets in foreign
securities, including emerging market securities. Emerging markets are generally
defined as countries in the initial stages of their industrialization cycles
with low per capita income.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
The Growth With Income Series of the MFS Variable Insurance Trust seeks
long-term growth of capital and future income while providing more current
dividend income than is normally obtainable from a portfolio of only growth
stocks. The series invests, under normal market conditions, at least 65% of its
total assets in common stock and related securities, such as preferred stocks,
convertible securities and depositary receipts for those securities. The series
will also seek to provide income equal to approximately 90% of the dividend
yield on the Standard & Poor's 500 Composite Index. While the fund may invest in
companies of any size, the fund generally focuses on companies with larger
market capitalizations that the series' adviser believes have sustainable growth
prospects and attractive valuations based on current and expected earnings or
cash flow. The series may invest in foreign securities through which it may have
exposure to foreign currencies.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The series invests, under normal market
conditions, at least 80% of its total assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts. The series focuses on companies that the series' adviser believes have
favorable prospects for long-term growth, attractive valuations based on current
and expected earnings or cash flow, dominant or growing market share and
superior management. The series may invest in foreign equity securities
(including emerging market securities) through which it may have exposure to
foreign currencies.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
Morgan Stanley Universal Institutional Funds Emerging Markets Equity Portfolio
seeks long-term capital appreciation by investing primarily in equity securities
of issuers in emerging market countries. The Adviser seeks to maximize returns
by investing in growth-oriented equity securities in emerging markets. The
Adviser's investment approach combines top-down country allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations and managements with a strong
shareholder value orientation. The Adviser allocates the portfolio's assets
among emerging markets based on relative economic, political and social
fundamentals, stock valuations and investor sentiments.
Adviser: Morgan Stanley Asset Management* Management Fee: 1.25% of the first
$500 million; 1.20% of the next $500 million; and 1.15% of the assets over
$1 billion.
*On December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc., but continues to do
business in certain instances using the name Morgan Stanley Asset
Management.
Morgan Stanley Universal Institutional FundsThe Fixed Income Portfolio seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified mix of dollar denominated investment grade
fixed income securities, particularly U.S. government, corporate and mortgage
securities. The Portfolio ordinarily will maintain an average weighted maturity
in excess of five years. The Portfolio may invest opportunistically in
non-dollar denominated securities and below investment grade securities.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the first
$500 million; 0.35% of the next $500 million; and 0.30% of the assets over
$1 billion.
Morgan Stanley Universal Institutional Funds High Yield Portfolio seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities (commonly referred to as "junk
bonds"). The Portfolio also may invest in investment grade fixed income
securities, including U.S. Government securities, corporate bonds and mortgage
securities. The Portfolio may invest to a limited extent in foreign fixed income
securities, including emerging market securities.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of the first
$500 million; 0.45% of the next $500 million; and 0.40% of the assets over
$1 billion.
Morgan Stanley Universal Institutional Funds International Magnum Portfolio
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The Adviser seeks to achieve
superior long-term returns by creating a diversified portfolio of undervalued
international equity securities. To achieve this goal, the Adviser uses a
combination of strategic geographic asset allocation and fundamental, value
oriented stock selection. 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 the more 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: Morgan Stanley Asset Management. Management Fee: 0.80% of the first
$500 million; 0.75% of the next $500 million; and 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 depositary receipts.
Adviser: OpCap Advisors.
Management Fee: 0.80% of the first $400 million and 0.75% of the next $400
million and 0.70% of net 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 of 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 be listed on a domestic or foreign
securities exchange or be represented by American depositary receipts.
Adviser: OpCap Advisors.
Management Fee: 0.80% of the first $400 million and 0.75% of the next $400
million and 0.70% of net assets over $800 million.
The StocksPLUS Growth and Income Portfolio of the PIMCO Variable Insurance Trust
seeks to achieve a total return which exceeds the total return performance of
the S&P 500. The Portfolio invests in common stocks, options, futures, options
on futures and swaps. Under normal market conditions, the Portfolio invests
substantially all of its assets in S&P 500 derivatives, backed by a portfolio of
fixed income instruments. The Portfolio uses S&P 500 derivatives in addition to
or in place of S&P 500 stocks to attempt to equal or exceed the performance of
the S&P 500. The Adviser actively manages the fixed income assets held by the
Portfolio, with a view to enhancing the Portfolio's total return investment
performance, subject to an overall portfolio duration which is normally not
expected to exceed one year. The Portfolio may invest up to 10% of its assets in
high yield bonds rated B or higher by Moody's or S&P, or if unrated, determined
by the Adviser to be comparable quality. The Portfolio may also invest up to 20%
of its assets in securities denominated in foreign currencies and may invest
beyond this limit in U.S. dollar denominated securities of foreign issuers.
Adviser: Pacific Investment Management Company.
Management Fee: 0.40%
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc. seeks
long-term capital growth. It invests at least 65% of its assets in a diversified
selection of equity securities of domestic growth companies of any size. The
manager uses a "bottom-up" approach to investing and constructs the portfolio
one company at a time. The manager focuses on identifying fundamental change in
its early stages and investing in premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
share-holder-oriented management; dominance in market share; cost production
advantages; leading brands; self-financed growth; and attractive reinvestment
opportunities. The manager of the portfolio believes in long-term investing and
does not try to time the market. However, when in the judgment of the manager
market conditions warrant, the portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash or cash equivalents.
Adviser: Transamerica Investment Management, LLC.
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 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 Investment Management, LLC.
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 and the investment advisory services in the
current prospectuses for the portfolios which accompany this prospectus.
Carefully read the prospectuses of the portfolios which interest you before you
make any decision concerning how you will invest in, or transfer monies among,
the variable sub-accounts.
We 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.
Portfolios Not Publicly Available
The portfolios are open-end management investment companies, or portfolios or
series of, open-end management companies registered with the SEC under the 1940
Act, that are often referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios. Shares of the portfolios are not offered to the public but solely to
the insurance company separate accounts and other qualified purchasers as
limited by federal tax laws. These portfolios are not the same as mutual funds
that may have very similar names that are sold directly to the public, and the
performance of such publicly available funds, which have different portfolios
and expenses, should not be considered as an indication of the performance of
the portfolios. The assets of each portfolio are held separate from the assets
of the other portfolios. Each portfolio operates as a separate investment
vehicle. The income or losses of one portfolio have no effect on the investment
performance of another portfolio. The sub-accounts reinvest dividends and/or
capital gains distributions received from a portfolio in more shares of that
portfolio as retained assets.
Addition, Deletion, or Substitution
We do not control the portfolios. For this reason, we cannot guarantee that any
of the variable sub-accounts offered under the 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.
We reserve 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 and 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 TransMark Optimum Choice contract is subject to the insurance laws and
regulations of each state or jurisdiction in which it is available for
distribution. There may be differences between the contract issued and the
general contract description contained in this prospectus because of
requirements of the state where your contract is issued. Some of the state
specific differences are included in the prospectus, but the prospectus does not
include references to all state specific differences. All state specific
contract features will be described in your contract.
The contract is a flexible purchase payment deferred variable annuity contract.
The rights and benefits of the contract are described below and in the contract.
We reserve the right to modify the contract if required by law. We also reserve
the right to give you, 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:
a) rollover and regular IRAs under Code Section 408(b); or
b) TSAs qualifying under Code Section 403(b).
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 there
are joint owners, the one designated as the primary owner will receive all mail
and any tax reporting information.
For TSAs, your employer and/or your spouse may need to acknowledge certain
requests you make before your separation from service.
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 of a non-qualified contract 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 administrative rules
described below will apply separately to each contract, unless otherwise noted.
Purchase Payments
All purchase payments must be paid by a check payable to Transamerica. Purchase
payments will only be credited upon receipt at the Service Center address
specified on page 15 or at the address given on the form attached to your
confirmation statement for additional purchase payments. We will issue you a
confirmation upon the acceptance of each purchase payment.
The initial purchase payment must be at least:
o $5,000 for a non-qualified contract; or
o $5,000 for an IRA contract issued as the result of a transfer or rollover
from an IRA or other qualified plan; or
o $2,000 for a contract issued as the result of a transfer or rollover from
another TSA contract or for a regular IRA contract; or
o $50 per month for a TSA contract if you elect to have your employer make
purchase payments by payroll reductions.
We will issue your contract and credit your initial purchase payment generally
within two business days after our Service Center receives the initial purchase
payment and sufficient information to issue a contract. For us to issue your
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 with owners, joint owners, or
annuitants more than 90 years old. Nor will we normally accept purchase payments
after any owner's (or annuitant's if non-individual owner), 91st birthday. In
our discretion we may waive these restrictions in appropriate cases.
If we cannot credit the initial purchase payment allocated to the variable
account 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. Unless
you consent to us retaining the initial purchase payment, and then we will
credit it to the variable account as soon as the requirements are fulfilled.
Before the annuity date and before you, a joint owner or any annuitant reaches
age 91, you may make additional purchase payments at any time while the contract
is in effect. The minimum amount of each additional purchase payment is:
o $1,000; or
o $50 per month if payments are made through your employer by payroll
reduction for a TSA, or EFT for other contracts.
In addition, minimum allocation amounts apply. See Allocation of Purchase
Payments below. We credit additional purchase payments to the contract as of the
date we receive your payment at our Service Center.
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 fixed account. Allocations must be equal to the lesser of 10% of the
purchase payments or $250. Percentage allocations must be in whole numbers.
The entire initial purchase payment will be held in the money market sub-account
during the applicable free look period, allowing 10 days for delivery. The
dollar value of the variable accumulation units held in the money market
sub-account attributed to such purchase payment will then be allocated among the
fixed account and/or variable sub-accounts according to your selected
allocations. This initial allocation to the money market sub-account does not
count toward the limit of 17 investment options over the life of the contract.
Each purchase payment will be subject to the allocation instructions in effect
at the time such purchase payment is received in our Service Center. You may
change your allocations 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 allocations 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
allocation choices will continue in effect until you change them again.
Free Look Option
If you exercise the free look option, unless otherwise required by law, we will
refund the greater of:
a) the purchase payments made, minus any withdrawals; or
b) the account value as of the date we receive your written notice to cancel
and your contract.
Your entire initial purchase payment will be held in the money market
sub-account during the applicable free look period plus 10 days for delivery. At
the end of the free-look period plus 10 days, we will automatically transfer the
value held in the money market sub-account according to your original allocation
instructions.
Investment Option Limit
Currently, you may not allocate monies to more than seventeen investment options
over the life of the contract. Investment options include variable sub-accounts
and fixed account. Each variable sub-account and the fixed account that ever
received a transfer or purchase payment allocation counts as one towards this
total of seventeen 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 count as one option 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.
Account Value
Before the annuity date, the account value is equal to:
a) the fixed account 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 regular trading on
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 the date our Service Center receives:
a) sufficient information, in an acceptable manner and form; or
b) 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 at our Service Center. 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
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 fixed account.
Transfers among the variable sub-accounts and the fixed account may be made by
submitting a request to our Service Center in a form and manner acceptable to
us. The transfer request must specify:
a) the variable sub-accounts and/or the fixed account from which your transfer
is to be made;
b) the amount of your transfer; and
c) the variable sub-accounts and/or fixed account to receive the transferred
amount.
The minimum amount which you may transfer is equal to the lesser of:
o 10% of the value in the account from which the transfer is being made; and
o $250.
Transfers among the variable sub-accounts are also subject to the terms and
conditions imposed by the portfolios.
We will generally process a transfer as of the end of the valuation period
during which the request is received by our Service Center.
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.
If a transfer reduces the value in a variable sub-account or in the fixed
account to less than $250, 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.
Telephone Transfers
We will allow telephone transfers if you have provided proper authorization for
such transfers in a form and manner acceptable to us. Withdrawals are not
permitted by telephone. We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. We will not be liable for
any losses due to unauthorized or fraudulent instructions. 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.
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 may 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.
Dollar Cost Averaging
Before the annuity date, you may request that amounts be automatically
transferred on a monthly basis from a source account to any of the variable
sub-accounts. The source account is currently the fixed account. You can do 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 begin until the later of:
a) 30 days after the contract effective date; or
b) the estimated end of the free look period which allows 10 days for
delivery.
Transfers will continue for the number of consecutive months which you selected
unless:
a) you terminate the transfers;
b) we automatically terminate the transfers because there are insufficient
amounts in the source account; or
c) 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 value of your source
account must be at least $5,000. This limit may be changed for new elections of
this service. Dollar cost averaging transfers can not be made from a source
account from which systematic withdrawals or automatic payouts are also being
made.
Dollar cost averaging may not be elected at the same time that automatic asset
rebalancing is in effect.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
Before the annuity date, you may elect to allocate entire purchase payments to
either the six or twelve month special Dollar Cost Averaging account of the
fixed account. The purchase payment will be credited with interest at a
guaranteed fixed rate. Amounts will then be transferred from the special Dollar
Cost Averaging account to the variable sub-accounts pro rata on a monthly basis
for six or twelve months (depending on the option you select) in the allocations
you specify.
Amounts from the sub-accounts and/or fixed account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if you
request a transfer (other than a Dollar Cost Averaging transfer) or a withdrawal
from a special Dollar Cost Averaging account, any amounts remaining in the
special account will be transferred to the variable sub-accounts according to
your allocation instructions. The special Dollar Cost Averaging option will end
and cannot be reelected.
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. 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. The fixed account 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. We reserve the right to discontinue the automatic asset rebalancing service
at any time for any reason.
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:
a) you may not make any more than four transfers per contract year after the
annuity date; and
b) 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. No transfers are allowed into or out of the fixed account.
Cash Withdrawals
If you own 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, including TSAs, withdrawals may
be subject to severe restrictions and, in certain circumstances, prohibited.
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. For example, if you are married, you may be
required to show us advance written consent from your spouse before we make
certain transactions. In addition, your employer may also need to acknowledge
certain transactions requiring your separation from service.
The cash surrender value is equal to the account value, minus any account fee,
and any contingent deferred sales load and applicable 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
unless you elect a variable period certain settlement option. Partial
withdrawals must be at least $250.
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 fixed
account. 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 $500. In such instances, you will be notified.
We will generally process any withdrawal requests, including surrender requests,
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:
o the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise
restricted;
o an emergency exists as defined by the Securities and Exchange Commission,
or the Commission requires that trading be restricted; or
o 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.
We may delay payment of any withdrawal from the fixed account 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 assume the investment risk for all amounts in the variable account and
because certain withdrawals are subject to a contingent deferred sales load and
other charges, the total amount paid upon surrender of your contract may be less
than the total purchase payments.
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, including that withdrawals and surrenders may be taxable and, if
taken before age 59 1/2, subject to the 10% federal tax penalty.
Restrictions for TSAs. You may not withdraw any portion of the account value
that represents purchase payments made by an elective salary deferral
arrangement after December 31, 1988, and the earnings on such purchase payments
and amounts held on December 31, 1988, unless you:
o are at least age 59 1/2;
o become disabled;
o separate from employment with your employer; or
o incur a financial hardship.
These restrictions will not apply if the withdrawal is:
o for payment to an alternate payee under a Qualified Domestic Relations
Order, or QDRO; or
o made in order to make a direct transfer to another TSA as provided in Rev.
Rul. 90-24.
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 in the percentage allocations
that you specify. Unless you specify otherwise, withdrawals will be pro rata
based on 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 payout
option is in effect.
To be eligible for the systematic withdrawal option, the account value must be
at least $12,000 at the time of election. The minimum monthly amount that can be
withdrawn is $100. Currently you can elect any amount over $100 to be withdrawn
systematically.
You may also make partial withdrawals while receiving systematic withdrawals.
If the total of all withdrawals (systematic, automatic or partial) in a contract
year exceed the allowed amount to be withdrawn without charge for that year,
your account value will be charged any contingent deferred sales load that may
apply.
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.
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, or APO, to satisfy minimum distribution requirements
under the following sections of the Code:
o 403(b); and
o 408(b)(3).
For regular 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 TSAs, APO can be elected no earlier than six months before the later of when
you:
a) attain age 70 1/2; or
b) 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
95th birthday.
Other Automatic Payout Option Information. Withdrawals will be from the variable
sub-accounts you designate and in the percentage allocations you specify. If you
do not indicate otherwise, withdrawals will be pro rata from account value. If
you take a withdrawal from a variable sub-account from which you have designated
that dollar cost averaging transfers be made, then the dollar cost averaging
option will terminate. The calculation of the APO amount will reflect the total
account value although the withdrawals are only from the variable sub-accounts.
This calculation and APO are based solely on the value in this contract.
To be eligible for this option, you must meet the following conditions:
a) your account value must be at least $12,000 at the time at which you select
this option; and
b) the annual withdrawal amount is the larger of the required minimum
distribution under Code Section 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.
TSA LOANS
If your plan allows for loans to be made, you may borrow against the account
value at any time before the annuity date if you fill out our loan forms and
mail them to us. We reserve the right to delay making a loan for up to six
months from the date we receive your request. See FEDERAL TAX MATTERS regarding
taxation of loans.
Amounts and Conditions
Your account value will be collateral for the loan. The aggregate amount
borrowed from all employer-sponsored plans may not exceed the lesser of:
o $10,000 or one half of the amount available for withdrawal, whichever is
greater; or
o $50,000 reduced by the excess (if any) of your highest outstanding loan
balance during the preceding 12 month period, over your outstanding loan
balance on the date the loan is made.
We will not allow a loan for an amount:
o of less than $1,000; or
o that would reduce the remaining net account value to less than $500.
Interest
The portion of the account value against which you have borrowed will earn an
effective annual interest rate of 3.0% credited daily. Interest on each loan
will be charged at the effective annual interest rate of 6.0%.
Terms and Repayment
You must generally repay each loan within five years from the date it is made.
However, if the loan is used to acquire a dwelling that you will use as your
principle residence within a reasonable period of time, you must repay the loan
within 30 years from the date it is made.
Payments are due on the date specified in the loan documents. Each payment we
receive will be applied to interest first, then to principal. The portion of
each payment applied to principal will reduce the outstanding loan balance and
will be transferred back to the annuity value according to the allocation
instructions we have at the time.
Repayment (of principal and interest) must be made in substantially equal
installments, not less frequently than quarterly. You must clearly mark a
payment as a loan repayment, or we will credit the amount as a premium payment.
You may repay a loan at any time subject to these restrictions.
Default
If you fail to repay the loan according to the terms of the loan documents that
you signed, we will consider the loan to be in default.
In order to correct the default, we must receive the missed payments before the
last day of the calendar quarter following the quarter in which the payment was
missed. If you do not correct the default by the last day of the next calendar
quarter, you must include the outstanding loan amount, including interest, in
your gross income for the year of the default. The loan remains an outstanding
debt which must be fully repaid, unless one of the following events occurs
allowing the loan to be distributed:
o you are at least age 59 1/2;
o you become disabled;
o you separate from employment with your employer; or
o you incur a financial hardship. A financial hardship withdrawal may not
include any earnings on your elective deferrals;
o a withdrawal is for payment to an alternate payee under a QDRO; or
o a withdrawal is made in order to make a direct transfer to another
qualified TSA.
Until you repay a defaulted loan, such loan will be considered outstanding for
purposes of calculating the maximum allowed amount of any subsequent loan.
Partial Withdrawals
You may make a partial withdrawal from the annuity contract while a loan is
outstanding. Any partial withdrawal may not:
o exceed 50% of the remaining net account value; and
o reduce the net account value to an amount less than the outstanding loan
balance plus $500.
Partial withdrawals are subject to the restrictions and applicable withdrawal
provisions of the contract.
We will waive the above restrictions if the partial withdrawal is required to
satisfy minimum distribution requirements.
Cash Surrender
If you request a surrender while a loan is outstanding, we will treat the loan
as in default. Any surrender is subject to the restrictions and applicable
withdrawal provisions of the contract. The value used to determine the cash
surrender value will be:
o the net account value on the date of the surrender; less
o any contingent deferred sales load and applicable premium tax charges.
Annuitization
If you elect to begin receiving payments under a settlement option while a loan
is outstanding, we will treat the loan as in default. The value used to provide
settlement option payments will be:
o the net account value on the date of the surrender; less
o any contingent deferred sales load and applicable premium tax charges.
Death
If you die before the annuity date and while a loan is outstanding, we will
treat the loan as in default as of your date of death. The amount used to
determine the death benefit payable will be the net account value.
Termination
Subject to applicable provisions of the Code, the contract will end on the date
that any loan and unpaid interest reduce the amount available for withdrawal to
less than $500. Termination will become effective 31 days after we mail notice
to you at your last known address.
Death Benefit
If an owner dies before the annuity date and both owners are age 70 or less, the
guaranteed minimum death benefit will be equal to the greatest of:
a) the account value; and
b) the sum of all purchase payments, less withdrawals taken, adjusted as
described below, and less any contingent deferred sales loads and premium
tax charges applicable to those withdrawals; and
c) the highest account value on any contract anniversary before the earlier of
the owner's or joint owner's 70th birthday, plus purchase payments made
since that contract anniversary, less withdrawals taken since that contract
anniversary, adjusted as described below, and less any contingent deferred
sales loads and premium tax charges applicable to those withdrawals.
If death occurs before the annuity date and after either the deceased owner's or
joint owner's 71st birthday, the guaranteed minimum death benefit will be equal
to the greater of:
a) the account value; and
b) the guaranteed minimum death benefit at age 70, plus total of all purchase
payments made since age 70, less withdrawals taken after age 70, adjusted
as described below, and less any contingent deferred sales loads and
premium tax charges applicable to those withdrawals.
If the owner is not a natural person, such as a trust, corporation or other
legal entity, the annuitant will be treated as the owners for purposes of the
death benefit.
Withdrawal Adjustment. If you make a withdrawal, the amount of the death benefit
may be reduced. The amount of the reduction will depend on 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 death 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
We will generally pay the death benefit when we receive proof of death of an
owner. Once we receive 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 contingent deferred
sales load 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
You may select one or more beneficiaries by designating the person or persons to
receive the amounts payable under the contract. The persons you designate will
receive the percentage you establish if:
o you die before the annuity date and there is no joint owner; or
o 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). The contract will remain in force with the
annuitant's surviving spouse as the new annuitant, however, if:
o the contract is owned by a trust; and
o the beneficiary is either the annuitant's surviving spouse, or a trust
holding the contract solely for the benefit of such spouse.
The manner in which we will pay the death benefit depends on the status of the
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:
o the joint owner, if any; or
o the beneficiary, if any
If the owner is not the annuitant:
o the joint owner, if any; or
o the beneficiary, if any; or
o the annuitant; or
o the joint annuitant; if any.
If the death benefit is payable to the owner's surviving spouse, or to a trust
for the sole benefit of such surviving spouse, we will continue 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:
o in a lump sum; or
o as settlement option payments, provided the person making the election is
an individual. Such payments must begin within one year after the owner's
death and must be in equal amounts over a period of time not extending
beyond the individual's life or life expectancy.
Election of either option must be made no later than 60 days 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 fixed account.
Contingent Deferred Sales Load/
Surrender Charge
No deduction for sales charges is made from purchase payments at the time they
are made. However, a contingent deferred sales load, or surrender charge, of up
to 9% of purchase payments may be imposed on certain withdrawals or surrenders.
This charge is designed to partially cover certain expenses incurred by us
relating to the sale of the contract, including commissions paid to
salespersons, the costs of preparation of sales literature and other promotional
costs and acquisition expenses.
The contingent deferred sales load/surrender charge percentage varies according
to the number of years between when a purchase payment was credited to the
contract and when the withdrawal is made. The amount of this charge is
determined by multiplying the amount withdrawn that is subject to the charge by
the contingent deferred sales load percentage according to the following table.
In no event will the total contingent deferred sales load/surrender charge
assessed against the contract exceed 9% of the total purchase payments.
Contingent Deferred
Sales Load As A
Percentage of
Number of Purchase Payment
Years Since Receipt Withdrawn
of Purchase Payment
-------------------
Less than 2 years 9%
2 years but less than 3 years 8%
3 years but less than 4 years 8%
4 years but less than 5 years 6%
5 years but less than 6 years 6%
6 years but less than 7 years 4%
7 years or more 0%
Any applicable contingent deferred sales load will be deducted from the amount
requested for both partial withdrawals, including withdrawals under the
systematic withdrawal option or the APO, and full surrenders, unless you elect
to add the amount of the applicable load to the amount requested for a partial
withdrawal to cover the applicable contingent deferred sales load. We will not
impose any contingent deferred sales load on withdrawals after the contract has
been in effect for 14 contract years.
Free Withdrawals-Allowed Amount
You may make a withdrawal up to the allowed amount without incurring a
contingent deferred sales load/surrender charge each contract year before the
annuity date.
For the first contract year, the allowed amount is equal to the greater of:
a) accumulated earnings not previously withdrawn; or
b) 10% of the total purchase payments received as of the date of withdrawal,
less any withdrawals during that contract year.
After the first contract year, the allowed amount is equal to the greater of:
a) accumulated earnings not previously withdrawn; or
b) 10% of the total purchase payments received less than seven years old as of
the last contract anniversary, less any withdrawals during that contract
year.
Withdrawals will be made first from earnings and then from purchase payments on
a first-in/first-out basis. The allowed amount may vary depending on the state
in which your contract is issued. If an allowed amount is not withdrawn during a
contract year, it does not carry over to the next contract year.
Purchase payments not previously withdrawn that have been held at least seven
full contract years, and accumulated earnings not previously withdrawn may be
withdrawn without charge. We will not impose any contingent deferred sales load
for withdrawals of purchase payments after the contract has been in effect for
fourteen years.
Other Free Withdrawals
We will waive the contingent deferred sales load:
a) upon annuitization after the first contract year to an option involving
life contingencies; or
b) upon annuitization at age 95 or over; or
c) upon payment of the death benefit before the annuity date; or
d) if you or a joint owner receive extended medical care in a qualifying
institution (as defined in the contract) for at least 60 consecutive days,
and the request for the withdrawal or surrender, together with proof of
such extended care, is received at our Service Center during the term of
such care, or within 90 days after the last day upon which you or joint
owner received such extended care; or
e) if you or a joint owner receive medically required hospice or in-home care
for at least 60 consecutive days and such extended care is certified by a
qualified medical professional. You may also be required to submit other
evidence as required by us such as evidence of Medicare eligibility; or
f) if you or a joint owner are diagnosed as terminally ill by a qualified
medical professional after the first contract year and are reasonably
expected to die within 12 months.
Neither d) nor e) apply if you or a joint owner are receiving extended medical
care in a qualifying institution or receiving in-home care at the time the
contract is purchased.
If you or a joint owner qualifies for a waiver of contingent deferred sales load
due to receipt of qualified extended care or are diagnosed with a terminal
illness, we reserve the right to not accept purchase payments after you or a
joint owner have qualified for any of these waivers. Any withdrawals on which
the contingent deferred sales load is waived will not reduce the allowed amount
for the contract year.
Administrative Charges
Account Fee. At the end of each contract year before the annuity date, we deduct
an annual account fee as partial compensation for expenses relating to the issue
and maintenance of the contract and the variable account. The annual account fee
is $25. If the contract is surrendered, the account fee will be deducted from a
full surrender before the application of any contingent deferred sales load. 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 fixed account.
Annuity Fee. After the annuity date, we deduct an annual annuity fee of $30 to
help cover processing costs. This fee will be deducted in equal amounts from
each variable payment made during the year. This fee will not be changed. No
annuity fee will be deducted from fixed payments.
Administrative Expense Charge. We also make a daily deduction for the
administrative expense charge from the variable account before the annuity date
at an effective annual rate of 0.15% of assets held in each variable sub-account
to reimburse us for administrative expenses. 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
Before the annuity date, 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 1.60% of the assets in the variable account. We guarantee that this
charge of 1.60% 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.
We anticipate that the contingent deferred sales load will not generate
sufficient funds to pay the cost of distributing the contracts. To the extent
that the contingent deferred sales load is insufficient to cover the actual cost
of contract distribution, the deficiency will be met from our general corporate
assets which may include amounts, if any, derived from the mortality and expense
risk charge.
Guaranteed Minimum Income Benefit (GMIB)
Rider Fee
Before the annuity date, we will deduct a daily charge at an effective annual
rate of 0.35% of the variable accumulated value not including amounts in the
money market sub-account. The charge for the GMIB Rider is reflected in the
variable annuity unit values for each variable sub-account, except the money
market sub-account.
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.
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. For more
information, see the portfolios' prospectuses.
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:
o in certain group arrangements, such as employee savings plans;
o to current or former officers, directors and employees, and their families,
of Transamerica and its affiliates;
o to officers, directors, and employees, and their families, of the
portfolios' investment advisers and their affiliates; or
o to officers, directors, employees and sales agents also known as registered
representatives, and their families, of broker-dealers and other financial
institutions that have sales agreements with us to sell the contracts.
In these situations:
a) the contingent deferred sales load may be reduced or waived;
b) the mortality and expense risk charge or administration charges may be
reduced or waived; and/or
c) 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, a subsidiary of AEGON N.V. TSSC is registered with the
Commission as a broker/dealer and is a member of the National Association of
Securities Dealers, Inc. 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 9%, 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 you select. You also select the
annuity date which 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 first day of the calendar
month immediately preceding the month of the oldest annuitant's or joint
annuitants' 95th birthday. This date may vary in certain jurisdictions and under
certain programs or circumstances.
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 (described below), the annuity amount is the
account value, minus any contingent deferred sales load and applicable premium
tax charges. Any contingent deferred sales load will be waived if:
o the settlement option payments involve life contingencies and begin on or
after the first contract anniversary; or
o the annuity date is on or after the oldest annuitant's or joint annuitant's
95th birthday.
Guaranteed Minimum Income Benefit Rider (May not be available in all states.)
The GMIB Rider guarantees a minimum annuitization value after the rider has been
in effect for seven years. You may elect this rider, within 30 days after the
contract date, if the annuitant or joint annuitant is less than age 69.
Once elected, you may not terminate this Rider at any time before the annuity
date.
The GMIB Rider's guaranteed minimum annuitization value, before the rider
anniversary on which the annuitant or joint annuitant reaches age 95, is the
greater of:
a) the "GMIB account value," which is the variable accumulated account value
minus any amount in the money market sub-account; or
b) the "GMIB benefit base" described below.
After the rider anniversary following the annuitant's or joint annuitant's 95th
birthday (earlier if required by state law), the rider's guaranteed minimum
annuitization value will be the GMIB account value, described in a) above.
The GMIB Rider applies only to amounts in the variable sub-accounts, not
including the money market sub-account. Additionally, it does not apply to the
fixed account. Any amounts in the fixed account and the money market sub-account
can be withdrawn or applied to settlement options separate and apart from the
GMIB Rider settlement option.
GMIB Benefit Base. On the contract date, the GMIB benefit base is equal to the
initial purchase payment allocated among the variable sub-accounts, other than
the money market sub-account. The GMIB benefit base is not an account value or a
cash value and is used solely for the purpose of calculating the guaranteed
minimum annuitization value available under the GMIB Rider.
If you make additional purchase payments or transfers to the GMIB account value,
we will increase the GMIB benefit base by the dollar amount of the purchase
payment or transfer.
If you take a withdrawal or transfer from the GMIB account value, we will reduce
the GMIB benefit base for the withdrawal, as described below, on the date that
you make the withdrawal or transfer. Withdrawals or transfers from the GMIB
account value may reduce the GMIB benefit base on a basis greater than
dollar-for-dollar.
Withdrawal Adjustment. If you make a withdrawal, the amount of the GMIB benefit
base will be reduced. The amount of the reduction will depend on whether the
GMIB account value is more or less than the GMIB benefit base on the date of
withdrawal. If the GMIB account value is equal to or more than the GMIB benefit
base, the benefit base will be reduced by the dollar amount of the withdrawal.
If the GMIB account value is less than the GMIB benefit base, the benefit base
will be reduced proportionately to the reduction in the GMIB account value. For
example, if the withdrawal reduces the GMIB account value by 20%, then the
benefit base will also be reduced by 20%.
Interest Credited to GMIB Benefit Base. The benefit base after the contract date
will be credited with interest each day through the annuitant's 75th birthday.
We will not credit interest after the annuitant's 75th birthday.
The current effective annual interest rate for the GMIB is 6% per year. We may,
at our discretion, change the rate in the future, but the rate will never be
less than 3% per year, and once the rider is added to your contract, the annual
rate will not vary during the life of that rider.
Annuitization. You can only annuitize using the GMIB Rider within 30 days after
the seventh or later rider anniversary. We may, at our discretion, change the
waiting period before which the GMIB options can be exercised.
Note Carefully--If you annuitize at any time other than indicated above, you
cannot use the GMIB Rider. Also, for purposes of the GMIB Rider, systematic
withdrawals and APO distributions under the contract are considered withdrawals
and will reduce the amount of the GMIB.
The settlement option that you may purchase with the GMIB Rider is a life
annuity with a 10 year period certain. If the life expectancy of the older
annuitant is less than 10 years as specified by the life expectancy table used
by the IRS, then the settlement option will be a joint life and period certain
annuity in which the period certain is the life expectancy of the older
annuitant. 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.
The guaranteed minimum annuitization value 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. When you begin receiving settlement
payments under the GMIB, you may not make any additional purchase payments to,
or withdrawals from, the contract.
The GMIB Rider does not establish or guarantee account value or guarantee
performance of any investment option. Because the payment options under the
Rider utilize more conservative actuarial factors or tables, the annuity
payments under the GMIB Rider may be less , for each dollar applied, than the
payments that would be provided by applying the same amount to annuity payment
options under the base contract (outside of the GMIB Rider). Therefor, the GMIB
Rider should be considered a safety net. A possibly higher minimum annuitization
value using the GMIB Rider should be balanced against the lower payout levels,
per dollar applied, inherent in the annuity tables used for the GMIB Rider
payment options.
Settlement Option Payments
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.
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.
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 fixed account
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 change after the death of an annuitant under some options; the
amount of change is 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 5.35%. If the actual net
investment performance of the variable sub-accounts is less than 5.35%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-accounts is higher than 5.35%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 5.35% rate, then the dollar amount of the actual payments
will remain constant.
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 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 60, 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. Period Certain Only. 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 period certain
elected.
The period certain may be 60, 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.
6. 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;
c) no further withdrawals will be allowed for fixed payment options or for
variable payment options under which payments are being made based on life
contingencies; and
d) if you are receiving variable payouts under a Period Certain Only
settlement option, you can surrender your contract for the surrender value
which will be equal to the present value of the remaining future payments
under the settlement option. In making this calculation, we will assume
future payments are equal to the most recent payment and we will calculate
their present value using the same interest rate to calculate the payments.
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 later 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 retirement plan, arrangement or federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax considerations
for U.S. persons 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 our understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service, or 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. If a prospective owner is not a U.S. person,
see Contracts Purchased by Nonresident Aliens and Foreign Corporations below.
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 403(b) and 408. 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:
o the type of retirement plan or arrangement for which the contract is
purchased;
o the tax and employment status of the individual concerned; or
o our 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 situations, 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 regarding the federal income tax
status of the previous annuity contract. We 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 requires 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. We believe
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. For 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.
For withdrawals from qualified contracts, including withdrawals under the
systematic withdrawal option or the automatic payout option, a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the individual's total accrued benefit under the
retirement plan or arrangement. The investment in the contract generally equals
the amount of non-deductible purchase payments made by or on behalf of any
individual. For certain qualified contracts, the investment in the contract can
be zero. Special tax rules applicable to certain distributions from qualified
contracts are discussed below, under Qualified Contracts.
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 us 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 403(b) TSAs 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, for
certain direct rollovers to other plans or arrangements.
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.
If distributions are delivered to foreign countries, federal income tax will
generally be withheld at a 10% rate unless you certify to us 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.
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:
a) made on or after the date on which the owner attains age 59 1/2;
b) made as a result of death or disability of the owner; or
a) received in substantially equal periodic payments as a life annuity or a
joint and survivor annuity forc) 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:
a) if distributed in a lump sum, they are taxed in the same manner as a full
surrender as described above; or
b) 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 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 regular IRAs, the Code requires that distributions generally must begin no
later than April 1 of the calendar year following the year in which the owner
reaches age 70 1/2.
For TSAs, the Code requires that distributions generally must begin no later
than April 1 of the calendar year following the year in which the owner or plan
participant:
a) reaches age 70 1/2; or
retires and distribution is made in a specified manner.
Individual Retirement Annuities (IRA). The sale of a contract for use with any
IRA may be subject to special disclosure requirements of the IRS, which is
included in the prospectus as APPENDIX D - DISCLOSURE STATEMENT for Individual
Retirement Annuities. If you purchase a contract for use with an IRA you will be
provided with another copy of the Disclosure Statement for Individual Retirement
Annuities.
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 traditional 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, or
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 distributed. 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.
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 incomes of the
employees, 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: a) elective contributions made in years beginning
after December 31, 1988;
b) earnings on those contributions; and
c) 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.
Failure to repay a TSA loan will generally result in both ordinary income
taxation of the entire loan balance and the premature distribute penalty tax of
10% if the participant has not reached age 59 1/2.
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.
Contracts Purchased by
Nonresident Aliens and Foreign
Corporations
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity owners that are U.S. persons. Taxable distributions
made to owners who are not U.S. persons will generally be subject to U.S.
federal income tax withholding at a 30% rate, unless a lower treaty rate
applies. In addition, distributions may be subject to state and/or municipal
taxes and taxes that may be imposed by the owner's country of citizenship or
residence. Prospective foreign owners are advised to consult with a qualified
tax adviser regarding U.S., state, and foreign taxation for any annuity contract
purchase.
Taxation of Transamerica
We are 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, we believe 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, we do 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 our being taxed on income or gains
arising from the variable account, then we 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 for
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, we do 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. We therefore
reserve 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. This requirement 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, provided it 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 and the mandatory distribution rules above still
apply. 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, postponing application of such payout requirements.
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 our 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, we may advertise yields and average annual total returns for
the variable sub-accounts. In addition, we 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. These money market yields will not reflect deductions of
fees for optional riders, unless otherwise noted.
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. These money market yields will not
reflect deductions of fees for optional riders, unless otherwise noted.
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 began 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. These total returns
will not reflect deductions of fees for optional riders, unless otherwise noted.
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:
a) 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
b) 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 our advertisements and sales literature, we may discuss, and may illustrate
by graphs, charts, or through other means of written communication:
o the implications of longer life expectancy for retirement planning;
o the tax and other consequences of long-term investment in the contract;
o the effects of the contract's lifetime payout options; and
o the operation of certain special investment features of the contract --
such as the dollar cost averaging option.
We may explain and depict in charts, or other graphics, the effects of certain
investment strategies, such as allocating purchase payments between the fixed
account and a variable sub-account. We may also discuss the Social Security
system and its projected payout levels and retirement plans generally, using
graphs, charts and other illustrations.
We 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.
We may also advertise performance figures for the variable sub-accounts based on
the performance of a portfolio before the time the variable account began
operations.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable account or
the principal underwriter of the contracts. 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
STATEMENTS
The statutory-basis financial statements of Transamerica as of December 31, 1999
and 1998, and for each of the three years in the periods ended December 31,
1999, 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. Transamerica Separate Account VA-8
had not commenced operations as of December 31, 1999 and, therefore, no
financial statements are included for the separate account. 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
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this prospectus. The following is the Table
of Contents for that Statement:
TABLE OF CONTENTS Page
THE CONTRACT ........................................................ 3
NET INVESTMENT FACTOR ............................................... 3
VARIABLE PAYMENT OPTIONS............................................. 3
Variable Annuity Units and Payments.................................. 3
Variable Annuity Unit Value.......................................... 3
Transfers After the Annuity Date..................................... 4
GENERAL PROVISIONS................................................... 4
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........................................... 7
HISTORICAL PERFORMANCE DATA........................................... 8
General Limitations.............................................. 8
Historical Performance Data...................................... 8
DISTRIBUTION OF THE CONTRACT.......................................... 6
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS................................ 6
STATE REGULATION...................................................... 7
RECORDS AND REPORTS................................................... 7
FINANCIAL STATEMENTS.................................................. 7
APPENDIX.............................................................. 8
<PAGE>
Appendix A
THE FIXED ACCOUNT
(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 fixed
account, see the contract itself.
The account value allocated to the fixed account becomes part of our general
account, 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 we have been
advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this prospectus which relate to the fixed account.
The fixed account is part of our general account. The general account consists
of all our general assets, other than those in the variable account, or in any
other separate account. We have sole discretion to invest the assets of its
general account subject to applicable law.
The allocation or transfer of funds to the fixed account does not entitle the
owner to share in the investment performance of our general account.
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts allocated to the fixed account
under the contracts. However, we reserve the right to change the minimum rate
according to state insurance law. We may credit interest at a rate in excess of
3% per year.
There is no specific formula for the determination of excess interest credits.
Some of the factors that we may consider in determining whether to credit excess
interest to amounts allocated to the fixed account and the amount in that
account are:
o general economic trends;
o rates of return currently available;
o returns anticipated on the company's investments;
o regulatory and tax requirements; and
o competitive factors.
Any interest credited to amounts allocated to the fixed account in excess of 3%
per year will be determined at our sole discretion. The owner assumes the risk
that interest credited to the fixed account allocations may not exceed the
minimum guarantee of 3% for any given year.
Rates of interest credited to the fixed account will be guaranteed for at least
twelve months and will vary according to the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, we may change the annual rate of interest for that class.
This new annual rate of interest will remain in effect for at least twelve
months. New purchase payments made to the contract which are allocated to the
fixed account may receive different rates of interest.
These rates of interest may differ from those interest rates credited to amounts
transferred from the variable sub-accounts and from those credited to amounts
remaining in the fixed account and receiving renewal rates. These rates of
interest may also differ from rates for allocations applied under certain
options and services we may be offering.
Transfers
Each contract year, you may transfer a portion of the value of the fixed account
to variable sub-accounts. The maximum percentage that may be transferred will be
declared annually by us. This percentage will be determined by us at our sole
discretion, but will not be less than 10% of the value of the fixed account or
$250.
If we permit dollar cost averaging from the fixed account to the variable
sub-accounts, the above restrictions are not applicable.
Generally, transfers may not be made from any variable sub-account to the fixed
account for the six-month period following any transfer from the fixed account
to one or more of the variable sub-accounts. Additionally, transfers may not be
made from the fixed account to:
a) the Transamerica VIF Money Market Sub-Account; or
b) any variable sub-account identified by Transamerica and investing in a
portfolio of fixed income investments.
We reserve the right to modify the limitations on transfers to and from the
fixed account and to defer transfers from the fixed account for up to six months
from the date of request.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
Before the annuity date, you may elect to allocate entire purchase payments to
either the six or twelve month special Dollar Cost Averaging account of the
fixed account. The purchase payment will be credited with interest at a
guaranteed fixed rate. Amounts will then be transferred from the special Dollar
Cost Averaging account to the variable sub-accounts pro rata on a monthly basis
for six or twelve months (depending on the option you select) in the allocations
you specify.
Amounts from the sub-accounts and/or fixed account may not be transferred into
the special Dollar Cost Averaging accounts. In addition, if you request a
transfer (other than a Dollar Cost Averaging transfer) or a withdrawal from a
special Dollar Cost Averaging account, any amounts remaining in the special
account will be transferred to the variable sub-accounts according to your
allocation instructions. The special Dollar Cost Averaging option will end and
cannot be reelected.
<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 .004795% (the daily equivalent of the
current charge of 1.75% on an annual basis) gives a net investment factor of
1.00244.
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 15.53782 (15.5 x 1.00244).
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 13.53149, (13.5 x
1.002444 (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
<PAGE>
Definitions
Account Value: The sum of the variable accumulated value and the fixed account
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, contingent deferred
sales load, and applicable premium tax charges.
Code:The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contingent Deferred Sales Load: A charge equal to a percentage of purchase
payments withdrawn from the contract that are less than seven years old. See
Contingent Deferred Sales Load/Surrender Charge on page 32 for the specific
percentages.
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.
FixedAccount: An account which credits a rate of interest for a period of at
least twelve months for each allocation or transfer.
Fixed Account Accumulated Value: The total dollar value of all amounts the owner
allocates or transfers to any fixed account; 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.
General Account: The assets of Transamerica that are not allocated to a separate
account.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a fixed account option.
Investment Options: The fixed account and the variable sub-account to which you
may allocate all or portions of your purchase
payments.
Net Account Value: The account value, less any outstanding loans, plus interest
on such loans, and less any applicable contingent deferred sales load.
Plan: The employee pension benefit plan as defined under Section 3(2)(A) of the
Employee Retirement Income Security Act of 1974, or ERISA, as amended.
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 Annuity Service Center at 9735 Landmark Pkwy. Dr.,
St. Louis, Missouri 63127, telephone 800-317-2688.
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.
Surrender Charge: See Contingent Deferred Sales Load.
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-8, 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 D
<PAGE>
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, 2000. 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:
Transamerica Annuity Service Center, 9735 Landmark Pkwy. Dr., St. Louis, MO
63127. 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,
or 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, certain
hardship withdrawals and 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 2000;
is eligible to make a before tax salary reduction contribution to the SARSEP for
the current tax year of up to $10,500, adjusted for inflation after 2000,
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, or 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>
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Married Filing Jointly Unmarried
Taxable Threshold Taxable Threshold
Year Level Year Level
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>
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
10,000 Deduction = Limit
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 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:
1. distributions begin when required;
2. distributions are made at least once a year; and
3. 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:
1. your life or the joint lives of you and your beneficiary; or
2. 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:
1. December 31 of the year following the year you died; or
2. 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.
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.
Effective January 1, 2000, the 10% penalty tax will not apply if distributions
are made pursuant to an IRS levy to pay your outstanding tax liability.
(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 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:
1. December 31 of the year following the year you died; or
2. 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:
1. upon your death or disability; or
2. 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.
(b) Early Distributions. Since the purpose of a Roth IRA is to accumulate funds
for retirement, your receipt or use of any portion of your Roth IRA before you
attain age 59 1/2 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).
Effective January 1, 2000, the 10% penalty tax will not apply if distributions
are made pursuant to an IRS levy to pay your outstanding tax liability.
(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 Durham 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, 9735 Landmark Pkwy. Dr., St. Louis, Missouri 63127
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSMARK OPTIMUM CHOICE VARIABLE ANNUITY
Separate Account VA-8
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects discussed in the
August 1, 2000 prospectus for the TransMark Optimum Choice Variable Annuity
("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-8. You may obtain a free copy of
the prospectus by writing to: Transamerica Life Insurance and Annuity Company,
Annuity Service Center, 9735 Landmark Pkwy. Dr., St. Louis, MO 63127, or calling
800-371-2688. 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 August 1, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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
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...................................................................... 7
HISTORICAL PERFORMANCE DATA...................................................................... 8
General Limitations......................................................................... 8
Historical Performance Data................................................................. 8
DISTRIBUTION OF THE CONTRACT..................................................................... 6
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS........................................................... 6
STATE REGULATION................................................................................. 7
RECORDS AND REPORTS.............................................................................. 7
FINANCIAL STATEMENTS............................................................................. 7
APPENDIX......................................................................................... 8
</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 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 mortality and expense risk charge of 0.004384% (1.60% annually)
times the number of calendar days in the current valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.004795% (0.15%
annually) times the number of calendar days in the current valuation
period.
A valuation day is defined as any day that the New York Stock Exchange is open.
VARIABLE PAYMENT OPTIONS
The variable payment option provide for payments that fluctuate in dollar
amount, based on the investment performance of the elected 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 assumed
interest rates other 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 24
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
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 an owner and/or an 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.
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 before 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 except in
certain states where medical questions are required on the application for the
optional Guaranteed Minimum Income Benefit Rider.
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 an 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" on 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 your 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) 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. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 9% of purchase
payments) that may be applicable to a contract.
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. The yield calculations do not reflect the effect of
any contingent deferred sales load that may be applicable to a particular
contract. Contingent deferred sales loads range from 9% to 0% of the amount of
account value withdrawn depending on the elapsed time since the receipt of each
purchase payment.
Because of the charges and deductions imposed by the variable account, the yield
for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts normally will
fluctuate over time. Therefore, the disclosed yield for any given period is not
an indication or representation of future yields or rates of return. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
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. The standard
average annual total return calculations will reflect the effect of any
contingent deferred sales load that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
We may also disclose "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. Moreover, it
may be disclosed assuming that the contract is not surrendered (i.e., with no
deduction for the contingent deferred sales load) and assuming that the contract
is surrendered at the end of the applicable period (i.e., reflecting a deduction
for any applicable contingent deferred sales load).
Other Performance Data
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 assuming that the contingent deferred
sales load percentage will be 0%.
CTR = {ERV/P}- 1
Where:
CTR = the cumulative total return net of sub-account recurring charges for
the period.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of the one, five, or ten-year period at the end
of the one, five, or ten-year period (or fractional portion of
the period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed.
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 Performance Data
The charts below show historical performance data for the sub-accounts,
including adjusted historical performance for the periods prior to the August 1,
2000 inception of the sub-accounts, based on the performance of the
corresponding portfolios since their inception date, with a level of charges
equal to those currently assessed under the contract. These figures are not an
indication of the future performance of the sub-accounts. The date next to each
sub-account name indicates the date of commencement of operation of the
corresponding portfolio.
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") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present 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.
Historical Performance Data Charts
1. Average Annual Total Returns - Assuming surrender but no optional Rider
2. Average Annual Total Returns - Assuming surrender and the Guaranteed
Minimum Income Benefit Rider
3. Average Annual Total Returns - Assuming no surrender or optional Rider
4. Average Annual Total Returns - Assuming no surrender but reflecting the
Guaranteed Minimum Income Benefit Rider
5. Cumulative Total Returns - Assuming surrender but no optional Rider
6. Cumulative Total Returns - Assuming surrender and the Guaranteed Minimum
Income Benefit Rider
7. Cumulative Total Returns - Assuming no surrender or optional Rider
8. Cumulative Total Returns - Assuming no surrender but reflecting the
Guaranteed Minimum Income Benefit Rider
<PAGE>
<TABLE>
<CAPTION>
1. Average Annual Total Returns - Assuming surrender but no optional Rider, for
periods since inception of the portfolio, including adjusted historical
performance, for each sub-account are as follows. These figures include
mortality and expense charges of 1.60% per annum, administrative expense charge
of 0.15% per annum, an account fee of $25 per annum and the applicable
contingent deferred sales load (maximum of 9% of purchase payments) and do not
reflect any fee deduction for the optional Rider.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement 1-year 3-year 5-year period 10-year commencement of
of operation of period ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alger American Income & Growth (11/15/88) 31.80% 27.33% 25.18% 16.79% 15.58%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Growth & Income 1.26% 10.78% 16.30% NA 13.39%
- Class B (1/14/91)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Premier Growth 21.84% 28.20% 28.19% NA 24.05%
- Class B (6/26/92)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Appreciation 1.35% 13.52% 17.85% NA 17.68%
(4/5/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Small Cap 12.84% 2.34% 8.44% NA 33.21%
(8/31/90)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Balanced 16.38% 18.13% 17.04% NA 18.20%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Worldwide Growth 53.42% 27.67% 25.80% NA 27.19%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Emerging Growth 65.47% 32.69% NA NA 33.49%
(7/24/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Growth w/ Income -3.33% 9.86% NA NA 18.18%
(10/9/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Research 13.72% 13.15% NA NA 19.97%
(7/26/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Emerging Markets Equity (10/1/96) 84.11% 4.92% NA NA 8.46%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Fixed Income -11.51% NA NA NA 1.08%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF High Yield -2.93% NA NA NA 4.30%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF International 14.84% NA NA NA 9.55%
Magnum (1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -5.00% 2.01% 12.15% 14.51% 15.57%
Managed (8/1/88)(3)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -11.71% -6.09% 0.99% 9.11% 9.47%
Small Cap (8/1/88) (1)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
PIMCO VIT StocksPLUS Growth & Income 9.59% NA NA NA 19.31%
(1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Growth 27.22% 32.73% 33.57% 24.53% NA
(2/26/69) (2)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Money -5.36% NA NA NA -1.12%
Market (1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
2. Average Annual Total Returns - Assuming surrender and reflecting the optional
Guaranteed Minimum Income Benefit Rider, for periods since inception of the
portfolio, including adjusted historical performance, for each sub-account are
as follows. These figures include mortality and expense charges of 1.60% per
annum, administrative expense charge of 0.15% per annum, an account fee of $25
per annum, the applicable contingent deferred sales load (maximum 9% of purchase
payments) and the optional Guaranteed Minimum Income Benefit Rider fee of 0.35%
per annum.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement 1-year 3-year 5-year period 10-year commencement of
of operation of period ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alger American Income & Growth (11/15/88) 31.31% 32.71% 29.75% 16.38% 15.18%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Growth & Income 0.88% 15.80% 20.77% NA 12.99%
- Class B (1/14/91)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Premier Growth 21.39% 33.60% 32.78% NA 23.61%
- Class B (6/26/92)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Appreciation 0.96% 18.62% 22.34% NA 17.26%
(4/5/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Small Cap 12.41% 7.11% 12.78% NA 32.74%
(8/31/90)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Balanced 15.95% 23.33% 21.52% NA 17.78%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Worldwide Growth 52.85% 33.05% 30.37% NA 26.75%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Emerging Growth 64.86% 38.16% NA NA 33.01%
(7/24/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Growth w/ Income -3.70% 14.86% NA NA 17.75%
(10/9/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Research 13.29% 18.24% NA NA 19.54%
(7/26/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Emerging Markets Equity (10/1/96) 83.44% 9.77% NA NA 8.06%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Fixed Income -11.85% NA NA NA 0.70%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF High Yield -3.30% NA NA NA 3.91%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF International 14.41% NA NA NA 9.14%
Magnum (1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -5.36% 6.76% 16.56% 14.10% 15.17%
Managed (8/1/88)(3)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -12.05% -1.67% 5.15% 8.73% 9.08%
Small Cap (8/1/88) (1)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
PIMCO VIT StocksPLUS Growth & Income 9.18% NA NA NA 18.87%
(1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Growth 26.75% 38.19% 38.19% 24.09% NA
(2/26/69) (2)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Money -5.72% NA NA NA -1.50%
Market (1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
3. Average Annual Total Returns - Assuming no surrender or optional Rider,
non-standard average annual total returns for periods since inception of the
portfolio, including adjusted historical performance, for each sub-account are
as follows. These figures include mortality and expense charges of 1.60% per
annum, administrative expense charge of 0.15% per annum and an account fee of
$25 per annum, but do not reflect any applicable contingent deferred sales load
(maximum of 9% of purchase payments) and do not reflect any fee deduction for
the optional Rider.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement 1-year 3-year 5-year period 10-year commencement of
of operation of period ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alger American Income & Growth (11/15/88) 39.90% 34.53% 30.58% 16.79% 15.58%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Growth & Income 9.36% 17.98% 21.70% NA 13.39%
- Class B (1/14/91)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Premier Growth 29.94% 35.40% 33.59% NA 24.05%
- Class B (6/26/92)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Appreciation 9.45% 20.72% 23.25% NA 17.89%
(4/5/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Small Cap 20.94% 9.54% 13.84% NA 33.21%
(8/31/90)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Balanced 24.48% 25.33% 22.44% NA 18.43%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Worldwide Growth 61.52% 34.87% 31.20% NA 27.35%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Emerging Growth 73.57% 39.89% NA NA 33.93%
(7/24/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Growth w/ Income 4.77% 17.06% NA NA 18.91%
(10/9/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Research 21.82% 20.35% NA NA 20.62%
(7/26/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Emerging Markets Equity (10/1/96) 92.21% 12.12% NA NA 10.27%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Fixed Income -3.41% NA NA NA 3.38%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF High Yield 5.17% NA NA NA 6.47%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF International 22.94% NA NA NA 11.51%
Magnum (1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust 3.10% 9.21% 17.55% 14.51% 15.57%
Managed (8/1/88)(3)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -3.61% 1.11% 6.39% 9.11% 9.47%
Small Cap (8/1/88) (1)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
PIMCO VIT StocksPLUS Growth & Income 17.69% NA NA NA 22.67%
(1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Growth 35.32% 39.93% 38.97% 24.53% NA
(2/26/69) (2)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Money 2.74% NA NA NA 2.90%
Market (1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
4. Average Annual Total Returns - Assuming no surrender but reflecting the
optional Guaranteed Minimum Income Benefit Rider, non-standard average annual
total returns for periods since inception of the portfolio, including adjusted
historical performance, for each sub-account are as follows. These figures
include mortality and expense charges of 1.60% per annum, administrative expense
charge of 0.15% per annum and, an account fee of $25 per annum, but do not
reflect any applicable contingent deferred sales load (maximum 9% of purchase
payments). They do reflect deduction of the fee for the optional Guaranteed
Minimum Income Benefit Rider fee of 0.35% per annum.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement 1-year 3-year 5-year period 10-year commencement of
of operation of period ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
-------------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth (11/15/88) 39.41% 34.06% 30.12% 16.38% 15.18%
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Growth & Income 8.98% 17.57% 21.28% NA 12.99%
- Class B (1/14/91)
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 29.49% 34.93% 33.12% NA 23.61%
- Class B (6/26/92)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 9.06% 20.30% 22.82% NA 17.48%
(4/5/93)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 20.51% 9.16% 13.44% NA 32.74%
(8/31/90)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 24.05% 24.89% 22.01% NA 18.02%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 60.95% 34.40% 30.74% NA 26.91%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 72.96% 39.40% NA NA 33.47%
(7/24/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 4.40% 16.65% NA NA 18.50%
(10/9/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.39% 19.93% NA NA 20.20%
(7/26/95)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity (10/1/96) 91.54% 11.72% NA NA 9.89%
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income -3.75% NA NA NA 3.02%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF High Yield 4.80% NA NA NA 6.09%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF International 22.51% NA NA NA 11.12%
Magnum (1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 2.74% 8.82% 17.14% 14.10% 15.17%
Managed (8/1/88)(3)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -3.95% 0.75% 6.02% 8.73% 9.08%
Small Cap (8/1/88) (1)
-------------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth & Income 17.28% NA NA NA 22.24%
(1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 34.85% 39.44% 38.48% 24.09% NA
(2/26/69) (2)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money 2.38% NA NA NA 2.54%
Market (1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
5. Cumulative Total Returns - for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expenses charges of 1.60% per annum,
administrative expenses charge of 0.15% per annum, an account fee of $25 per
annum and the applicable contingent deferred sales load (maximum of 9% of
purchase payments) and do not reflect any fee deduction for the optional Rider.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement 1-year 3-year For the 10-year commencement of
of operation of period ending period 5-year period period portfolio operations
corresponding portfolio) 12/31/99 ending ending ending to 12/31/99
12/31/99 12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
-------------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth (11/15/88) 31.80% 136.25% 274.28% 372.02% 401.40%
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Growth & Income 1.26% 57.01% 161.59% NA 208.57%
- Class B (1/14/91)
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 21.84% 141.05% 320.08% NA 405.60%
- Class B (6/26/92)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 1.35% 68.73% 179.03% NA 199.79%
(4/5/93)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 12.84% 24.25% 85.81% NA 1356.86%
(8/31/90)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 16.38% 89.64% 169.79% NA 186.94%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 53.42% 138.11% 283.40% NA 355.59%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 65.47% 166.57% NA NA 259.14%
(7/24/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income -3.33% 53.21% NA NA 100.98%
(10/9/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 13.72% 67.12% NA NA 122.60%
(7/26/95)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity (10/1/96) 84.11% 33.73% NA NA 30.23%
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income -11.51% NA NA NA 2.38%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF High Yield -2.93% NA NA NA 12.56%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF International 14.84% NA NA NA 30.53%
Magnum (1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -5.00% 23.04% 119.05% 287.49% 422.61%
Managed (8/1/88)(3)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -11.71% -3.85% 30.93% 139.15% 181.06%
Small Cap (8/1/88) (1)
-------------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth & Income 9.59% NA NA NA 42.29%
(1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 27.22% 166.77% 412.89% 796.83% N/A
(2/26/69) (2)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money -5.36% NA NA NA -2.23%
Market (1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
6. Cumulative Total Returns - Assuming surrender and the optional Guaranteed
Minimum Income Benefit Rider, for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expense charges of 1.60% per annum,
administrative expense charge of 0.15% per annum, an account fee of $25 per
annum, the applicable contingent deferred sales load (maximum 9% of purchase
payments) and the optional Guaranteed Minimum Income Benefit Rider fee of 0.35%
per annum.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the 1- For the For the For the For the period from
(date of commencement year period 3-year 5-year period 10-year commencement of
of operation of ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
-------------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth (11/15/88) 31.31% 133.71% 267.67% 355.74% 382.20%
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Growth & Income 0.88% 55.29% 156.94% NA 199.02%
- Class B (1/14/91)
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 21.39% 138.45% 312.68% NA 392.46%
- Class B (6/26/92)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 0.96% 66.89% 174.08% NA 192.77%
(4/5/93)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 12.41% 22.88% 82.48% NA 1309.92%
(8/31/90)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 15.95% 87.58% 165.00% NA 180.58%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 52.85% 135.55% 276.64% NA 345.56%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 64.86% 163.71% NA NA 253.48%
(7/24/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income -3.70% 51.53% NA NA 97.91%
(10/9/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 13.29% 65.29% NA NA 119.05%
(7/26/95)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity (10/1/96) 83.44% 32.26% NA NA 28.68%
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income -11.85% NA NA NA 1.22%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF High Yield -3.30% NA NA NA 11.30%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF International 14.41% NA NA NA 29.08%
Magnum (1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -5.36% 21.68% 115.15% 274.13% 402.09%
Managed (8/1/88)(3)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -12.05% -4.93% 28.56% 130.90% 170.02%
Small Cap (8/1/88) (1)
-------------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth & Income 9.18% NA NA NA 41.23%
(1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 26.75% 163.90% 403.88% 765.92% NA
(2/26/69) (2)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money -5.72% NA NA NA -2.97%
Market (1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
7. Cumulative Total Returns - Assuming no surrender or optional Rider,
non-standard cumulative total returns for periods since inception of the
portfolio, including adjusted historical performance, for each sub-account are
as follow. These figures include mortality and expense charges of 1.60% per
annum, administrative expense charge of 0.15% per annum and an account fee of
$25 per annum but do not reflect any applicable contingent deferred sales load
(maximum of 9% of purchase payments) and do not reflect any fee deduction for
the optional Rider.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the 1- For the For the For the For the period from
(date of commencement year period 3-year 5-year period 10-year commencement of
of operation of ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
-------------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth (11/15/88) 39.90% 143.45% 279.68% 372.02% 401.40%
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Growth & Income 9.36% 64.21% 166.99% NA 208.57%
- Class B (1/14/91)
-------------------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth 29.94% 148.25% 325.48% NA 405.60%
- Class B (6/26/92)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 9.45% 75.93% 184.43% NA 203.39%
(4/5/93)
-------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 20.94% 31.45% 91.21% NA 1356.86%
(8/31/90)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 24.48% 96.84% 175.19% NA 190.54%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 61.52% 145.31% 288.80% NA 359.19%
- Service Shares (9/13/93)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 73.57% 173.77% NA NA 266.34%
(7/24/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 4.77% 60.41% NA NA 108.18%
(10/9/95)
-------------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.82% 74.32% NA NA 129.80%
(7/26/95)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity (10/1/96) 92.21% 40.93% NA NA 37.43%
-------------------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income -3.41% NA NA NA 10.48%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF High Yield 5.17% NA NA NA 20.66%
(1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
MS UIF International 22.94% NA NA NA 38.63%
Magnum (1/2/97)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 3.10% 30.24% 124.45% 287.49% 422.61%
Managed (8/1/88)(3)
-------------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -3.61% 3.35% 36.33% 139.15% 181.06%
Small Cap (8/1/88) (1)
-------------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth & Income 17.69% NA NA NA 50.39%
(1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 35.32% 173.97% 418.29% 796.83% NA
(2/26/69) (2)
-------------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money 2.74% NA NA NA 5.87%
Market (1/2/98)
-------------------------------------------------------------------------------------------------------------------------------
8. Cumulative Total Returns - Assuming no surrender but reflecting the optional
Guaranteed Minimum Income Benefit Rider, non-standard cumulative total returns
for periods since inception of the portfolio, including adjusted historical
performance, for each sub-account are as follow. These figures include mortality
and expense charges of 1.60% per annum, administrative expense charge of 0.15%
per annum and an account fee of $25 per annum, but do not reflect any applicable
contingent deferred sales load (maximum 9% of purchase payments). They do
reflect deductions of the fee for the optional Guaranteed Minimum Income Benefit
Rider fee of 0.35% per annum.
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement 1-year 3-year 5-year period 10-year commencement of
of operation of period ending period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alger American Income & Growth (11/15/88) 39.41% 140.91% 273.07% 355.74% 382.20%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Growth & Income 8.98% 62.49% 162.34% NA 199.02%
- Class B (1/14/91)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Alliance VP Premier Growth 29.49% 145.65% 318.08% NA 392.46%
- Class B (6/26/92)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Appreciation 9.06% 74.09% 179.48% NA 196.37%
(4/5/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Dreyfus VIF Small Cap 20.51% 30.08% 87.88% NA 1309.92%
(8/31/90)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Balanced 24.05% 94.78% 170.40% NA 184.18%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Janus Aspen Series Worldwide Growth 60.95% 142.75% 282.04% NA 349.16%
- Service Shares (9/13/93)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Emerging Growth 72.96% 170.91% NA NA 260.68%
(7/24/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Growth w/ Income 4.40% 58.73% NA NA 105.11%
(10/9/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MFS VIT Research 21.39% 72.49% NA NA 126.25%
(7/26/95)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Emerging Markets Equity (10/1/96) 91.54% 39.46% NA NA 35.88%
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF Fixed Income -3.75% NA NA NA 9.32%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF High Yield 4.80% NA NA NA 19.40%
(1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
MS UIF International 22.51% NA NA NA 37.18%
Magnum (1/2/97)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust 2.74% 28.88% 120.55% 274.13% 402.09%
Managed (8/1/88)(3)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
OCC Accumulation Trust -3.95% 2.27% 33.96% 130.90% 170.02%
Small Cap (8/1/88) (1)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
PIMCO VIT StocksPLUS Growth & Income 17.28% NA NA NA 49.33%
(1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Growth 34.85% 171.10% 409.28% 765.92% NA
(2/26/69) (2)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
Transamerica VIF Money 2.38% NA NA NA 5.13%
Market (1/2/98)
-------------------------------------------- -------------- -------------- --------------- ------------- ----------------------
</TABLE>
<PAGE>
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
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation, a subsidiary of AEGON N.V. 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.
Separate Account VA-8 did not begin operations until August 1, 2000. Therefore,
no commissions were paid during fiscal year 1999 to TSSC as underwriter of
Separate Account VA-8. Under the sales agreements, TSSC will pay broker-dealers
compensation based on a percentage of each purchase payment. This percentage may
be up to 9% 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.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The assets of
the variable account are kept separate and apart from Transamerica general
account assets. Records are maintained of all purchases and redemptions of
portfolio shares held by each of the sub-accounts.
STATE REGULATION
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 Office. 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
The variable account had not begun operations as of December 31, 1999.
Therefore, no financial statements of the variable account are included in this
Statement of Additional Information.
The financial statements for Transamerica included in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our 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>
<TABLE>
<CAPTION>
Transamerica Life Insurance and Annuity Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
CONTENTS
<S> <C>
Report of Independent Auditors..........................................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis........................................................................3
Statements of Operations - Statutory Basis..............................................................5
Statements of Changes in Capital and Surplus - Statutory Basis..........................................6
Statements of Cash Flow - Statutory Basis...............................................................7
Notes to Financial Statements - Statutory Basis.........................................................9
Statutory Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis.....................................................................................33
Supplementary Insurance Information - Statutory Basis..................................................34
Reinsurance - Statutory Basis..........................................................................36
</TABLE>
<PAGE>
2
Report of Independent Auditors
The Board of Directors
Transamerica Life Insurance and Annuity Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Life Insurance and Annuity Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. Our audits also included the accompanying statutory-basis financial
schedules required by Article 7 of Regulation S-X. These financial statements
and schedules 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 auditing standards generally accepted
in the United States. 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.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the North Carolina Department of Insurance, which practices differ
from accounting principles generally accepted in the United States. The
variances between such practices and accounting principles generally accepted in
the United States also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of Transamerica Life Insurance and Annuity Company at
December 31, 1999 and 1998, or the results of its operations or its cash flows
for each of the three years in the period ended December 31, 1999.
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica Life
Insurance and Annuity Company at December 31, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices prescribed or
permitted by the North Carolina Department of Insurance. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic statutory-basis financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
March 31, 2000
<PAGE>
3
<TABLE>
<CAPTION>
Transamerica Life Insurance and Annuity Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
DECEMBER 31
1999 1998
--------------------------------------
ADMITTED ASSETS Cash and invested assets:
<S> <C> <C>
Bonds $ 12,569,942 $ 12,316,491
Preferred stocks-unaffiliated 153,263 118,440
Common stocks-unaffiliated 198,562 108,401
Common stock-subsidiaries 120,319 112,957
Mortgage loans on real estate 406,037 364,453
Policy loans 9,508 10,036
Cash and short-term investments 367,023 414,787
Other investments 221,601 136,610
--------------------------------------
Total cash and invested assets 14,046,255 13,582,175
Accrued investment income 202,664 172,788
Deferred and uncollected premiums 1,909 4,919
Commissions and expense allowances due 2,205 8,236
Other admitted assets 14,014 21,936
Separate account assets 6,118,265 4,575,184
--------------------------------------
Total admitted assets $ 20,385,312 $ 18,365,238
======================================
<PAGE>
8
DECEMBER 31
1999 1998
--------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserves for future policy benefits $ 9,221,606 $ 8,084,356
Premiums and other deposit funds 1,211,802 2,013,253
Funding agreements 2,670,635 2,355,990
Other 1,824 2,278
Accounts payable and other liabilities 139,395 285,876
Asset valuation reserve 214,753 177,794
Interest maintenance reserve 28,192 39,678
Separate account liabilities 6,099,996 4,575,184
--------------------------------------
Total liabilities 19,588,203 17,534,409
Capital and surplus:
Common Stock ($100 par value):
Authorized shares - 50,000
Issued and outstanding shares - 25,000 in 1999
and 15,300 in 1998 2,500 1,530
Contributed surplus 228,816 228,816
Unassigned surplus 565,793 600,483
--------------------------------------
Total capital and surplus 797,109 830,829
--------------------------------------
Total liabilities and capital and surplus $ 20,385,312 $ 18,365,238
======================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Transamerica Life Insurance and Annuity Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Revenues:
<S> <C> <C> <C>
Premiums and annuity considerations $ 169,711 $ 338,850 $ 430,860
Fund deposits 5,793,132 4,053,557 2,122,178
Net investment income 1,032,629 1,064,299 1,048,328
Amortization of interest maintenance reserve (359) 1,178 (92)
Other 112,386 40,530 14,995
------------------------------------------------------
7,107,499 5,498,414 3,616,269
Benefits and expenses:
Benefits paid or provided for:
Annuity benefits 406,862 390,039 378,915
Surrender benefits and other withdrawals 5,326,123 3,908,081 2,541,297
Interest on policy or contract funds 158,829 129,676 158,089
Increase in reserves 1,137,250 68,165 88,915
Decrease in liability for premium and other deposit funds
(801,451) (441,595) (12,782)
Other 9,940 12,468 5,065
------------------------------------------------------
6,237,553 4,066,834 3,159,499
Expenses:
Commissions and expense allowances 156,845 68,615 43,736
Other operating expenses 110,399 94,956 85,177
Net transfers to separate accounts 502,778 1,103,788 173,890
------------------------------------------------------
770,022 1,267,359 302,803
------------------------------------------------------
7,007,575 5,334,193 3,462,302
------------------------------------------------------
Gain from operations before dividends to policyholders,
federal income tax expense and
net realized capital gains (losses) 99,924 164,221 153,967
Dividends to policyholders 257 215 121
------------------------------------------------------
Gain from operations before federal income tax
expense and net realized capital gains (losses) 99,667 164,006 153,846
Federal income tax expense 38,559 61,553 50,161
------------------------------------------------------
Gain from operations before net realized capital gains
(losses) 61,108 102,453 103,685
Net realized capital gains (losses) (8,012) 106,488 31,659
------------------------------------------------------
Net income $ 53,096 $ 208,941 $ 135,344
======================================================
See accompanying notes.
<PAGE>
Transamerica Life Insurance and Annuity Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Capital and surplus at beginning of year $ 830,829 $ 675,268 $ 568,693
Net income 53,096 208,941 135,344
Increase (decrease) in net unrealized capital gains 6,779 44,869 (2,199)
Increase in liability for reinsurance in
unauthorized companies (1,826) (443) (32)
(Increase) decrease in non-admitted assets (8,169) (13,488) 1,779
Increase in asset valuation reserve (36,959) (22,992) (7,992)
Dividends paid to parent (50,000) (50,000) (40,000)
Increase in contributed surplus 970 - 20,029
Other 2,389 (11,326) (354)
------------------------------------------------------
Capital and surplus at end of year $ 797,109 $ 830,829 $ 675,268
======================================================
See accompanying notes.
<PAGE>
Transamerica Life Insurance and Annuity Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
OPERATING ACTIVITIES
Premiums and annuity considerations $ 172,721 $ 336,451 $ 428,243
Fund deposits 5,793,132 4,054,271 2,116,788
Other income received 131,708 30,701 4,876
Investment income received 965,065 1,062,909 993,082
Life claims paid (14,530) (5,038) (1,384)
Surrender benefits and other fund withdrawals paid (5,324,839) (3,936,376) (2,532,263)
Other benefits paid to policyholders (570,325) (525,826) (539,918)
Commissions, other expenses and taxes paid (274,156) (153,238) (128,774)
Dividends paid to policyholders (257) (215) (121)
Federal income taxes paid (63,826) (126,165) (29,145)
Net transfer to separate accounts (513,986) (1,108,006) (173,890)
Other expenses paid (3,425) (11,288) (2,058)
------------------------------------------------------
Net cash provided by (used in) operating activities 297,282 (381,820) 135,436
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds 3,757,923 4,130,583 4,455,430
Stocks 89,662 415,807 140,896
Mortgage loans 68,866 68,866 53,186
Other invested assets - 3,193 7,101
Miscellaneous proceeds 5,463 234 9,691
------------------------------------------------------
Total investment proceeds 3,921,914 4,618,683 4,666,304
Taxes paid on capital gains - - 12,861
------------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 3,921,914 4,618,683 4,653,443
Cost of investments acquired:
Bonds (4,001,611) (3,049,192) (4,966,625)
Stocks (197,512) (349,174) (137,079)
Mortgage loans (63,520) (55,835) (23,785)
Other invested assets (1,272) (9,601) (1,173)
Miscellaneous applications (29,374) (83,519) (711)
------------------------------------------------------
Total cost of investments acquired (4,293,289) (3,547,321) (5,129,373)
Net decrease in policy loans 528 981 2,553
------------------------------------------------------
Net cash (used in) provided by investing activities (370,847) 1,072,343 (473,377)
<PAGE>
Transamerica Life Insurance and Annuity Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
FINANCING ACTIVITIES Other cash provided:
Capital surplus paid-in $ 970 $ - $ 20,029
Other sources 303,795 174,802 450,051
------------------------------------------------------
Total other cash provided 304,765 174,802 470,080
------------------------------------------------------
Other cash applied:
Dividends paid to shareholders (50,000) (50,000) (40,000)
Other applications, net (228,964) (491,410) (24,323)
------------------------------------------------------
Total other cash applied (278,964) (541,410) (64,323)
------------------------------------------------------
Net cash provided by (used in) financing activities 25,801 (366,608) 405,757
Net increase (decrease) in cash and short-term investments
(47,764) 323,915 67,816
Cash and short-term investments at
beginning of year 414,787 90,872 23,056
------------------------------------------------------
Cash and short-term investments at end of year $ 367,023 $ 414,787 $ 90,872
======================================================
See accompanying notes.
</TABLE>
<PAGE>
Transamerica Life Insurance and Annuity Company
Notes to Financial Statements - Statutory Basis
December 31, 1999
32
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transamerica Life Insurance and Annuity Company (the Company) is domiciled in
North Carolina. The Company is a wholly owned subsidiary of Transamerica
Occidental Life Insurance Company (TOLIC), which is an indirect wholly owned
subsidiary of Transamerica Corporation. The Company is the parent of
Transamerica Assurance Company (TAC), a Missouri domiciled life insurance
company, and Gemini Investments, Inc., an investment company acquired in 1998.
During 1999, Transamerica Corporation was merged with an indirect wholly owned
subsidiary of AEGON N.V., a holding company organized under the laws of the
Netherlands.
NATURE OF BUSINESS
The Company engages in providing life insurance, pension and annuity products,
structured settlements and investment products which are distributed through a
network of independent and company-affiliated agents and independent brokers.
The Company's customers are primarily in the United States and are relatively
evenly distributed in 49 states.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies 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 accompanying financial statements have been prepared in conformity with
statutory accounting practices (SAP) prescribed or permitted by the North
Carolina Department of Insurance (the North Carolina Department), which vary in
some respects from accounting principles generally accepted in the United States
(GAAP). The more significant variances from GAAP are as follows:
The accounts and operations of the Company's subsidiaries are not
consolidated but are included in investments in common stocks at the
statutory net carrying value. Changes in the subsidiaries' net carrying
values are charged or credited directly to unassigned surplus.
<PAGE>
Transamerica Life Insurance and Annuity Company
Notes to Financial Statements - Statutory Basis (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Bonds, where permitted, are carried at amortized cost, rather than
segregating the portfolio into held-to-maturity (reported at amortized
cost), available-for-sale (reported at fair value) and trading (reported
at fair value) classifications.
The costs of acquiring new and renewal business, such as commissions and
underwriting and policy issue costs, are expensed when incurred rather
than deferred and amortized over the terms of the related policies.
Certain assets recognized under GAAP, principally agents' debit balances
and furniture and equipment, are "non-admitted" and excluded from the
accompanying financial statements under SAP and are charged directly to
unassigned surplus.
Reserves for future policy benefits generally are calculated based on
mortality and interest assumptions that are statutorily required rather
than using estimated expected experience or actual account balances. The
policy liabilities are reported net, rather than gross, of ceded amounts.
Revenues for investment-type contracts consist of the entire premium
received and benefits represent the benefits paid and the change in
policy reserves. Under GAAP, premiums received in excess of policy
charges are not recognized as revenue and benefits represent the excess
of benefits paid over the policy account value and interest credited to
the account value.
An Interest Maintenance Reserve (IMR) is provided which defers certain
realized capital gains and losses attributable to changes in the general
level of interest rates. Such deferred gains or losses are amortized into
investment income over the remaining period to maturity based on
groupings of individual securities sold in five-year bands.
An Asset Valuation Reserve (AVR) is provided which reclassifies a portion
of surplus to liabilities. The AVR is calculated according to a specified
formula as prescribed by the National Association of Insurance
Commissioners (NAIC) and is intended to stabilize the Company's surplus
against possible fluctuations in the market values of bonds, equity
securities, mortgage loans, real estate, and other invested assets.
Changes in the required AVR balance are charged or credited directly to
unassigned surplus.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Deferred federal income taxes are not provided for differences between
the financial statement amounts and tax bases of assets and liabilities.
Policyholders dividends are recognized when declared rather than over the
term of the related policies.
A liability for reinsurance balances has been provided for unsecured
policy reserves ceded to reinsurers unauthorized by license to assume
such business. Changes to those amounts are credited or charged directly
to unassigned surplus. Under GAAP, an allowance or amounts deemed
uncollectible would be established through a charge to earnings.
Other significant accounting policies are as follows:
INVESTMENTS
Investments are shown on the following bases:
Bonds - where permitted, at amortized cost; all others are carried at
values prescribed by the Securities Valuation Office of the NAIC (SVO);
premiums and discounts are amortized using the interest method. For
loan-backed bonds, the interest method including anticipated prepayments
at the date of purchase is used. Prepayment assumptions for loan-backed
bonds are estimated using broker dealer survey values. The retrospective
adjustment method is used to value all securities except for interest
only securities which are valued using the prospective method.
Preferred stocks - where permitted, at cost; all others are carried at
fair value based on NAIC values.
Common stocks - at fair value based on NAIC market values, except for the
investment in subsidiaries which are at statutory net carrying value. The
related unrealized capital gains or losses are reported in unassigned
surplus without any adjustments for federal income taxes.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Mortgage loans on real estate - at the aggregate unpaid balances.
Policy loans - at the aggregate unpaid principal balances.
Other investments - consists of partnerships, receivable for securities
sold and derivatives and are reported primarily at the lower of cost or
fair value. Derivative instruments are valued in accordance with the NAIC
Accounting Practices and Procedures manual and Purposes and Procedures
manual of the SVO. All derivative instruments are used for hedging
purposes and valued on a basis consistent with the hedged item.
The Company uses interest rate swaps, caps and floors, options and certain other
derivatives as part of its overall interest rate risk management strategy for
certain life insurance and annuity products. As the Company only uses
derivatives for hedging purposes, the Company values all derivative instruments
on a consistent basis as the hedged item. Upon termination, gains and losses on
those instruments are included in the carrying values of the underlying hedged
items and are amortized over the remaining lives of the hedged items as
adjustments to investment income or benefits from the hedged items. Any
unamortized gains or losses are recognized when the underlying hedged items are
sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
Interest rate caps and floors are used to limit the effects of changing interest
rates on yields of variable rate or short-term assets or liabilities. The
initial cost of any such agreement is amortized to net investment income over
the life of the agreement. Periodic payments that are receivable as a result of
the agreements are accrued as an adjustment of interest income or benefits from
the hedged item.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Gains and losses on disposal of investments are recognized on the
specific-identification basis. Changes in the statutory fair values of stocks
and those bonds carried at NAIC statement values, rather than amortized cost,
are reported as unrealized gains or losses directly in unassigned surplus and,
accordingly, have no effect on net income.
Short-term investments include investments with maturities of less than one year
at date of acquisition. The Company had a net cash overdraft balance of $0 and
$110 at December 31, 1999 and 1998, respectively.
SEPARATE ACCOUNTS
The Company administers segregated asset accounts for pension and other clients.
The assets of the separate accounts are not subject to liabilities arising out
of any other business the Company may conduct and are reported at fair value.
Substantially all investment risks associated with fair value changes are borne
by the clients. The liabilities of these separate accounts represent reserves
established to meet withdrawal and future benefit payment provisions of the
contracts.
POLICY RESERVES
Life and annuity benefit reserves are calculated based upon published tables
using such interest rate assumptions and valuation methods that will provide, in
the aggregate, reserves that meet the amounts required by the North Carolina
Department. The Company waives deductions of deferred fractional premiums upon
death of the insureds and, for more recent issues, returns any portion of the
final premium beyond the date of death.
PREMIUM REVENUES
Premiums from life insurance policies are recognized as revenue when due and
premiums from annuity contracts are recognized when received. Accident and
health premiums are earned pro rata over the terms of the policies.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
Reinsurance 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.
Premiums ceded and recoverable losses have been reported as a reduction of
premium income and benefits, respectively.
RECLASSIFICATIONS
Certain reclassifications of 1997 and 1998 amounts have been made to conform
with the 1999 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values for bonds are based on market values prescribed by the SVO rather
than on actual or estimated market values. For bonds without available market
values, amortized costs are used as estimated fair values. As of December 31,
1999 and 1998, the fair value of investments in bonds includes $6,447 million
and $6,566 million, respectively, of bonds that were valued at amortized cost.
Fair values for preferred and common stocks are based on market values
prescribed by the SVO, except for the investment in subsidiaries which are at
statutory net carrying value.
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.
Fair values for derivative instruments are estimated using values obtained from
independent pricing services.
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts of cash and short-term investments and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts, included in
reserves for future policy benefits and premium and other deposit funds, 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.
<TABLE>
<CAPTION>
The carrying values and fair values of financial instruments are as follows (in
thousands):
DECEMBER 31
1999 1998
--------------------------------- --------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------------------------------- --------------------------------
Financial assets:
<S> <C> <C> <C> <C>
Bonds $ 12,569,942 $ 12,503,313 $ 12,316,491 $ 12,802,540
Preferred stocks 153,263 160,651 118,440 115,201
Common stocks 318,881 318,881 221,358 221,358
Mortgage loans on real estate 406,037 390,020 364,453 395,310
Policy loans 9,508 9,508 10,036 10,036
Floors and caps 18,456 17,118 21,598 57,954
Short-term investments 367,023 367,023 414,787 414,787
Cash on hand and on deposit - - - -
Accrued investment income 202,664 202,664 172,788 172,788
Financial liabilities (liabilities for investment-type contracts):
Single and flexible premium
deferred annuities 5,107,350 4,852,274 3,819,956 3,657,037
Single premium immediate annuities 582,921 553,705 307,956 325,366
Guaranteed investment contracts 2,003,251 2,036,664 2,013,253 2,034,864
Funding agreements 2,670,635 2,642,116 2,355,990 2,347,701
Other deposit contracts 1,954,414 1,921,062 1,677,464 1,683,371
Off-balance sheet assets (liabilities): Swap designated as hedges that are in a:
Receivable position - 126,973 - 16,420
Payable position - (59,773) - (2,933)
</TABLE>
<PAGE>
2. FAIR VALUES OF 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.
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. Interest rate swap agreements are intended
primarily for asset and liability management. 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.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is funded. As of December 31, 1999, there were no unfunded interest
rate swap agreements.
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. These agreements enable the
Company to transfer, modify, or reduce its interest rate risk and generally
require up front premium payments. The costs of interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. The 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.
<PAGE>
<TABLE>
<CAPTION>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The information on derivative instruments is summarized as follows (in
thousands):
AGGREGATE WEIGHTED
NOTIONAL AVERAGE FAIR
AMOUNT FIXED RATE VALUE
-------------------------------------------------------
DECEMBER 31, 1999
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
<S> <C> <C> <C>
Fixed rate interest $ 2,063,339 6.02% $ 79,362
Floating rate interest 240,569 6.09 (271)
Floating rate interest based on one
index and receives floating rate
interest based on another index 40,000 5.88 571
Interest rate swap agreements designated
as hedges of financial liabilities, where
the Company pays:
Fixed rate interest 78,600 6.18 818
Floating rate interest 1,152,078 6.40 (8,750)
Floating rate interest based on one
index and receives floating rate
interest based on another index 155,000 6.16 (1,047)
Interest rate floor agreements 160,500 - 9,462
Swaptions 1,770,000 6.15 9,270
Other 4,866 - 3,386
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
AGGREGATE WEIGHTED
NOTIONAL AVERAGE
AMOUNT FIXED RATE FAIR VALUE
-------------------------------------------------------
DECEMBER 31, 1998
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
Fixed rate interest $ 320,535 5.56% $ (83,692)
Floating rate interest 451,729 4.09 23,002
Interest rate swap agreements designated as hedges of financial liabilities,
where the Company pays:
Fixed rate interest 28,600 5.55 177
Floating rate interest 1,738,800 5.41 13,310
Interest rate floor agreements 160,500 - 16,675
Swaptions 1,770,000 5.35 38,728
Other 4,866 - 2,552
</TABLE>
Generally, notional amounts indicate the volume of transactions and fair values
indicate the amounts subject to credit risk.
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of temporary cash investments, fixed maturities,
mortgage loans on real estate and reinsurance recoverables. The Company places
its temporary cash investments with high credit quality financial institutions.
Concentration of credit risk with respect to investments in fixed maturities and
mortgage loans on real estate is 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, 1999, the Company had no significant concentration of
credit risk.
<PAGE>
3. INVESTMENTS
<TABLE>
<CAPTION>
The carrying value and estimated fair value of investments in debt securities
are summarized as follows (in thousands):
GROSS GROSS
CARRYING UNREALIZED UNREALIZED ESTIMATED
VALUE GAINS LOSSES FAIR VALUE
------------------------------------------------------------------
DECEMBER 31, 1999
U.S. Treasury securities and obligations
of U.S. government corporations and
<S> <C> <C> <C> <C>
agencies $ 216,181 $ 13,246 $ 1,538 $ 227,889
Obligations of states and
political subdivisions 72,500 13 644 71,869
Foreign governments 22,067 1,252 - 23,319
Corporate securities 8,932,101 138,190 203,667 8,866,624
Public utilities 1,472,771 17,160 28,776 1,461,155
Mortgage and other asset-
backed securities 1,854,322 234 2,099 1,852,457
------------------------------------------------------------------
$ 12,569,942 $ 170,095 $ 236,724 $ 12,503,313
==================================================================
DECEMBER 31, 1998
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 143,002 $ 53,537 $ 28 $ 196,511
Obligations of states and
political subdivisions 84,827 5,223 - 90,050
Foreign governments 22,060 4,963 - 27,023
Corporate securities 8,720,653 360,172 32,266 9,048,559
Public utilities 1,544,895 95,323 875 1,639,343
Mortgage and other asset-
backed securities 1,801,054 - - 1,801,054
------------------------------------------------------------------
$ 12,316,491 $ 519,218 $ 33,169 $ 12,802,540
==================================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
The carrying value and estimated fair value of bonds at December 31, 1999, by
contractual maturity, are as follows (in thousands):
CARRYING ESTIMATED
VALUE FAIR VALUE
------------------------------------
Maturity:
<S> <C> <C>
Due in one year or less $ 362,958 $ 360,091
Due after one year through five years 2,149,228 2,173,346
Due after five years through ten years 3,238,327 3,190,037
Due after ten years 4,965,107 4,927,382
Mortgage and other asset-backed securities 1,854,322 1,852,457
------------------------------------
$ 12,569,942 $ 12,503,313
====================================
</TABLE>
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
The costs and fair values of preferred stocks and common stocks (unaffiliated
companies) are as follows (in thousands):
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
<S> <C> <C> <C> <C>
Preferred stocks $ 153,263 $ 17,154 $ 9,766 $ 160,651
Common stocks 111,756 94,441 7,635 198,562
DECEMBER 31, 1998
Preferred stocks $ 118,440 $ 1,191 $ 4,430 $ 115,201
Common stocks 43,468 66,240 1,307 108,401
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
The maximum and minimum lending rates for mortgage loans during 1999 were 8.95%
and 6.60%, respectively. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of any purchase money or insured or
guaranteed mortgages, was 80%. Fire insurance is carried in every case at least
equal to the excess of the loan over the maximum loan which would be permitted
by law on the land without the buildings.
<TABLE>
<CAPTION>
Net investment income by major category of investments is summarized as follows
(in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Bonds $ 988,055 $ 1,026,381 $ 1,016,359
Stocks 12,291 6,055 7,468
Mortgage loans on real estate 30,246 32,769 33,681
Policy loans 300 336 432
Other 11,444 11,677 2,720
------------------------------------------------------
1,042,336 1,077,218 1,060,660
Investment expense (9,707) (12,919) (12,332)
------------------------------------------------------
$ 1,032,629 $ 1,064,299 $ 1,048,328
======================================================
The realized capital gains and losses are reported net of federal income taxes
and amounts transferred to IMR are as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Net gains (losses) on disposition of investments in:
Bonds $ (19,775) $ 10,901 $ (22,928)
Stocks (4,485) 166,345 47,181
Other (6,289) (3,073) 1,525
------------------------------------------------------
(30,549) 174,173 25,778
Related income (taxes) recovery 10,692 (60,960) (9,022)
Transfer from (to) the IMR 11,845 (6,725) 14,903
------------------------------------------------------
Net investment gains (losses) $ (8,012) $ 106,488 $ 31,659
======================================================
<PAGE>
3. INVESTMENTS (CONTINUED)
Proceeds, gross gains and gross losses from the disposition of investment in
bonds and other information related to investments are summarized as follows (in
thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Proceeds from disposition of investment in
bonds $ 3,757,923 $ 4,130,583 $ 4,455,430
Gross gains on disposition of investment in
bonds 29,345 30,206 19,221
Gross losses on disposition of investment in
bonds 49,120 19,305 42,149
Change in net unrealized gains (losses):
Bonds (10,822) (513) -
Preferred stocks (253) (1,448) 5,514
Common stocks 29,235 35,348 (8,213)
Other (11,381) 11,482 500
-----------------------------------------------------
$ 6,779 $ 44,869 $ (2,199)
=====================================================
</TABLE>
Common stocks-subsidiaries are carried at the statutory capital and surplus of
the subsidiaries of $120 million (cost of $143 million) in 1999, and $112
million (cost of $143 million) in 1998. No dividends were received from the
subsidiaries in 1999, 1998 or 1997.
In 1998, the Company increased its investment in subsidiaries by purchasing
Gemini Investments, Inc. (Gemini) with a cost-basis of $63.6 million. Gemini's
only activity is to hold certain investment securities.
4. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies, including affiliated companies. Risks are reinsured with other
companies to permit the recovery of a portion of the direct losses. These
reinsured risks are treated as though, to the extent of the reinsurance, they
are risks for which the Company is not liable.
<PAGE>
4. REINSURANCE (CONTINUED)
Policy liabilities and accruals are reported in the accompanying financial
statements net of reinsurance ceded. The Company remains liable to the extent
the reinsuring companies do not meet their obligations under these reinsurance
treaties.
<TABLE>
<CAPTION>
The following summarizes the effect of certain reinsurance transactions (in
thousands):
ASSUMED
CEDED TO FROM
--------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES AMOUNT
-----------------------------------------------------------------------------
Year ended
December 31, 1999:
<S> <C> <C> <C> <C> <C>
Premium revenue $ 181,992 $ 586 $ 79,073 $ 67,378 $ 169,711
=============================================================================
At December 31, 1999:
Life insurance in force $ 82,964 $ 34,165 $ - $ - $ 48,799
=============================================================================
Reserves for future policy
benefits $ 5,218,969 $ 4,520 $ 13,768 $ 4,020,925 $ 9,221,606
Policy and contract claims
payable 18,201 - 17,385 - 816
-----------------------------------------------------------------------------
$ 5,237,170 $ 4,520 $ 31,153 $ 4,020,925 $ 9,222,422
=============================================================================
Year ended
December 31, 1998:
Premium revenue $ 226,930 $ 678 $ 64,264 $ 176,862 $ 338,850
=============================================================================
At December 31, 1998:
Life insurance in force $ 94,458 $ 38,491 $ - $ 13 $ 55,980
=============================================================================
Reserves for future policy
benefits $ 3,111,826 $ 4,700 $ 16,487 $ 4,993,717 $ 8,084,356
Policy and contract claims
payable 21,673 - 19,265 - 2,408
-----------------------------------------------------------------------------
$ 3,133,499 $ 4,700 $ 35,752 $ 4,993,717 $ 8,086,764
=============================================================================
Year ended
December 31, 1997:
Premium revenue $ 266,148 $ 783 $ 17,214 $ 182,709 $ 430,860
=============================================================================
At December 31, 1997:
Life insurance in force $ 103,418 $ 44,818 $ - $ 70 $ 58,670
=============================================================================
Reserves for future policy
benefits $ 2,584,863 $ 5,133 $ 5,075 $ 5,441,536 $ 8,016,191
Policy and contract claims
payable 4,350 - 4,248 767 869
-----------------------------------------------------------------------------
$ 2,589,213 $ 5,133 $ 9,323 $ 5,442,303 $ 8,017,060
=============================================================================
<PAGE>
4. REINSURANCE (CONTINUED)
ASSUMED
CEDED TO FROM
DIRECT OTHER AFFILIATED NET
AMOUNT COMPANIES COMPANIES AMOUNT
-----------------------------------------------------------------------
Year ended
December 31, 1999:
Benefits paid or provided $ 224,707 $ 85,631 $ 277,726 $ 416,802
=======================================================================
Year ended
December 31, 1998:
Benefits paid or provided $ 167,435 $ 42,773 $ 277,845 $ 402,507
=======================================================================
Year ended
December 31, 1997:
Benefits paid or provided $ 113,417 $ 7,114 $ 277,677 $ 383,980
=======================================================================
</TABLE>
5. INCOME TAXES
The Company's taxable income or loss is included in the consolidated return of
Transamerica Corporation for the period ended July 21, 1999. The method of
allocation between the companies for the period ended July 21, 1999, is subject
to written agreement approved by the Board of Directors. Tax payments are made
to, or refunds received from, Transamerica Corporation in amounts which would
result from filing separate tax returns with federal taxing authorities, except
that tax benefits attributable to operating losses and other carryovers are
recognized currently since utilization of these benefits is assured by
Transamerica Corporation. The provision does not purport to represent a
proportionate share of the consolidated tax.
For the period beginning July 22, 1999, the Company will join in a consolidated
tax return with certain life affiliates: TOLIC, TAC and Transamerica Life
Insurance Company of New York. The method of allocation between the companies
for the period beginning July 22, 1999, will be subject to written agreement to
be approved by the Board of Directors. It is anticipated that this agreement
will require that tax payments are made to, or refunds are received from, TOLIC,
in amounts which would result from filing separate tax returns with federal
taxing authorities.
<PAGE>
5. INCOME TAXES (CONTINUED)
Amounts due to TOLIC for federal income taxes were $8.5 million and $36.1
million at December 31, 1999 and 1998, respectively, and are included in
accounts payable and other liabilities in the accompanying balance sheets.
<TABLE>
<CAPTION>
Following is a reconciliation of federal income taxes computed at the statutory
rate with the income tax provision, excluding income tax expenses or benefits
related to net realized gains or losses on investment transactions (in
thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 34,883 $ 57,402 $ 53,846
Amortization of IMR 126 (412) 32
Income not subject to tax (1,535) (1,094) (1,382)
Other 5,085 5,657 (2,335)
------------------------------------------------------
Provision for income taxes $ 38,559 $ 61,553 $ 50,161
======================================================
</TABLE>
The Company records a deferred tax asset for the tax effect of the temporary
difference that arises between statutory basis and tax basis deferred
acquisition costs and policy reserves. The resulting deferred tax asset was
non-admitted at December 31, 1999 and 1998. This practice differs from
prescribed SAP and has been permitted by the North Carolina Department and has
no effect on capital and surplus.
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 Life Insurance Tax Act of 1984. That amount would become subject to tax
when it exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1999, was $20.3 million.
No income taxes have been provided on the policyholders' surplus account since
the conditions that would cause such taxes are remote. Should the entire amount
in the policyholders' surplus account become taxable, the tax thereon computed
at current rates would amount to approximately $7.1 million.
<PAGE>
6. ANNUITY RESERVES AND DEPOSIT LIABILITIES
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------------------- -------------------------------
AMOUNT PERCENT AMOUNT PERCENT
------------------------------- -------------------------------
Subject to discretionary withdrawal - with adjustments:
<S> <C> <C> <C> <C>
With market value adjustment $ 8,232,898 50% $ 7,585,914 52%
At book value less surrender charge
2,191,632 14 1,260,466 9
------------------------------- -------------------------------
10,424,530 64 8,846,380 61
Subject to discretionary withdrawal -
without adjustment 2,737,028 17 2,522,495 17
Not subject to discretionary withdrawal
provision 3,122,738 19 3,124,785 22
------------------- -------------------
------------- -------------
Total annuity reserves and deposit
liabilities 16,284,296 100% 14,493,660 100%
============= =============
Less reinsurance - -
------------------- -------------------
Net annuity reserves and deposit liabilities
$ 16,284,296* ==================
$ 14,493,660*
===================================================================================================================
</TABLE>
* Includes $5,876 million and $4,407 million of annuities reserves and
deposit liabilities reported in the separate account liability at December
31, 1999 and 1998, respectively.
<PAGE>
7. CAPITAL AND SURPLUS
The Company is subject to the requirements of the NAIC approved Risk Based
Capital (RBC) rules and at December 31, 1999, the Company met the RBC
requirement.
The amount of dividends which can be paid by the Company without prior approval
of the North Carolina Department is subject to restrictions related to statutory
surplus and gains from operations. The Company could pay $99.9 million in
dividends in 2000 without prior approval.
8. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees are covered by the noncontributory defined benefit
plans sponsored by the Company and Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates in which the Company participates.
Pension benefits are based on the employee's compensation during the highest
paid 60 consecutive months during the 120 months before retirement. The general
policy is to fund current service costs currently and prior service costs over
periods ranging from 10 to 30 years. Assets of those plans are invested
principally in publicly traded stocks and bonds. Pension costs incurred in 1999,
1998 and 1997 were not material.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits. The Company accounts for the costs of such benefit programs under the
accrual method and amortizes its transition obligation for retirees and fully
eligible or vested employees over 20 years. Postretirement benefit costs charged
to income in 1999, 1998 and 1997 were not material.
9. ASSETS ON DEPOSIT
At December 31, 1999 and 1998, $6.9 million and $7.0 million were on deposit
with public officials, in compliance with regulatory requirements.
<PAGE>
10. RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and its
affiliated companies in the normal course of operations. These transactions
include the assumption and cession of reinsurance and the performance of certain
administrative and support services by an affiliated company.
Transactions with Transamerica Corporation and its affiliates also include
transactions related to pension plans, a fixed maturity investment in a special
purpose subsidiary of Transamerica Corporation ($233.3 in 1999 and $233.3
million in 1998), investments in a money market fund managed by an affiliated
company, and rental of computer services. Pension funds administered for these
companies amounted to $1.8 billion, $1.6 billion and $1.3 billion at December
31, 1999, 1998 and 1997, respectively.
11. LEASES
Rental expense for equipment and properties occupied by the Company, not
including occupancy of the Company's buildings, was $6.8 million in 1999, $4.9
million in 1998 and $2.7 million in 1997. Future minimum rental commitments are
not significant.
12. LITIGATION
The Company is a defendant in various legal actions arising from its operations.
These include legal actions against one of its subsidiaries 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, one of the subsidiaries 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 financial position of the
Company or the results of its operations.
<PAGE>
13. SEPARATE ACCOUNTS
Separate accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist primarily of fixed maturities
and equity securities and are carried at estimated fair value. The Company
provides a minimum guaranteed return to policyholders of certain separate
accounts. Certain other separate accounts do not have any minimum guarantees and
substantially all the investment risks associated with market value changes are
borne entirely by the policyholder.
<TABLE>
<CAPTION>
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999, is as follows (in thousands):
NON-
GUARANTEED
SEPARATE
INDEXED ACCOUNTS TOTAL
------------------------------------------------------
<S> <C> <C> <C>
Premiums, deposits and other considerations $ 636,218 $ 2,118,548 $ 2,754,766
======================================================
Reserves for separate accounts with assets at:
Fair value $ 1,208,498 $ 4,682,448 $ 5,890,946
Amortized cost - - -
Other 20,518 188,532 209,050
------------------------------------------------------
Total $ 1,229,016 $ 4,870,980 $ 6,099,996
======================================================
Reserves for separate accounts by withdrawal characteristics:
Subject to discretionary withdrawal (with
adjustment): $ - $ - $ -
With market value adjustment
At book value without market value
adjustment and with current surrender
charge of 5% or more - - -
At market value 1,208,498 4,682,448 5,890,946
At book value without adjustment and with
current surrender charges less than 5%
- - -
------------------------------------------------------
Subtotal 1,208,498 4,682,448 5,890,946
Not subject to discretionary withdrawal - - -
Other 20,518 188,532 209,050
======================================================
Total separate account liabilities $ 1,229,016 $ 4,870,980 $ 6,099,996
======================================================
<PAGE>
13. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from the separate accounts is
presented below (in thousands):
1999 1998 1997
---------------------------------------------------
Transfers as reported in the summary of operations of the separate accounts
statement:
Transfers to separate accounts $ 2,764,696 $ 2,484,100 $ 720,601
Transfers from separate accounts 2,256,282 1,360,271 549,414
---------------------------------------------------
Net transfers to separate accounts 508,414 1,123,829 171,187
Reconciling adjustments:
Deposit/withdrawals directly to separate accounts
(5,636) (20,041) 2,703
---------------------------------------------------
Transfers as reported in the statements
of income $ 502,778 $ 1,103,788 $ 173,890
===================================================
</TABLE>
<TABLE>
<CAPTION>
14. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS
The Company has the following direct premiums written through managing general
agents (in thousands):
DIRECTED
EXCLUSIVE TYPES OF AUTHORITY WRITTEN
CONTRACT BUSINESS WRITTEN GRANTED PREMIUMS
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National Benefit Resources No Specific and aggregate excess
of loss insurance * $ 17,164
R.E. Moulton Insurance Agency, No Specific and aggregate excess
Inc. of loss insurance * 46,631
Intermediary Insurance Services, No Specific and aggregate excess
Inc. of loss insurance * 38,822
<PAGE>
14. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS (CONTINUED)
DIRECTED
EXCLUSIVE TYPES OF AUTHORITY WRITTEN
CONTRACT BUSINESS WRITTEN GRANTED PREMIUMS
--------------------------------------------------------------------------
Excess Reinsurance Underwriters No Specific and aggregate excess
Agency, Inc. of loss insurance * $ 1,753
Risk Assessment Strategies No Specific and aggregate excess
of loss insurance * 1,673
International Assurance of No Specific and aggregate excess
Tennessee of loss insurance * 6,981
</TABLE>
*Premium collection, underwriting and commission/claim payments authority
granted.
15. NAIC CODIFICATION
In 1998, the NAIC adopted codified statutory accounting practices (Codification)
effective January 1, 2001. Codification will likely change, to some extent,
prescribed statutory accounting practices and may result in changes to the
accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the state of North Carolina must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Department. The state
of North Carolina has stated affirmatively that it will adopt Codification
effective January 1, 2001. Management believes that the impact of Codification
will not be material to the Company's statutory-basis financial statements.
16. REGULATORY EXAMINATION
In 1996, the North Carolina Department performed an examination of the Company
for the four-year period ending December 31, 1995. The results of the
examination were finalized on February 1, 1999, with no material adjustments.
<PAGE>
17. YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
<PAGE>
Statutory Basis
Financial Statement Schedules
<PAGE>
33
Transamerica Life Insurance and Annuity Company
Summary of Investments -
Other Than Investments in Related Parties - Statutory Basis
(Dollars in thousands)
December 31, 1999
<TABLE>
<CAPTION>
SCHEDULE I
AMOUNT AT WHICH
SHOWN IN THE
MARKET BALANCE SHEET
TYPE OF INVESTMENT COST(1) VALUE
--------------------------------------------------------------------------------------------------------------------
FIXED MATURITIES
Bonds:
United States government and government agencies and
<S> <C> <C> <C>
authorities $ 216,181 $ 227,889 $ 216,181
States, municipalities and political subdivisions 72,500 71,869 72,500
Foreign governments 22,067 23,319 22,067
Public utilities 1,472,771 1,461,155 1,472,771
All other corporate bonds 8,932,101 8,866,624 8,932,101
Mortgage and other asset-backed securities 1,854,322 1,852,457 1,854,322
Redeemable preferred stock 150,164 155,235 148,463
--------------------------------------------------------
Total fixed maturities 12,720,106 12,658,548 12,718,405
EQUITY SECURITIES
Common stocks:
Subsidiaries 143,468 120,319 120,319
Banks, trust and insurance 35,585 36,438 36,438
Industrial, miscellaneous and all other 76,171 162,124 162,124
Nonredeemable preferred stock 4,800 5,416 4,800
--------------------------------------------------------
Total equity securities 260,024 324,297 323,681
Mortgage loans on real estate 406,037 390,020 406,037
Policy loans 9,508 9,508 9,508
Other long-term investments 221,601 221,601 221,601
Cash and short-term investments 367,023 367,023 367,023
--------------------------------------------------------
Total investments $ 13,984,299 $ 13,970,997 $ 14,046,255
========================================================
</TABLE>
(1)Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjustment for amortization of premiums or
accrual of discounts.
<PAGE>
34
Transamerica Life Insurance and Annuity Company
<TABLE>
<CAPTION>
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
SCHEDULE III
FUTURE POLICY POLICY AND
BENEFITS AND CONTRACT PREMIUM REVENUE
EXPENSES LIABILITIES
-----------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
<S> <C> <C> <C>
Individual life $ 12,276 $ (1,316) $ 1,540
Group life and health 2,244 2,132 14,440
Annuity 9,207,086 - 153,731
------------------------------------------------------
9,221,606 816 169,711
Year ended December 31, 1998
Individual life 11,998 (1,176) 1,880
Group life and health 2,828 3,583 11,506
Annuity 8,069,530 - 325,464
------------------------------------------------------
8,084,356 2,407 338,850
Year ended December 31, 1997
Individual life 14,924 14 1,018
Group life and health 1,283 855 3,557
Annuity 7,999,984 - 426,285
------------------------------------------------------
------------------------------------------------------
$ 8,016,191 $ 869 $ 430,860
======================================================
</TABLE>
<PAGE>
35
<TABLE>
<CAPTION>
Transamerica Life Insurance and Annuity Company
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
SCHEDULE III
BENEFITS, CLAIMS
NET INVESTMENT LOSSES AND OTHER OPERATION
INCOME* SETTLEMENT EXPENSES EXPENSES* PREMIUMS WRITTEN
---------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
<S> <C> <C> <C> <C>
Individual life $ 1,122 $ 1,568 $ 358 $ 2,126
Group life and health 235 12,453 30,320 93,513
Annuity 1,031,272 6,223,532 739,344 86,353
-------------------------------------------------------------------------
1,032,629 6,237,553 770,022 181,992
Year ended December 31, 1998
Individual life 1,294 1,883 764 2,558
Group life and health 204 9,286 23,862 75,770
Annuity 1,062,801 4,055,665 1,242,733 148,602
-------------------------------------------------------------------------
1,064,299 4,066,834 1,267,359 226,930
Year ended December 31, 1997
Individual life 322 1,601 490 1,801
Group life and health 279 2,548 6,078 20,771
Annuity 1,047,727 3,155,350 296,235 243,576
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 1,048,328 $ 3,159,499 $ 302,803 $ 266,148
=========================================================================
</TABLE>
* Allocations of net investment income and other operating expenses are based
on a number of assumptions and estimates, and the results would change if
different methods were applied.
<PAGE>
<TABLE>
<CAPTION>
Transamerica Life Insurance and Annuity Company
Reinsurance - Statutory Basis
(Dollars in thousands)
SCHEDULE IV
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER COMPANIES NET ASSUMED
AMOUNT COMPANIES AMOUNT TO NET
----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
<S> <C> <C> <C> <C>
Life insurance in force $ 82,964 $ 34,165 $ - $ 48,799 -
=========================================================================================
Premiums:
Individual life $ 2,126 $ 586 $ - $ 1,540 -
Individual health - - - - -
Group life and health 93,513 79,073 - 14,440 -
Annuity 86,353 - 67,378 153,731 44%
-----------------------------------------------------------------------------------------
$ 181,992 $ 79,659 $ 67,378 $ 169,711 40%
=========================================================================================
Year ended December 31, 1998
Life insurance in force $ 94,458 $ 38,491 $ 13 $ 55,980 0%
=========================================================================================
Premiums:
Individual life $ 2,558 $ 678 $ - $ 1,880 -
Individual health - - - - -
Group life and health 75,770 64,264 - 11,506 -
Annuity 148,602 - 176,862 325,464 54%
-----------------------------------------------------------------------------------------
$ 226,930 $ 64,942 $ 176,862 $ 338,850 52%
=========================================================================================
Year ended December 31, 1997
Life insurance in force $ 103,418 $ 44,818 $ 70 $ 58,670 0%
=========================================================================================
Premiums:
Individual life $ 1,801 $ 783 $ - $ 1,018 -
Individual health - - - - -
Group life and health 20,771 17,214 - 3,557 -
Annuity 243,576 - 182,709 426,285 43%
-----------------------------------------------------------------------------------------
$ 266,148 $ 17,997 $ 182,709 $ 430,860 42%
=========================================================================================
</TABLE>
<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-8 (the "Separate Account"). 1/
(2) Not Applicable.
(3) Form of Distribution 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.
(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
(i) re PIMCO Variable Insurance Trust 1
(9) Opinion and Consent of Counsel. 1/
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors.
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations. 3/
(14) Not Applicable.
(15) Powers of Attorney. 1/ 2/
----------------------------
1/ Incorporated by reference to the like-numbered exhibit of the Initial
Filing to the Form N-4 Registration Statement, File No. 333-32664
(March 16, 2000).
2/ Filed herewith.
3/ To be filed by subsequent Amendment.
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(s).
List of Directors of Transamerica Life Insurance and Annuity Company
Patrick S. Baird*
Brenda K. Clancy*
James W. Dederer
George A. Foegele**
Douglas C. Kolsrud*
Richard N. Latzer
Karen O. MacDonald
Larry N. Norman*
Gary U. Rolle'
Paul E. Rutledge III***
Craig D. Vermie*
*4333 Edgewood Road, NE, Cedar Rapids, Iowa 52499
**300 Consilium Place, Scarborough, Ontario M1H362 Canada
***401 N. Tryon Street, Charlotte, North Carolina 28202-2108
<PAGE>
<TABLE>
<CAPTION>
List of Officers for Transamerica Life Insurance and Annuity Company
<S> <C>
Larry N. Norman President
Paul E. Rutledge III President - Reinsurance Division
William R. Gernert Executive Vice President, Diversified Financial Products Division
John R. Kenney Executive Vice President, Agency Group
James W. Dederer CLU General Counsel and Secretary
Nicki Bair FSA Senior Vice President
Brenda Clancy Senior Vice President, Corporate
Roy Chong-Kit Senior Vice President and Chief Actuary
Douglas C. Kolsrud Senior Vice President, Investment Division
Karen MacDonald Senior Vice President
Thomas O'Neill Senior Vice President
Ron F. Wagley, CLU Senior Vice President
William R. Wellnitz FSA Senior Vice President and Actuary
Colin Funai Investment Officer
Heidi Y. Hu Investment Officer
Matthew W. Kuhns Investment Officer
Richard N. Latzer Investment Officer
Matthew A. Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Gary U. Rolle' CFA Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
Lawrence M. Agin FSA Vice President & Associate Actuary
Lynn Allen Vice President, Diversified Financial Products Division
Clifford Angstman Vice President and Chief Actuary
Michael G. Ayers Vice President, Diversified Financial Products Division
John Bailey Vice President, Investment Division
Michael Barnhart Regional Vice President
James A. Beardsworth Vice President-Accounting, Corporate
Cal Birkey Vice President, Financial Markets Division
David L. Blankenship Vice President, Investment Division
Nancy Blozis Vice President and Controller
Jim Bowman Vice President
Rose Ann Bremser Vice President
Sandy Brown Vice President
Kirk Buese Vice President, Investment Division
Frank A. Camp Vice President & Division General Counsel, Financial Markets Division
Dave Carney Vice President, Investment Division
Steven C. Chamberlin Vice President
Cindy L. Chanley Vice President, Financial Markets Division
Wonjoon Cho Vice President
Matt Coben Vice President
Ken Cochrane Vice President
Catherine Collinson Vice President
Bill Cook Vice President, Investment Division
Jane A. Coyne Vice President, Financial Markets Division
Glen Cunningham Vice President
Maureen DeWald Vice President & Assistant Secretary, Investment Division
John Dohmen Vice President
J. Peter Donlon Vice President
Mark E. Dunn Vice President, Investment Division
Steven Fenic Vice President
Karen Fleming Vice President
Roger Freeman Vice President, Financial Markets Division
Jerry Gable Vice President
Diana Geraci Vice President
Eric B. Goodman Vice President, Investment Division
Richard R. Greer Vice President, Financial Markets Division
David R. Halfpap Vice President, Investment Division
Robert L. Hansen Vice President, Investment Division
Meheriar Hasan Vice President
Donna Heitzman Vice President, Investment Division
Paul Henry Vice President
Jo Ann B. Hepperman Vice President and Division General Counsel, Marketing Partnerships
Marsha Hicks Vice President & Assistant Secretary, Investment Division
Aruna Hobbs Vice President, Diversified Financial Products Division
David Hopewell Vice President, Investment Division
Frederick B. Howard Vice President, Investment Division
Suzette Hoyt Vice President and Assistant Secretary
Marvin A. Johnson Vice President
Carolyn M. Johnson Vice President, Marketing Partnerships
Ahmad Kamil Vice President & Associate Actuary
Michael Kappos Vice President
Patrick Kelleher Vice President and Reinsurance Financial Officer
Jon D. Kettering Vice President, Investment Administration, Investment Division
Ken Kilbane Vice President
Larry M. Kirkland Vice President & Managing Actuary, Equity Group
Bill Kling Vice President, Financial Markets Division
Michael Lane Vice President, Financial Markets Division
Lisa Layman Vice President, Diversified Financial Products Division
Carl Macero Vice President and Chief Reinsurance Underwriter
Susan Mack Vice President and Associate General Counsel
James MacKinnon Vice President, Investment Division
Philip McHale Vice President and Chief Underwriter
Diane Meiners Vice President-Accounting, Corporate
Gregory E. Miller-Breetz Vice President and Assistant Secretary, Diversified Financial Products
Division
Kate Modzelewski Vice President-Tax, Corporate
Daniel C. Mohwinkel Vice President, Financial Markets Division
Steven J. Myers Vice President
Maureen E. Nielsen Vice President, Financial Markets Division
Thomas L. Nordstrom Vice President, Investment Division
Paul L. Norris FSA Vice President & Actuary
Ralph M. O'Brien Vice President, Investment Division
Mary T. Pech Vice President, Investment Division
Thomas E. Pierpan Vice President, Equity Group
Bruce J. Purvis Vice President and Chief Medical Director
Donald P. Radisich Vice President
Brian Rolland Vice President, Investment Division
Jeffrey L. Rosen Vice President, Diversified Financial Products Division
Douglas A. Sarcia Vice President, Special Markets Group
Lorne W. Schinbein Vice President & Managing Actuary, Equity Group
Lindsay Schmuacher Vice President, Investment Division
Gary H. Scott Vice President, Financial Markets Division
Clifford Sheets Vice President, Investment Division
Michael Simpson Vice President, Investment Division
Jon L. Skaggs Vice President, Investment Division
R. Michael Slaven Vice President & Assistant Secretary, Diversified Financial
Products Division
Robert A. Smedley Vice President, Investment Division
Brian Smith Vice President, Special Markets Group
Michael S. Smith Vice President, Investment Division
Anne M. Spaes Vice President, Financial Markets Division
Bradley L. Stofferahn Vice President, Investment Division
Karen Stout Vice President
James O. Strand Vice President
Alice Su Vice President
Mary Taiber Vice President
Bill Tate Vice President
Gregory Theobald Vice President & Assistant Secretary, Investment Division
Colleen Tobiason Vice President, Financial Markets Division
Barry Tobin Vice President
Emily Urbano Vice President
Colleen Vandermark Vice President
Craig D. Vermie Vice President & Counsel, Corporate
William A. Waldie Vice President, Financial Markets Division
Richard L. Weinstein FSA Vice President & Associate Actuary
James Wilson Vice President
Ronald Wolfe Regional Vice President
Bob Woodcock Vice President and Assistant Secretary
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Ronald L. Ziegler Vice President & Actuary, Financial Markets Division
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
Toni Forge Second Vice President
Selma Fox Second Vice President
Thomas Freitas Second Vice President
Linda Goodwin M.D. Second Vice President and Reinsurance Medical Director
Andrew G. Kanelos Second Vice President
Liwen Lien Second Vice President
Danny Mahoney Second Vice President
Clay Moye Second Vice President
Daniel A. Norwick Second Vice President
John O'Bryan Second Vice President, Corporate Tax
Beverly Rockecharlie Second Vice President
Stacy Schultz Second Vice President
Frank Snyder Second Vice President
Donna J. Spalding Second Vice President, Financial Markets Division
Boning Tong Second Vice President and Associate Actuary
Tonya J. Vessels Second Vice President
Susan Vivino Second Vice President and Assistant Secretary
Joan Ward Second Vice President
Kimberly A. Bivins Assistant Vice President, Diversified Financial Products Division
Erik Furnish Assistant Vice President, Diversified Financial Products Division
Jacqueline D. Griffin Assistant Vice President, Diversified Financial Products Division
Thomas J. Hartlage Assistant Vice President, Diversified Financial Products Division
Priscilla I. Hechler Assistant Vice President & Assistant Secretary, Equity Group
JoAnn Herndon Assistant Vice President, Financial Markets Division
Michael G. Herp Assistant Vice President, Diversified Financial Products Division
Richard C. Hicks Assistant Vice President & Assistant Secretary, Equity Group
Melanie Mabe Assistant Vice President, Diversified Financial Products Division
William R. Maurer Assistant Vice President, Financial Markets Division
Kevin Maynard Assistant Vice President, Diversified Financial Products Division
Lisa L. Patterson Assistant Vice President, Diversified Financial Products Division
Robert E. Payne Assistant Vice President, Financial Markets Division
Rhonda L. Pritchett Assistant Vice President, Diversified Financial Products Division
Darin Smith Assistant Vice President & Assistant Secretary, Financial Markets
Division
Teresa L. Stolba Assistant Vice President, Financial Markets Division
Thomas E. Walsh Assistant Vice President, Diversified Financial Products Division
Harvey E. Willis Assistant Vice President, Diversified Financial Products Division
Jill A.H. Andersen Counsel, Corporate
Mary J. Clark Counsel, Corporate
Katherine A. Schulze Counsel, Corporate
Emarie S. Payne Counsel, Corporate
Kamran Haghighi Tax Officer
Neva Curtis Assistant Secretary, Marketing Partnerships
John Donner Assistant Secretary, Investment Division
Mary Schaefer Assistant Secretary, Financial Markets Division
Marie W. Schmitt Assistant Secretary, Marketing Partnerships
Kim A. Tursky Assistant Secretary
Clifton W. Flenniken III Assistant Treasurer, Investment Division
James Wolfenden Statement Officer
James T. Bradley Product Compliance Officer, Marketing Partnerships
</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 charts indicate the persons controlled by or under common
control with Transamerica Corporation and AEGON N.V.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
(Common Parent Corporation)
Inter-America Corporation
Transamerica Corporation (Oregon)
Transamerica LP Holdings Corporation
Transamerica Finance Corporation
Transamerica HomeFirst, Inc. (Common)
Transamerica HomeFirst, Inc. (Preferred)
TREIC Enterprises, Inc.
Transamerica CBO I, Inc.
Transamerica International Holdings, Inc.
Transamerica Financial Products, Inc.
Pyramid Insurance Company Ltd. (Common)
Pyramid Insurance Company Ltd. (Preferred)
RTI Holdings, Inc. (dormant)
Transamerica Business Technologies Corporation
ARC Reinsurance Corporation
Transamerica Management, Inc.
Transamerica Intellitech, Inc.
Realist, Inc.
Transamerica Home Loan
Transamerica Lending Company
Transamerica Insurance Corporation of California
Arbor Life Insurance Company
Plaza Insurance Sales, Inc.
Transamerica International Insurance Services, Inc.
Transamerica Annuity Service Corporation
Transamerica Advisors, Inc.
Transamerica Securities Sales Corporation
Transamerica Products, Inc.
Transamerica Products I, Inc.
Transamerica Products II, Inc.
NEF Investment Company
Greenwich Potomac Holding Corporation
Transamerica Products IV, Inc.
Transamerica Service Company
Transamerica South Park Resources, Inc.
Transamerica Financial Resources Insurance Agency
Of Alabama, Inc.
Transamerica Financial Resources Insurance Agency
Of Massachusetts, Inc.
USA Administration Services, Inc.
Financial Resources Insurance Agency of Texas
Transamerica Financial Resources, Inc.
Gemini Investments, Inc.
Transamerica Senior Properties, Inc.
Transamerica Senior Living, Inc.
Transamerica Investment Services, Inc.
TA Leasing Holding Co., Inc.
Transamerica Leasing Inc.
Intermodal Equipment Inc.
Transamerica Distribution Services Inc.
Transamerica Transport Inc.
Transamerica Leasing Holdings Inc.
Transamerica Trailer Holdings I, Inc.
Transamerica Trailer Holdings II, Inc.
Transamerica Trailer Holdings III, Inc.
Trans Ocean Ltd.
Trans Ocean Container Finance Corp.
Trans Ocean Container Corp.
Trans Ocean Tank Services Corp.
SpaceWise, Inc.
Trans Ocean Regional Corporate Holdings
Trans Ocean Management Corp.
Greybox Logistics Services, Inc.
Transamerica Commercial Finance Corporation, I
Pacific Agency, Inc. (Indiana)
Transamerica Consumer Mortgage Receivables Corporation
Transamerica Mortgage Company
Transamerica Consumer Finance Holding Company
Metropolitan Mortgage Company
Easy Yes Mortgage, Inc. (Florida) (dormant)
Easy Yes Mortgage, Inc. (Georgia) (dormant)
First Florida Appraisal Services, Inc. (dormant)
First Georgia Appraisal Services, Inc. (dormant)
Freedom Tax Services, Inc. (dormant)
J.J. & W. Advertising, Inc. (dormant)
J.J. & W. Realty Services, Inc. (dormant)
Liberty Mortgage Company of Fort Myers, Inc. (dormant)
Metropolis Mortgage Company (dormant)
Perfect Mortgage Company (dormant)
TCF Asset Management Corporation
BWAC Twelve, Inc.
Transamerica Commercial Finance Corporation
BWAC International Corporation
BWAC Credit Corporation
BWAC Seventeen, Inc.
BWAC Twenty-One, Inc.
Transamerica GmbH, Inc.
Transamerica Insurance Finance Corporation Transamerica Insurance Finance
Corporation of California Transamerica Business Credit Corporation (Common)
Transamerica Business Credit Corporation (Preferred) Transamerica Insurance
Finance Company (Europe) Transamerica Inventory Finance Corporation Transamerica
Joint Ventures, Inc.
The Plain Company
Direct Capital Equity Investments, Inc. Transamerica Distribution Finance
Corporation Transamerica Retail Financial Services Corporation Transamerica
Vendor Financial Services Corporation TIFCO Lending Corporation TA Air I,
Corporation TA Air II, Corporation TA Air III, Corporation TA Air IV,
Corporation TBC I, Inc.
TBC II, Inc.
TBC III, Inc.
Transamerica Accounts Holding Corporation
TBC IV, Inc.
TBC V, Inc.
TA Air East, Corporation
TBC Tax I, Inc.
TBC Tax II, Inc.
TBC Tax III, Inc. TBC Tax IV, Inc. TBC Tax V, Inc. TBC Tax VI, Inc. TBC Tax VII,
Inc. TBC Tax VIII, Inc. TBC Tax IX, Inc.
Bay Capital Corporation
Gulf Capital Corporation
Coast Funding Corporation
Inventory Funding Trust (Delaware Trust, 1997 Form 8832)
Transamerica Bank N.A.
TBCC Funding Trust I (Delaware Trust, 1998 Form 8832) TBCC Funding Trust II
(Delaware Trust, 1998 Form 8832) TA Air V, Corporation TA Air VI, Corporation TA
Air VII, Corporation TA Air VIII, Corporation Transamerica Equipment Financial
Services Corporation
Transamerica Mezzanine Financing, Inc.
Transamerica Small Business Services, Inc.
Transamerica Distribution Finance - Overseas, Inc.
TA Marine I, Inc.
TA Marine II, Inc. TA Air IX, Corporation TA Air X, Corporation TBC VI, Inc.
Emergent Business Capital Holdings, Inc. TA Air XI Corporation Transamerica
Business Advisory Group, Inc. TA Air XII Corporation TA Air XIII Corporation TA
Air XIV Corporation TA Air XV Corporation Transamerica Realty Services, Inc.
Pyramid Investment Corporation The Gilwell Company Bankers Mortgage Company of
California Transamerica Minerals Company Transamerica Oakmont Corporation
Ventana Inn, Inc.
Transamerica Affordable Housing, Inc.
Transamerica Occidental Life Insurance Company
Transamerica Life Insurance & Annuity Company
Transamerica Assurance Company
Transamerica Life Insurance Company of New York
Transamerica Pacific Insurance Company, Ltd.
Transamerica International Re (Bermuda) Ltd.
Transamerica International Re (Bermuda) Ltd.
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
VERENGING AEGON - Netherlands Membership Association
AEGON N.V. - Netherlands corporation (51.16%)
Transamerica Corporation and subsidiaries (100%) (DE) AEGON Nederland N.V. -
Netherlands corporation (100%) AEGON NEVAK HOLDING B.V. - Netherlands
corporation (100%) GRONINGER FINANCIERINGEN B.V. - Netherlands corporation
(100%) AEGON INTERNATIONAL N.V. - Netherlands corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)(DE)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%) CORPA
Reinsurance Company (NY) (100%) AEGON Management
Company (IN) (100%) RCC North America Inc. (DE)
(100%)
AEGON USA, Inc. - holding co. (IA) (100%)
AEGON Funding Corp. (DE) (100%)
First AUSA Life Insurance Company - insurance
holding co. (MD) (100%) AUSA Life Insurance Company, Inc. -
insurance (NY) (82.33%) Life Investors Insurance Company of America
- insurance (IA) (100%)
Bankers United Life Assurance Company - insurance (IA) (100%)
Great American Insurance Agency, Inc. (IA) (100%)
Life Investors Alliance, LLC (DE) (100%)
PFL Life Insurance Company - insurance (IA) (100%) AEGON Financial
Services Group, Inc. (MN) (100%) AEGON Assignment Corporation of
Kentucky (KY) (100%) AEGON Assignment Corporation (IL) (100%)
Southwest Equity Life Insurance Company - insurance (AZ) (100%
Voting Common) Iowa Fidelity Life Insurance Company - insurance
(AZ) (100% Voting Common) Western Reserve Life Assurance Co. of
Ohio - insurance (OH) (100%) WRL Investment Management, Inc. -
investment adviser (FL) (100%) WRL Investment Services, Inc. -
transfer agent (FL)(100%) WRL Series Fund, Inc. - mutual fund (MD)
ISI Insurance Agency, Inc. and subsidiaries (CA) (100%) AEGON
Equity Group, Inc. (FL) (100%) Monumental General Casualty Company
- insurance (MD) (100%) United Financial Services, Inc. - general
agency (MD) (100%) Bankers Financial Life Insurance Company -
insurance (AZ) The Whitestone Corporation - insurance agency (MD)
(100%) Cadet Holding Corp. - holding company (IA) (100%) Monumental
General Life Insurance Company of Puerto Rico (PR) (51%)
AUSA Holding Company - holding company (MD) (100%)
Monumental General Insurance Group, Inc. - holding company
(MD)(100%)
Monumental General Administrators, Inc. (MD) (100%)
Executive Management and Consultant Services, Inc. - consulting
services (MD) (100%)
Trip Mate Insurance Agency, Inc. (KS) (100%)
Monumental General Mass Marketing, Inc. - marketing (MD) (100%)
AUSA Financial Markets, Inc. - marketing (IA) (100%)
Endeavor Group (CA) (100%)
Endeavor Management Company (CA) (100%)
Universal Benefits Corporation - third party administrator (IA)
(100%) Investors Warranty of America, Inc. - provider of automobile
extended maintenance
contracts (IA) (100%)
Massachusetts Fidelity Trust Company - trust company (IA) (100%)
Money Services, Inc. - financial counseling for employees and
agents of affiliated companies (DE) (100%)
ORBA Insurance Services, Inc. (CA) (10.56%)
Zahorik Company, Inc. - broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
Long, Miller & Associates, L.L.C. (CA) (33-1/3%)
AEGON Asset Management Services, Inc. (DE) (100%)
InterSecurities, Inc. - broker-dealer (DE) (100%)
Associated Mariner Financial Group, Inc. - holding company
(MI) (100%)
Mariner Financial Services, Inc. - broker/dealer (MI)(100%)
Associated Mariner Agency of Hawaii, Inc. - insurance agency
(MI) (100%)
Associated Mariner Agency of New Mexico, Inc. (MI) (100%)
Idex Investor Services, Inc. - shareholder services (FL) (100%)
Idex Management, Inc. - investment adviser (DE) (100%)
IDEX Mutual Funds - mutual fund (MA)
Diversified Investment Advisors, Inc. - investment adviser (DE)
(100%)
Diversified Investors Securities Corporation - broker-dealer
(DE) (100%)
AEGON USA Securities, Inc. - broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - mutual fund (MD)
Creditor Resources, Inc. - credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - insurance
agency (Canada) (100%)
Weiner Agency, Inc. (MD) (100%)
AEGON USA Investment Management, Inc. - investment adviser (IA)
(100%)
AEGON USA Realty Advisors, Inc. - real estate investment services
(IA) (100%)
QSC Holding, Inc. (DE) (100%)
Landauer Realty Advisors, Inc. - real estate counseling (IA)
(100%)
Landauer Associates, Inc. - real estate counseling (DE) (100%)
Landauer Realty Associates, Inc. (TX) (100%)
Realty Information Systems, Inc. - information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - real estate investment trust
(IA) RCC Properties Limited Partnership (IA)
Item 27. Number of Contract Owners
Durham 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-2L; VA-2NL; VUL-1; VUL-2; VUL-3 and VL; Transamerica Life Insurance
and Annuity Company's Separate Accounts VA-1; VA-6 and VA-7; and Transamerica
Life Insurance Company of New York VA-2LNY; VA-2NLNY; VA-5NLNY; and VA-6NY
The Underwriter is wholly-owned by Transamerica Insurance Corporation of
California, a wholly-owned subsidiary of Transamerica Corporation, a subsidiary
of AEGON, N.V.
(b) The following table furnishes information with respect to each director
and officer of the principal Underwriter currently distributing securities of
the registrant:
Nooruddin Veerjee Director (Chairman)
Nicki Bair Director
Sandy Brown Director, President and Treasurer
Roy Chong-Kit Director
George Chuang Vice President and Chief Financial Officer
Chris Shaw Vice President, Chief Compliance Officer and
Secretary
(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> <C> <C> <C>
TSSC 0 0 0 0
</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 NAVISYS, 9375 Landmark Parkway Drive, St. Louis,
Missouri 63127-1690
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.
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SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Transamerica Life Insurance and Annuity Company has caused this
Registration Statement to be signed on its behalf by the undersigned in the City
of Los Angeles, State of California on the 5th day of July, 2000.
SEPARATE ACCOUNT VA-8 OF
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(REGISTRANT)
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(DEPOSITOR)
----------------------------------
David M. Goldstein Vice President
As required by the Securities Act of 1933, this Registration Statement has been
signed below on June 29, 2000 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
_______________________ President and Director July 5, 2000
Larry N. Norman*
_______________________ Director July 5, 2000
Patrick S. Baird*
_______________________ Director and Senior Vice President July 5, 2000
Brenda K. Clancy*
_______________________ Directors, General Counsel and Secretary July 5, 2000
James W. Dederer*
_______________________ Director July 5, 2000
George A. Foegele*
_______________________ Director and Senior Vice President July 5, 2000
Douglas C. Kolsrud
_______________________ Director and Investment Officer July 5, 2000
Richard N. Latzer*
_______________________ Director and Acting Chief Financial Officer July 5, 2000
Karen O. MacDonald*
_______________________ Director and Investment Officer July 5, 2000
Gary U. Rolle'*
_______________________ Director and President-Reinsurance Division July 5, 2000
Paul E. Rutledge III*
_______________________ Director, Vice President and Counsel July 5, 2000
Craig D. Vermie*
_________________________ On July 5, 2000 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney filed herewith.
</TABLE>
<PAGE>
