As filed with the Securities and Exchange Commission on April 28, 1997
Registration No. 33-49998
811-7042
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 8|X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 10 |X|
-------
SEPARATE ACCOUNT VA-2L
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(Name of Depositor)
1150 South Olive, Los Angeles, CA 90015
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (213) 742-2111
Name and Address of Agent for Service: Copy to:
James W. Dederer, Esquire Frederick R. Bellamy, Esquire
Executive Vice President, General Counsel Sutherland, Asbill & Brennan,L.L.P.
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Co. Washington, D.C. 20004-2404
1150 South Olive
Los Angeles, CA 90015
Approximate date of proposed sale to the
public: As soon as practicable after effectiveness of the
Registration Statement.
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the year ended December 31, 1996 was filed on February 26,
1997. .
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b)
|X| on May 1, 1997 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on ________________ pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on ________________ pursuant to
paragraph (a)(ii) of Rule 485
If appropropriate, check the following box:
|_| this Post-Effective Amendment designates
a new effective date for a previously
filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
<S> <C> <C>
1. Cover Page............................................... Cover Page
2. Definitions.............................................. Definitions
3. Synopsis................................................. Summary
4. Condensed Financial Information.......................... Not Applicable
5. General
(a) Depositor Transamerica Occidental Life
Insurance Company;
Additional Information about
Transamerica
Occidental Life Insurance Company;
(b) Registrant The Variable Account
(c) Portfolio Company The Funds
(d) Fund Prospectus The Funds
(e) Voting Rights Voting Rights
6. Deductions and Expenses..................................
(a) General Charges and Deductions
(b) Sales Load % Contingent Deferred Sales Load
(c) Special Purchase Plan Not Applicable
(d) Commissions Distribution of the Contracts
(e) Fund Expenses The Funds
(f) Operating Expenses Variable Account Fee Table
7. Contracts
(a) Persons with Rights The Contract; Cash
Withdrawals; Death Benefit;
Voting Rights
(b) (i) Allocation of Premium
Payments..................................... Allocation of Purchase Payments
(ii) Transfers.................................... Transfers
(iii) Exchanges.................................... Federal Tax Matters
(c) Changes Addition, Deletion, or
Substitution
(d) Inquiries Summary; Available Information
8. Annuity Period........................................... Annuity Payments
9. Death Benefit............................................ Death Benefit
10. Purchase and Contract Balances
(a) Purchases Contract Application and
Purchase Payments
(b) Valuation Participant Account Value
(c) Daily Calculation Variable Accumulated Value
(d) Underwriter Distribution of the Contracts
11. Redemptions
(a) By Contract Owners Withdrawals; Systematic
Withdrawal Option;
Automatic Payout Option
By Annuitant....................................... Not Applicable
(b) Texas ORP Not Applicable
(c) Check Delay Cash Withdrawals
(d) Lapse Not Applicable
(e) Free Look Definitions; Summary; Contract
Application and
................................................... Purchase Payments
12. Taxes.............................................. Federal Tax Matters
13. Legal Proceedings.................................. Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information................................... Statement of Additional Information Table
of
Contents
PART B
Item of Form N-4 Statement of Additional
Information Caption
15. Cover Page......................................... Cover Page
16. Table of Contents.................................. Table of Contents
17. General Information
and History.............................................. (Prospectus) Transamerica Occidental Life
Insurance Company; (Prospectus)
Additional
Information About Transamerica
Occidental Life
Insurance Company
18. Services...........................................
(a) Fees and Expenses
of Registrant...................................... (Prospectus) Variable Account Fee Table;
(Prospectus) The Funds
(b) Management Contracts (Prospectus) Third Party
Administration
(c) Custodian Records and Reports;
Safekeeping of Account
Assets
Independent Auditors ............................. (Prospectus) Accountants
(d) Assets of Registrant Not Applicable
(e) Affiliated Person Not Applicable
(f) Principal Underwriter Not Applicable
19. Purchase of Securities
Being Offered............................................ (Prospectus) The Contract
Offering Sales Load...................................... (Prospectus) Contingent Deferred Sales
Load
20. Underwriters....................................... (Prospectus) Distribution of the Contracts
21. Calculation of Performance
Data..................................................... (Prospectus) Performance Data; Calculation of
Yields and Total Returns
22. Annuity Payments................................... (Prospectus) Annuity Payments; Annuity
Period
23. Financial Statements............................... Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits............................................. Financial Statements and Exhibits
(a) Financial Statements Financial Statements
(b) Exhibits Exhibits
25. Directors and Officers of
the Depositor............................................ Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant Persons Controlled By or
Under Common Control
with the Depositor or Registrant
27. Number of Contract Owners.......................... Number of Contract Owners
28. Indemnification.................................... Indemnification
29. Principal Underwriters............................. Principal Underwriters
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>
PROFILE
Of The
DREYFUS/TRANSAMERICA
TRIPLE ADVANTAGE(R)
VARIABLE AND FIXED ANNUITY
Issued by
TRANSAMERICA OCCIDENTAL LIFE
INSURANCE COMPANY
May 1, 1997
This Profile is a summary of some of the more
important points that you should know and consider
before purchasing a Contract.
The Contract is more fully described in the full
Prospectus which accompanies this Profile. Please
read the Prospectus carefully.
1. The Annuity Contract. The Dreyfus/Transamerica Triple Advantage is a contract
between you and Transamerica Occidental Life Insurance Company with both
"variable" and "guaranteed" investment options. In the Contract, you can invest,
in your choice of fifteen mutual funds ("Portfolios") in the Variable Account or
in the Guaranteed Periods of the Fixed Account from Transamerica. You could lose
money you invest in the Portfolios, but you could also earn more than investing
in the Fixed Account options. Transamerica guarantees the safety of money
invested in the Fixed Account options. The Fixed Account and some of the
Portfolios may not be available in all states.
The Contract is a deferred annuity, which means it has two phases: the
accumulation phase and the annuity phase. During the accumulation phase you can
make additional purchase payments to the Contract, transfer your money among the
investment options, and withdraw some or all of your investment. During this
phase earnings accumulate on a tax-deferred basis for individuals, but if you
withdraw money some or all of it may be taxable. Tax deferral is not available
for corporations and some trusts.
During the annuity phase Transamerica will make periodic payments to
you. The dollar amount of the payments may depend on the amount of money
invested and earned during the accumulation phase (and other factors, such as
age and sex).
2. The Annuity Payments. You can generally decide when to end the accumulation
phase and begin receiving annuity payments from Transamerica. You can choose
fixed annuity payments, where the dollar amount of each payment generally stays
the same, or variable payments that go up or down in dollar amount based on the
investment performance of the Portfolios you select. You can choose among
payments for the lifetime of an individual, or payments for the longer of one
lifetime or a guaranteed period of 10, 15, or 20 years, or payments for one
lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally, you must invest at least $5,000 to purchase
a Contract, and then you can make more investments of at least $500 each ($100
each if made under the automatic payment plan and deducted from your bank
account). You may cancel your Contract during the Free Look Period. This right
is explained in item 10 on page 5 of this Profile.
The Triple Advantage variable annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement or other long-term
goals. Individuals in high tax brackets get the most benefit from the tax
deferral feature. You should not make an investment in the Contract for
short-term purposes or if you cannot take the risk of losing some of your
investment.
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the
following fifteen Portfolios:
Money Market Capital Appreciation International Value
Managed Assets Stock Index Disciplined Stock
<PAGE>
Zero Coupon 2000 Socially Responsible Growth Small Company Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
These Portfolios are described in their own prospectuses. You can earn
or lose money in any of these Portfolios. All Portfolios may not be available in
all states.
FIXED ACCOUNT: In most states, you can also invest in a Fixed Account
option, where Transamerica guarantees the principal invested plus at least 3%
annual interest.
5. Expenses. The Contract provides many benefits and features that you
do not get with a regular mutual fund or CD investment. It costs Transamerica
money to provide these benefits, so there are charges in connection with this
Contract.
If you withdraw your money within seven years of investing it, there
may be a withdrawal charge of up to 6% of the amount invested.
Once each Contract year we deduct an account fee of no more than $30
(there is no fee if your Contract value is over $50,000).
Insurance and administrative charges of 1.40% per year are charged
against your average daily value in the Variable Account. Advisory fees are also
deducted by the Portfolios' manager, and the Portfolios pay other expenses
which, in total, vary from 0.30% to 1.35% per year of the amounts in the
Portfolios.
Finally, there might be premium taxes ranging from 0 to 3.5% of your
investment and/or on amounts you use to purchase annuity benefits (depending on
your state's law).
The following chart shows these charges (except premium taxes). The $30
annual account fee is not included in the first column because the fee is waived
for contract values over $50,000 and the approximate average contract value for
these contracts value is more than $50,000. The third column is the sum of the
first two. The examples in the last two columns show the total amounts you would
be charged, in dollars, if you invested $1000, the investment grew 5% each year,
and you withdrew your entire investment after one year or ten years. Year one
includes the withdrawal charge and year 10 does not.
<TABLE>
<CAPTION>
EXAMPLES:
Total
Variable Account Annual Annual Expenses at
Total Expenses
Portfolio/ Insurance Portfolio Total Annual end of One
at end of 10
Sub-Account Charges Charges Charges Year
Years
<S> <C> <C> <C> <C> <C>
Money Market 1.40% 0.62% 2.02% $73.29
$234.80
Managed Assets 1.40% 0.93% 2.33% $76.21
$266.60
Zero Coupon 2000 1.40% 0.66% 2.06% $73.67
$238.97
Quality Bond 1.40% 0.81% 2.19% $74.89
$252.37
Small Cap 1.40% 0.79% 2.19% $74.89
$252.37
Capital Appreciation 1.40% 0.84% 2.24% $75.37
$257.48
Stock Index 1.40% 0.30% 1.70% $70.26
$200.86
Socially Responsible 1.40% 0.99% 2.39% $76.78
$272.63
Growth & Income 1.40% 0.83% 2.23% $75.27
$256.46
International Equity 1.40% 1.28% 2.68% $79.50
$301.24
2
<PAGE>
International Value 1.40% 1.35% 2.75% $80.16
$308.01
Disciplined Stock 1.40% 0.96% 2.36% $76.50
$269.62
Small Company 1.40% 0.94% 2.34% $76.31
$267.60
Balanced 1.40% 1.25% 2.65% $79.22
$298.32
Limited Term High 1.40% 1.00% 2.40% $76.87
$273.63
Income
</TABLE>
The Annual Portfolio Charges above are for 1996 and do not reflect expense
reimbursements or fee waivers, except for the Balanced and Limited Term High
Income Portfolios which did not commence operations in 1996; the numbers for
these funds are annualized estimates for 1997. Expenses may be higher or lower
in the future. See the Variable Account Fee Table on page 11 of the Triple
Advantage prospectus for more detailed information.
6. Federal Income Taxes. Individuals generally are not taxed on increases
in the contract value until a distribution
occurs (e.g., a withdrawal or annuity payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of the contract).
3
<PAGE>
If you withdraw money, earnings come out first and are taxed. Generally, some
portion (sometimes all) of any distribution or deemed distribution is taxable as
ordinary income. In some cases, income taxes will be withheld from
distributions. If you are under age 59 1/2 when you withdraw money, an
additional 10% federal tax penalty may apply on the withdrawn earnings. Certain
owners that are not individuals may be currently taxed on increases in the
contract, whether distributed or not.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. A withdrawal charge of up to 6% of a purchase payment may be
assessed by Transamerica, but no withdrawal charge will be assessed on money
that has been in the Contract for seven years. In certain cases, the withdrawal
charge may be waived if you are in a hospital or nursing home for a long period
or, in some states, if you are diagnosed with a terminal illness. Additionally,
you can withdraw accumulated earnings on your purchase payments not previously
withdrawn at any time without a withdrawal charge. After the first Contract
Year, for only the first withdrawal in a Contract Year, you may withdraw the
greater of accumulated earnings or 15% of Purchase Payments received at least
one but less than seven years ago. (See Page 41 of the prospectus for a more
detailed discussion.)
You may have to pay income taxes on amounts you withdraw and there may also be a
10% tax penalty if you make withdrawals before you are 59 1/2 years old.
If you withdraw money from the fixed account option prematurely, you will
generally forfeit some of the interest that you earned, but will always receive
the principal you invested plus 3% interest.
8. Past Investment Performance. The value of the money you allocate to the
Portfolio(s) will go up or down, depending on the investment performance of the
Portfolios you pick. The following chart shows the past investment performance
on a year by year basis for each Sub-Account. These figures have already been
reduced by the insurance charges, the account fee, the fund manager's fee and
all the expenses of the mutual fund portfolio. But these figures do not include
the withdrawal charge, which would reduce performance if it applied. Remember,
past performance is no guarantee of future performance or earnings.
CALENDAR YEAR
<TABLE>
<CAPTION>
SUB-ACCOUNT 1996 1995 1994 1993 1992
1991 1990 1989
- ----------- ---- ---- ---- ---- ---- ---- ----
----
<S> <C> <C> <C> <C> <C> <C>
Money Market(1) 3.53% 4.21% 3.00% 1.86% 2.71%
4.54% N/A N/A
Managed Assets(1) (5.67%) (0.48%) (3.48%) 26.74% (0.41%)
8.99% N/A N/A
Zero Coupon 2000(1) 1.10% 16.35% (5.41%) 13.52% 7.29%
17.14% N/A N/A
Quality Bond(1) 1.63% 18.91% (6.17%) 13.66% 10.45%
12.47% N/A N/A
Small Cap(1) 15.06% 28.84% 4.95% 65.77% 68.98%
156.07% N/A N/A
Capital 22.71% 32.82% 1.45% N/ N/A N/A
N/A N/A
Appreciation(2) A
Stock Index(3) 19.80% 35.92% (0.60%) 7.75% 5.55%
27.98% (6.52%) N/A
4
<PAGE>
Socially Responsible 19.00% 33.67% (0.08%) N/A N/A
N/A N/A N/A
Growth and 18.63% 59.58% N/A N/A N/A
N/A N/A N/A
Income(5)
International 9.82% 6.62% N/A N/A N/A N/A
N/A N/A
Equity(5)
</TABLE>
(1) Portfolio Inception 8-31-90
(2) Portfolio Inception 4-5-93
(3) Portfolio Inception 9-29-89
(4) Portfolio Inception 10-7-93
(5) Portfolio Inception 12-15-94
No performance is reported for the International Value, Disciplined Stock and
Small Company Stock Sub-Accounts because these Sub-Accounts had not been in
operation for a full year in 1996. Additionally, the Balanced and Limited Term
High Income Sub-Accounts did not commence operations in 1996 and, therefore, no
performance is reported for these Sub- Accounts.
9. Death Benefit. If you or the annuitant dies during the accumulation phase,
then the appropriate beneficiary is guaranteed by Transamerica to receive a
death benefit of at least the amount you invested (less any amounts you have
already withdrawn), even if your investment has lost money because of the
investment performance of the Portfolios you picked.
The death benefit will be the greatest of: (1), the Account Value; (2)
a "seven-year step-up" death benefit, which is the Account Value on any seven
year anniversary of your purchase of the Contract (adjusted for additional
investments and any withdrawals since that anniversary less premium taxes
applicable to those withdrawals); or (3) your investments, less withdrawals and
any premium taxes applicable to that withdrawal, compounded at 5% annual
effective interest (the 5% interest stops when you, your joint owner, or the
annuitant reaches age 75, or when it has doubled the amount of your investment,
whichever is earlier).
10. Other Information. The Triple Advantage variable annuity offers other
features you might be interested in. These features may not be available in all
states and may not be suitable for your particular situation. Some
of these features include:
FREE LOOK. After you get your Contract, you have ten days to look it
over and decide if it is really right for you (this period may be longer in
certain states). If you decide not to keep the Contract, you can cancel it
during this period, and you will get back the amount of your investment that you
allocated to the Fixed Account and the current value of the amounts you
allocated to the Variable Account (without any withdrawal charges). Certain laws
may require that if you cancel during this period, you are entitled to get back
the greater of your full investment or the Contract value. If one of these laws
apply, then during this "free look" period your investment allocated to the
Variable Account, may be placed in the Money Market Portfolio (depending upon
the state in which the Contract is sold).
TELEPHONE TRANSFERS. You can generally arrange to transfer money
between the investments in your contract by telephone.
DOLLAR COST AVERAGING. You can instruct Transamerica to automatically
transfer amounts from the Purchase Payments you allocated to the Money Market
or Quality Bond Sub-Accounts, or possibly from another Sub-Account
5
<PAGE>
or a Guarantee Period of the Fixed Account, to any of the other Sub-Accounts
each month. Dollar Cost Averaging is intended to give you a lower average cost
per share or unit than a single, one time investment.
AUTOMATIC ASSET REBALANCING. The performance of each Sub-Account
may
cause the allocation of value among the Sub-Accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
Sub-Accounts by reallocating amounts among them.
SYSTEMATIC WITHDRAWAL OPTION. You can arrange to have Transamerica
send you money automatically each month out of your Contract during the
accumulation phase. There are limits on the amounts, but the withdrawal charge
will not apply (the payments may be taxable and subject to the penalty tax if
you are under age 59 1/2 ).
AUTOMATIC PAYOUT OPTION. If you have a Qualified Contract (an IRA),
you can arrange to have the minimum distributions required by the IRS to be
automatically paid to you.
11. INQUIRIES. You can get more information and have your questions
answered by writing or calling:
Transamerica Annuity Service Center
P.O. Box 31848
Charlotte, North Carolina 28231-1848
(800) 258-4260
6
<PAGE>
["Front Green Cover"]
LOGO
PROSPECTUS FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
May 1, 1997
A Variable Annuity Issued by
Transamerica Occidental
Life Insurance Company
Including Fund Prospectuses for
DREYFUS VARIABLE INVESTMENT FUND
May 1, 1997
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
May 1, 1997
DREYFUS STOCK INDEX FUND
May 1, 1997
<PAGE>
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
VARIABLE ANNUITY
Issued by
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY 1150 South Olive Street, Los Angeles,
California 90015, 213-742-2111.
This Prospectus describes the Dreyfus/Transamerica Triple Advantage
Variable Annuity, a variable annuity contract (the "Contract") issued by
Transamerica Occidental Life Insurance Company ("Transamerica"). The Contract is
designed to aid individuals in long-term financial planning and for retirement
or other long-term purposes.
The Owner may allocate Purchase Payments to one or more Sub-Accounts
of Separate Account VA-2L (the "Variable Account"), to the available Guarantee
Periods of the Fixed Account (which credit interest at guaranteed annual rates),
or to both.
The Account Value, except for amounts in the Fixed Account, will vary
in accordance with the investment performance of the Portfolios in which the
selected Sub-Accounts are invested. The Owner bears the entire investment risk
for all amounts allocated to the Variable Account. Amounts allocated to the
Fixed Account are guaranteed by Transamerica to accrue at a Guaranteed Interest
Rate if held for the entire Guarantee Period chosen by the Owner. There is no
guaranteed or minimum withdrawal value for amounts in the Variable Account; the
Cash Surrender Value or Annuity Purchase Amount could be less than the Purchase
Payments invested in the Contract.
This Prospectus sets forth the basic information that a prospective
investor should know before investing. A "Statement of Additional Information"
containing more detailed information about the Contract is available free by
writing Transamerica Occidental Life Insurance Company, Annuity Service Center,
at P.O. Box 31848, Charlotte, North Carolina 28231-1848, or by calling
800-258-4260. The Statement of Additional Information, which has the same date
as this Prospectus, as it may be supplemented from time to time, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information is
included at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Please read this prospectus carefully and keep it for
future reference. The date of this Prospectus is May 1,
1997,
This Prospectus must be accompanied by current prospectuses for Dreyfus Variable
Investment Fund, Dreyfus Stock Index Fund, and The Dreyfus Socially Responsible
Growth Fund, Inc.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR
OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS
IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
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, the Federal Reserve Board or any
other government agency. Investing in the Contract involves certain investment
risks, including possible loss of principal.
<PAGE>
The Contract provides for monthly Annuity Payments to be made by
Transamerica on a fixed or a variable basis or combination of a fixed and
variable basis for the life of the Annuitant or for some other period, beginning
on the first day of the month following the Annuity Date selected by the Owner.
Prior to the Annuity Date, the Owner can transfer amounts between and among the
Guarantee Periods of the Fixed Account and the Sub-Accounts of the Variable
Account. Some prohibitions and restrictions apply. After the Annuity Date, some
transfers are permitted among the Sub-Accounts if the Owner selects a Variable
Annuity Payment Option. Before the Annuity Date, the Owner can also elect to
withdraw all or a portion of the Cash Surrender Value in exchange for a cash
payment from Transamerica; however, withdrawals may be subject to a Contingent
Deferred Sales Load, premium taxes, federal tax and/or a tax penalty, an
interest adjustment (for Fixed Account withdrawals) and, upon surrender, the
annual Account Fee may also be deducted.
The Variable Account is divided into Sub-Accounts. Each Sub-Account is
invested in shares of a specific Portfolio. Fifteen Portfolios are currently
available for investment under the Contract: the Money Market, Managed Assets,
Zero Coupon 2000, Quality Bond, Small Cap, Capital Appreciation, Growth and
Income, International Equity, International Value, Disciplined Stock, Small
Company Stock, Balanced and Limited Term High Income Portfolios of Dreyfus
Variable Investment Fund; Dreyfus Stock Index Fund; and The Dreyfus Socially
Responsible Growth Fund, Inc. Certain fees and expenses are charged against the
assets of each Portfolio. The Account Value and the amount of any variable
Annuity Payments will vary to reflect the investment performance of the
Sub-Account(s) selected by the Owner and the deduction of the Contract charges
described under "Charges and Deductions" (page 35). For more information about
the Funds, see "The Funds" (page 21) and the accompanying Funds' prospectuses.
The Fixed Account is divided into Guarantee Periods, each of which has
its own Guaranteed Interest Rate and its own Expiration Date. Purchase Payments
allocated or Account Value transferred to the Guarantee Periods of the Fixed
Account will be credited with interest of at least 3% per year. Transamerica
may, in its discretion, declare interest rates for Guarantee Periods in excess
of the 3% minimum annual rate; it is never obligated to declare more than a 3%
annual rate. Amounts withdrawn or transferred from a Guarantee Period prior to
its Expiration Date will generally be subject to an interest adjustment which
will reduce the interest credited to the minimum 3% annual rate. (See "The Fixed
Account" page 24.)
The Initial Purchase Payment for each Contract must generally be at
least $5,000 unless, with the prior permission of Transamerica, the Contract is
sold as a Qualified Contract to certain retirement plans. Generally, each
additional Purchase Payment must be at least $500, unless an automatic payment
plan is selected. The prior approval of Transamerica is required before it will
accept total Purchase Payments for any Contract in excess of $1,000,000.
The Dreyfus/Transamerica Triple Advantage Variable Annuity 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.
2
<PAGE>
TABLE OF CONTENTS Page
DEFINITIONS.................................................................5
SUMMARY.....................................................................8
CONDENSED FINANCIAL INFORMATION............................................17
PERFORMANCE DATA...........................................................19
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE
VARIABLE ACCOUNT..........................................................20
Transamerica Occidental Life Insurance Company....................20
Published Ratings.................................................20
The Variable Account..............................................20
THE FUNDS..................................................................21
THE FIXED ACCOUNT..........................................................24
Guarantee Periods.................................................25
Interest Adjustment...............................................25
Expiration of a Guarantee Period..................................25
THE CONTRACT...............................................................26
.............................................................
APPLICATION AND PURCHASE PAYMENTS..........................................27
Purchase Payments.................................................27
Allocation of Purchase Payments...................................27
ACCOUNT VALUE..............................................................28
TRANSFERS..................................................................29
Before the Annuity Date...........................................29
Telephone Transfers...............................................29
Possible Restrictions.............................................30
Dollar Cost Averaging.............................................30
Automatic Asset Rebalancing.........................................
After the Annuity Date............................................30
CASH WITHDRAWALS...........................................................30
Withdrawals.......................................................30
Systematic Withdrawal Option......................................32
Automatic Payout Option .....................................32
Restrictions under Section 403(b) Programs.......................33
DEATH BENEFIT.............................................................33
Payment of Death Benefit.........................................34
Designation of Beneficiaries.....................................34
Death of Annuitant Prior to the Annuity Date.....................34
Death of Owner Prior to the Annuity Date................34
Death of Annuitant or Owner After the Annuity Date...............34
CHARGES AND DEDUCTIONS....................................................35
Contingent Deferred Sales Load...................................35
Administrative Charges...........................................36
Mortality and Expense Risk Charge................................37
Premium Taxes....................................................37
Transfer Fee.....................................................37
Systematic Withdrawal Option.....................................38
Taxes............................................................38
Portfolio Expenses...............................................38
Interest Adjustment..............................................38
TABLE OF CONTENTS CONTINUED
ANNUITY PAYMENTS.............................................
3
<PAGE>
Annuity Date....................................................38
Annuity Payment.................................................38
Election of Annuity Forms and Payment Options...................39
Annuity Payment Options.........................................39
Fixed Annuity Payment Option....................................39
Variable Annuity Payment Option.................................39
Annuity Forms...................................................40
Alternate Fixed Annuity Rates...................................41
QUALIFIED CONTRACTS
Withholding.......................................................
Automatic Payout Option ("APO")...................................
Restrictions under 403(b) Programs................................
FEDERAL TAX MATTERS......................................................41
Introduction....................................................41
Taxation of Annuities...........................................42
Qualified Contracts.............................................43
Possible Changes in Taxation....................................44
Other Tax Consequences..........................................44
General.........................................................44
DISTRIBUTION OF THE CONTRACT.............................................45
LEGAL PROCEEDINGS........................................................45
LEGAL MATTERS............................................................45
ACCOUNTANTS..............................................................45
VOTING RIGHTS............................................................45
AVAILABLE INFORMATION....................................................46
STATEMENT OF ADDITIONAL
INFORMATION - TABLE OF CONTENTS..........................................47
APPENDIX A..............................................................A-1
Example of Variable Accumulation Unit Value Calculations.......A-1
Example of Variable Annuity Unit Value Calculations............A-1
Example of Variable Annuity Payment Calculations...............A-1
The Contract is not available in all
states.
4
<PAGE>
DEFINITIONS
Account: The account established and maintained under the Contract to which the
Owner's Net Purchase Payments are credited. Account Value: The Account Value is
equal to the sum of: (a) the Fixed Accumulated Value, plus (b) the Variable
Accumulated Value. Active Sub-Account: A Sub-Account of the Variable Account in
which the Contract has current value. Annuitant: The person: (a) whose life is
used to determine the amount of monthly annuity payments on the Annuity Date;
and (b) who is the Payee designated to receive monthly annuity payments, unless
such Payee is changed by the Owner. The Annuitant cannot be changed after this
Certificate has been issued, except upon the Annuitant's death prior to the
Annuity Date if a Contingent Annuitant has previously been named. In the case of
a Qualified Contract used to fund an IRA, the Owner must be the Annuitant.
Annuitant's Beneficiary: The person or persons named by the Owner who may
receive the Death Benefit under the Contract, if: (a) the Annuitant is not the
Owner, there is no named Contingent Annuitant and the Annuitant dies before the
Annuity Date and before the death of the Owner(s); or (b) the Annuitant dies
after the Annuity Date under an Annuity Form containing a period certain option.
Annuity Date: The date on which the Annuity Purchase Amount will be applied to
provide an Annuity under the Annuity Form and Payment Option selected by the
Owner. Unless a different Annuity Date is elected under the annuity provisions,
the Annuity Date will be as shown in the Contract. Annuity Payment: An amount
paid by Transamerica at regular intervals to the Annuitant and/or any other
Payee specified by the Owner. It may be on a variable or fixed basis. Annuity
Purchase Amount: The Annuity Purchase Amount is the amount applied as a single
premium to provide an annuity under the Annuity Form and Payment Option elected
by the Owner. The Annuity Purchase Amount is equal to: (a) the Account Value;
less (b) any applicable interest adjustment; less (c) any applicable Contingent
Deferred Sales Load; and less (d) any applicable premium taxes. In determining
the Annuity Purchase Amount, Transamerica will waive the Contingent Deferred
Sales Load if the Annuity Form elected involves life contingencies and the
Annuity Date occurs on or after the third Contract Anniversary. Annuity Year: A
one-year period starting on the Annuity Date and, after that, each succeeding
one-year period. Cash Surrender Value: The amount payable to the Owner if the
Contract is surrendered on or before the Annuity Date. The Cash Surrender Value
is equal to: (a) the Account Value; less (b) reductions for the annual Account
Fee, if any; less (c) any applicable interest adjustment; less (d) any
applicable Contingent Deferred Sales Load; and less (e) any applicable premium
taxes. Code: The U.S. Internal Revenue Code of 1986, as amended, and the rules
and regulations issued thereunder. Contingent Annuitant: The person who: (a)
becomes the Annuitant if the Annuitant dies before the Annuity Date; or (b) may
receive benefits under the Contract if the Annuitant dies after the Annuity Date
under an Annuity Form containing a contingent annuity option. The contingent
annuitant may be changed by the Owner at any time while the Annuitant is living
and before the Annuity Date. Contract: An individual annuity contract issued by
Transamerica, or a certificate issued by Transameria which evidences his or her
coverage under a group annuity contract. Contract Anniversary: The same month
and day as the Contract Date in each calendar year after the calendar year in
which the Contract Date occurs. Contract Date: The effective date of the
Contract as shown on the Contract. Contract Year: The 12-month period from the
Contract Date and ending with the day before the Contract Anniversary and each
twelve month period thereafter. The first Contract Year for any particular net
Purchase Payment is the Contract Year in which the Purchase Payment is received
by the Service Center. Death Benefit: The benefit that may be payable by
Transamerica to the Owner's or Annuitant's Beneficiary, as applicable, if an
Owner or the Annuitant dies before the Annuity Date. The Death Benefit is equal
to the greatest of (1) the Account Value, (2) the greatest Account Value
determined as of the seventh Contract Anniversary and at each succeeding
Contract Anniversary occurring at subsequent seven year intervals thereafter
(adjusted for any subsequent Purchase Payments and less the sum of all
subsequent withdrawals and any premium taxes applicable to those withdrawals),
or (3) the sum of all Purchase Payments, less withdrawals and any premium taxes
applicable to those withdrawals, plus interest thereon equal to a 5% annual
effective rate, credited on a daily basis up to (i) the Contract Anniversary
following the earlier of any Owner's or Annuitant's
5
<PAGE>
75th birthday, or (ii) the date the sum of all Purchase Payments (less the sum
of all withdrawals and any premium taxes applicable to those withdrawals),
together with credited interest, has grown to two times the amount of all
Purchase Payments (less all withdrawals and any premium taxes applicable to
those withdrawals) as a result of such interest accumulation, if earlier. The
Death Benefit will be determined as of the end of the Valuation Period during
which the last of the following items is received by us at our Service Office:
(i) proof of death of the Owner or Annuitant; and (ii) the written notice of the
method of settlement elected by the beneficiary. Expiration Date: The last day
of a Guarantee Period. Fixed Account: The Fixed Account contains one or more
Guarantee Periods to which all or portions of Net Purchase Payments and
transfers may be allocated. The Fixed Account assets are general assets of
Transamerica and are distinguishable from those allocated to a separate account
of Transamerica. Fixed Accumulated Value: The total dollar amount of all
Guarantee Amounts held under the Fixed Account for the Contract prior to the
Annuity Date. The Fixed Accumulated Value is determined without regard to any
interest adjustment. Fixed Annuity: An annuity with predetermined payment
amounts. Free Look Period: The period of time, beginning on the date the Owner
receives the Contract, during which the Owner has the right to cancel the
Contract. The length of this period depends upon the state of issuance. Funds:
Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund, and The Dreyfus
Socially Responsible Growth Fund, Inc., in which the Variable Account currently
invests. Guarantee Amount: The Guarantee Amount is equal to: (a) the amount of
the Net Purchase Payment or transfer allocated to a particular Guarantee Period
with a particular Expiration Date; less (b) any withdrawals or transfers made
from that Guarantee Period; less (c) any applicable Transfer Fees; less (d) any
reductions for the annual Account Fee; and plus (e) interest credited. Guarantee
Period: The period for which a Guaranteed Interest Rate is credited which shall
not be less than one year. Guaranteed Interest Rate: The effective annual rate
of interest credited by Transamerica to a Guarantee Amount during any Guarantee
Period. Inactive Sub-Account: A Sub-Account of the Variable Account in which the
Contract has a zero balance. Net Investment Factor: An index that measures the
investment performance of a Sub-Account from one Valuation Period to the next.
Net Purchase Payment: A Purchase Payment reduced by any applicable premium tax
(including retaliatory premium taxes). Non-Qualified Contract: A Contract other
than a Qualified Contract. Owner (Joint Owners): The person(s) who, while
living, control(s) all rights and benefits under the Contract. Joint Owners own
the Contract equally with right of survivorship. The right of survivorship means
that if a Joint Owner dies, his or her interest in the Contract will pass to the
suriving Joint Owner in accordance with the Death Benefit provisions. Joint
Owners must be husband and wife as of the Contract Date (except in
Pennsylvania). Qualified Contracts cannot have Joint Owners. Owner's
Beneficiary: If the Owner is an individual, the Owner's Beneficiary is the
person(s) who may receive the Death Benefit if the Owner dies before the Annuity
Date and before the death of the Annuitant. If the Contract has Joint Owners,
the surviving Joint Owner will be the Owner's Beneficiary. Payee: The person who
receives the annuity payments after the Annuity Date. The Payee will be the
Annuitant, unless otherwise changed by the Owner. Portfolio: Dreyfus Stock Index
Fund, The Dreyfus Socially Responsible Growth Fund, Inc., or any one of the
Series of Dreyfus Variable Investment Fund underlying a Sub-Account of the
Variable Account. Proof of Death: May be: (a) a copy of a certified death
certificate; (b) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; (c) a written statement by a medical
doctor who attended the deceased; or (d) any other proof satisfactory to
Transamerica. Qualified Contract: A Contract used in connection with an
individual retirement annuity (an "IRA") which receives special federal income
tax treatment under Section 408 of the Code and whose initial Purchase Payment
is derived from a rollover of amounts from a qualified retirement plan(s)
receiving special tax treatment under Sections 401(a), 403(b) or 408 of the Code
(a "rollover IRA") or, with Transamerica's prior permission, an IRA which
receives special tax treatment under Section 408 of the Code and whose initial
Purchase Payment is limited by the contribution limits of the Code (a
"contributory IRA"), an annuity under Section 403(b) of the Code, or a qualified
pension, retirement or profit-sharing plan which receives special tax treatment
under Section 401(a) of the Code. Receipt: Receipt and acceptance by
Transamerica at its Service Center. Series: Any of the Portfolios of Dreyfus
Variable Investment Fund available for investment by a Sub-Account under the
Contract.
6
<PAGE>
Service Center: Transamerica's Annuity Service Center, at P.O. Box 31848
Charlotte, North Carolina 28231-1848, and at telephone (800) 258-4260. Socially
Responsible Fund: The Dreyfus Socially Responsible Growth Fund, Inc., a
diversified open-end management investment company. Source Account: A
Sub-Account of the Variable Account or a Guarantee Period of the Fixed Account,
as permitted, from which Dollar Cost Averaging transfers are being made. Stock
Index Fund: Dreyfus Stock Index Fund, a non-diversified open-end management
investment company. Sub-Account: A subdivision of the Variable Account investing
solely in shares of one of the Portfolios. Valuation Day: Any day the New York
Stock Exchange is open for trading. Valuation occurs currently as of 4:00 p.m.
ET each Valuation Day. Valuation Period: The time interval between the closing
of the New York Stock Exchange on consecutive Valuation Days. Variable Account:
Separate Account VA-2L, a separate account established and maintained by
Transamerica for the investment of a portion of its assets pursuant to Section
10506 of the California Insurance Code. The Variable Account contains several
Sub-Accounts to which all or portions of Net Purchase Payments and transfers may
be allocated. Variable Accumulated Value: The total dollar amount of all
Variable Accumulation Units under each Sub-Account of the Variable Account held
for the Contract prior to the Annuity Date. The Variable Accumulated Value prior
to the Annuity Date is equal to: (a) Net Purchase Payments allocated to the
Sub-Accounts; plus or minus (b) any increase or decrease in the value of the
assets of the Sub-Accounts due to investment results; less (c) the daily
Mortality and Expense Risk Charge; less (d) the daily Administrative Expense
Charge; less (e) any reductions for the annual Account Fee; plus or minus (f)
amounts transferred from or to the Fixed Account; less (g) any applicable
Transfer Fees and Systematic Withdrawal fees; and less (h) withdrawals from the
Sub- Accounts less any premium taxes applicable to those withdrawals. Variable
Accumulation Unit: A unit of measure used to determine the Account Value prior
to the Annuity Date. The value of a Variable Accumulation Unit varies with each
Sub-Account. Variable Annuity: An annuity with payments which vary as to dollar
amount in relation to the investment performance of specified Sub-Accounts of
the Variable Account. Variable Annuity Unit: A unit of measure used to determine
the amount of the second and each subsequent payment under a Variable Annuity
Payment Option. The value of a Variable Annuity Unit varies with each
Sub-Account. Variable Fund: Dreyfus Variable Investment Fund, an open-end
management investment company. Withdrawals: Refers to partial withdrawals,
including systematic withdrawals, and full surrenders that are paid in cash to
the Owner or person(s) the Owner specifies.
7
<PAGE>
SUMMARY
The Contract
The Flexible Purchase Payment Multi-Funded Deferred Annuity Contract described
in this Prospectus is designed to aid individuals in long-term financial
planning and for retirement or other long-term purposes. The Contract may be
used with non-qualified plans and as an individual retirement annuity that
qualifies for special tax treatment under Section 408 of the Code and whose
initial Purchase Payment is a rollover of amounts from a qualified retirement
plan(s) receiving special tax treatment under Sections 401(a), 403(b) and 408 of
the Code (a "rollover IRA"). Additionally, with Transamerica's prior permission,
the Contract may be used as an IRA whose initial Purchase Payment is limited to
the contribution limitations of the Code (a "contributory IRA"), as an annuity
under Section 403(b) of the Code, and with various types of qualified pension
and profit-sharing plans under Section 401(a) of the Code. The Contract is
issued by Transamerica Occidental Life Insurance Company ("Transamerica"), a
wholly-owned subsidiary of Transamerica Insurance Corporation of California,
which in turn is a direct subsidiary of Transamerica Corporation. Its principal
office is at 1150 South Olive Street, Los Angeles, California 90015, telephone
(213) 742-2111.
The term "Contract" as used herein refers to either an individual
annuity contract or to a certificate issued under a group annuity contract. The
term "Owner" refers to the Owner or any Joint Owner of the individual contract
or the certificate, as appropriate.
Transamerica will establish and maintain an Account for each individual
annuity contract and for each certificate issued under a group contract. Each
Owner will receive either an individual annuity contract, or a certificate
evidencing the Owner's coverage under a group annuity contract. The Contract
provides that the Account Value, after certain adjustments, will be applied to
an Annuity Form and Payment Option on a selected future date ("Annuity Date").
The Owner may allocate all or portions of Net Purchase Payments to one
or more Sub-Accounts of the Variable Account, to the available Guarantee Periods
of the Fixed Account which guarantees a minimum fixed return, or to both.
The Account Value prior to the Annuity Date, except for amounts in the
Fixed Account, will vary depending on the investment experience of each
Sub-Account of the Variable Account selected by the Owner. All payments and
values provided under the Contract when based on the investment experience of
the Variable Account are variable and are not guaranteed as to dollar amount.
Therefore, prior to the Annuity Date the Owner bears the entire investment risk
under the Contract for amounts allocated to the Variable Account.
There is no guaranteed or minimum Cash Surrender Value, so the proceeds
of a surrender could be less than the total Purchase Payments.
The initial Purchase Payment for each Contract must generally be at
least $5,000 unless, with Transamerica's permission, the Contract is sold as a
Qualified Contract to certain retirement plans. Generally each additional
Purchase Payment must be at least $500 unless an automatic payment plan is
selected. In no event, however, may the total of all Purchase Payments under a
Contract exceed $1,000,000 without the prior approval of Transamerica. The
minimum Net Purchase Payment that may be allocated to an Inactive Sub-Account is
$500 and to a new Guarantee Period is $1,000. (See "Application and Purchase
Payments" page 27.) The Variable Account
The Variable Account is a separate account (Separate Account VA-2L)
that is subdivided into Sub-Accounts. (See "The Variable Account" page 20.)
Assets of each Sub-Account are invested in a specified mutual fund Portfolio.
Each Sub-Account uses its assets to purchase, at their net asset value, shares
of a specific Series of Dreyfus Variable Investment Fund or shares in Dreyfus
Stock Index Fund or The Dreyfus Socially Responsible Growth Fund, Inc. (together
"The Funds"). The following fifteen Portfolios are currently available for
investment in the Variable Account.
Money Market Capital Appreciation International Value
Managed Assets Stock Index Disciplined Stock
Zero Coupon 2000 Socially Responsible Growth Small Company Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
8
<PAGE>
Each Portfolio has distinct investment objectives and policies which are
described in the accompanying prospectuses for the Funds. (See "The Funds" page
21.) Some Portfolios may not be available in all states.
The Funds pay their investment adviser and administrators certain fees
charged against the assets of each Portfolio. The Account Value, if any, of a
Contract and the amount of any Variable Annuity Payments will vary to reflect
the investment performance of all of the Sub-Accounts selected by the Owner and
the deduction of the charges described under "Charges and Deductions" (page 35).
For more information about the Funds, see "The Funds" (page 21) and the
accompanying Funds' prospectuses. The Fixed Account
Each Net Purchase Payment, or portion thereof, allocated to the Fixed
Account, as well as each amount transferred to the Fixed Account, will establish
a new Guarantee Period. Each Guarantee Period will have its own Guaranteed
Interest Rate (which will be at least 3% per year) and its own Expiration Date.
Amounts allocated to a new Guarantee Period must be at least $1,000. Amounts
withdrawn or transferred from a Guarantee Period prior to its Expiration Date
will generally be subject to an interest adjustment which will reduce the
interest credited to the amount withdrawn to the minimum 3% annual rate. (See
"The Fixed Account" page 24.) Transfers Before the Annuity Date
Prior to the Annuity Date, the Owner may make transfers between and
among the Guarantee Periods of the Fixed Account and the Sub-Accounts of the
Variable Account. A "transfer" is the reallocation of amounts between the
Guaranteed Period(s) of the Fixed Account and the Sub-Account(s) of the Variable
Account, among the Guarantee Periods of the Fixed Account, and among
Sub-Accounts of the Variable Account. All reallocations on any one day are
considered one transfer. Total transfers are limited to eighteen during a
Contract Year. This limit includes all transfers except those specifically
excluded under certain programs. Amounts transferred from a Guarantee Period
prior to its Expiration Date will generally be subject to an interest adjustment
which will reduce the interest credited to the minimum 3% annual rate. (See
"Transfers" on page 29.)
Transamerica currently does not impose a Transfer Fee, but it reserves
the right to charge a Transfer Fee for each
transfer in excess of six made during the same Contract Year. (See "Transfer
Fee" page 38.) (See "The Fixed Account" page
24.) (For Transfers after the Annuity Date, see "After the Annuity Date" page
31.)
Withdrawals
All or part of the Cash Surrender Value for a Contract may be withdrawn
by the Owner on or before the Annuity Date. Amounts withdrawn may be subject to
a Contingent Deferred Sales Load depending upon how long the withdrawn Purchase
Payments have been held under the Contract. (See "Contingent Deferred Sales
Load" below and at page 35.) Amounts withdrawn may be subject to a premium tax
or similar tax, depending upon the state in which the Owner lives. Withdrawals
may further be subject to any federal, state or local income tax, and subject to
a penalty tax. Withdrawals from Qualified Contracts may be subject to severe
restrictions. (Except for rollover IRAs, Qualified Contracts are sold only with
Transamerica's prior permission.) (See "Qualified Contracts" page and "Federal
Tax Matters" page 41.) The annual Account Fee generally will be deducted on a
full surrender of a Contract. (See "Withdrawals" page 31.) Only one, and in some
states no partial withdrawal, will be permitted while the Systematic Withdrawal
Option is in effect.
Amounts withdrawn from a Guarantee Period prior to its Expiration Date
will generally be subject to an interest
adjustment which will reduce the interest credited to the amount withdrawn to
the minimum 3% annual rate. (See "The Fixed
Account" page 24.) Transamerica may delay payment of any withdrawal from the
Fixed Account for up to six months. (See
"Cash Withdrawals" page 31.)
Contingent Deferred Sales Load
Transamerica does not deduct a sales charge from Purchase Payments
(although premium taxes may be deducted). However, if any part of the Account
Value is withdrawn, a Contingent Deferred Sales Load of up to 6% of Purchase
Payments may be assessed by Transamerica to cover certain expenses relating to
the sale of the Contracts, including commissions to registered representatives
and other promotional expenses. TRANSAMERICA GUARANTEES THAT THE
AGGREGATE
CONTINGENT DEFERRED SALES LOAD WILL NEVER EXCEED 6% OF THE
PURCHASE PAYMENTS.
After a Purchase Payment has been held by Transamerica for seven Contract Years,
it may be withdrawn without charge. In addition, no Contingent Deferred Sales
Load is assessed on death, on transfers, or on certain annuitizations. (See
Contingent Deferred Sales Load" page 35.)
9
<PAGE>
Certain amounts may be withdrawn free of any Contingent Deferred Sales
Load. The Owner may make withdrawals up to the "Allowed Amount" (described
below) without incurring a Contingent Deferred Sales Load each Contract Year
before the Annuity Date. During the first Contract Year, the Allowed Amount is
equal to accumulated earnings not previously withdrawn. For the first
withdrawal, and only the first withdrawal, in a Contract Year after the first
Contract Year, the available Allowed Amount is equal to the sum of: (a) 100% of
Purchase Payments not previously withdrawn and received at least seven Contract
Years before the date of withdrawal; plus (b) the greater of (i) the accumulated
earnings not previously withdrawn or (ii) 15% of Purchase Payments received at
least one but less than seven complete Contract Years before the date of
withdrawal not reduced by any withdrawals deemed to have been made from such
Purchase Payments. After the first withdrawal in a Contract Year, after the
first Contract Year, the available Allowed Amount is equal to the sum of: (a)
100% of Purchase Payments, not previously withdrawn and received at least seven
complete Contract Years before the date of withdrawal; plus (b) accumulated
earnings not previously withdrawn. Withdrawals will always be made first from
accumulated earnings, and then from Purchase Payments on a first in first out
basis. Therefore, accumulated earnings could be withdrawn as part of the first
withdrawal in a Contract Year and, therefore, not be available for withdrawals
made later that Contract Year. If an Allowed Amount is not withdrawn during a
Contract Year, it does not carry over to the next Contract Year. However,
accumulated earnings, if any, in an Owner's Account Value are always available
as the Allowed Amount. No withdrawals are allowed with regard to Purchase
Payment made by a check which has not cleared. The Contingent Deferred Sales
Load is waived on a withdrawal if the Owner is confined to a hospital or nursing
care facility for 45 days (30 days in Pennsylvania) out of a continuous 60 day
period and other conditions are met. Additionally, in some states, the
Contingent Deferred Sales Load is waived if the Owner is diagnosed with a
terminal illness, reasonably expected to result in death within twelve months
after the first Contract Year. (See "Contingent Deferred Sales Load" page 35. )
Other Charges and Deductions
Transamerica deducts a daily charge (the "Mortality and Expense Risk
Charge") equal to a percentage of the value of the net assets in the Variable
Account for the mortality and expense risks assumed. The effective annual rate
of this charge is 1.25% of the value of the net assets in the Variable Account
attributable to the Contracts. (See "Mortality and Expense Risk Charge" page
37.) TRANSAMERICA GUARANTEES THAT THIS MORTALITY AND EXPENSE
RISK CHARGE WILL
NOT BE INCREASED.
Transamerica also deducts a daily charge (the "Administrative Expense
Charge") equal to a percentage of the value of the net assets in the Variable
Account corresponding to an effective annual rate of 0.15% to help cover some of
the costs of administering the Contracts and the Variable Account. This charge
may change, but it is guaranteed not to exceed a maximum effective annual rate
of 0.25% (See "Administrative Charges" page 36.)
There is also an administrative charge (the "Account Fee") each year
for Contract maintenance. This fee currently is $30 (or 2% of the Account Value,
if less) deducted at the end of the Contract Year. This fee may change but it is
guaranteed not to exceed $60 (or 2% of the Account Value, if less) per Contract
Year. If the Account Value is over $50,000 on the last business day of the
Contract Year, or as of the date the Contract is surrendered the Account Fee
will be waived for that year. After the Annuity Date this fee is referred to as
the Annuity Fee. The Annuity Fee is $30 and will not change. (See
"Administrative Charges" page 36.)
Currently, no Transfer Fees or fees for the Systematic Withdrawal
Option are imposed. However, for each transfer in excess of six during a
Contract Year, a Transfer Fee of the lesser of 2% of the amount transferred or
$10 may be imposed (see "Transfer Fee" page 38) and a fee of $25 per Contract
Year may be imposed for the Systematic Withdrawal Option (see page ).
Charges for state premium taxes (including retaliatory premium taxes)
will be imposed in some states. Depending on the applicability of such state
taxes, the charges could be deducted from premiums, from amounts withdrawn,
and/or from the Annuity Purchase Amount upon annuitization. (See "Premium Taxes"
page 37.)
In addition, amounts withdrawn or transferred out of a Guarantee Period
of the Fixed Account prior to its Expiration Date will generally be subject to
an interest adjustment which will reduce the interest earned on that amount to
the minimum 3% annual rate.
10
<PAGE>
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the Owner will bear directly and indirectly. The table
reflects expenses of the Variable Account as well as of the Portfolios. The
table assumes that the entire Account Value is in the Variable Account. The
information set forth should be considered together with the narrative provided
under the heading "Charges and Deductions" on page 35 of this Prospectus, and
with the Funds' prospectuses. In addition to the expenses listed below, premium
taxes may be applicable. Contract Transaction Expenses(1)
Sales Load Imposed on Purchase Payments 0
Maximum Contingent Deferred Sales Load(2) 6%
- -------------------------------------------------------------------------------
Range of Contingent Deferred Sales Load Over Time
Contingent Deferred
Contract Years since Sales Load
Purchase Payments Receipt Percentage
Less than 2 years 6%
2 years but less than 4 years 5%
4 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more 0%
- -------------------------------------------------------------------------------
Transfer Fee(3) 0
Systematic Withdrawal Fee(3) 0
Account Fee(4) $30
Variable Account Annual Expenses(1)
Mortality and Expense Risk Charges 1.25%
Administrative Expense Charge(5) .15%
Other Fees and Expenses of the Variable Account 0.00%
Total Variable Account Annual Expenses 1.40%
<TABLE>
<CAPTION>
Zero Stock
Money Managed Coupon Quality Small Capital
Index
Portfolio Market Assets 2000 Bond Cap Appreciation
Fund (6)
- --------- ------ ------ ---- ---- --- ------------ ----------
Annual Expenses
- -------------------
(as a percentage of Portfolio
average net assets after fee waiver
and/or expense reimbursement)
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.50% 0.75% 0.45% 0.65% 0.75%
0.75% 0.25%
Other Expenses 0.12% 0.18% 0.21% 0.14% 0.04%
0.09% 0.05%
Total Portfolio Annual 0.62% 0.93% 0.66% 0.79% 0.79%
0.84% 0.30%
Expenses
</TABLE>
<TABLE>
<CAPTION>
Socially Growth
Small
Responsible and International International Disciplined
Company
Portfolio Fund(6) Income Equity Value(6)(7) Stock(6)(7)
Stock(6)(7)
Annual Expenses
(as a percentage of Portfolio
average net assets after fee waiver
and/or expense reimbursement )
<S> <C> <C> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75% 1.00%
0.75% 0.75%
Other Expenses 0.24% 0.08% 0.53% 0.35% 0.21%
0.19%
Total Portfolio Annual 0.99% 0.83% 1.28% 1.35% 0.96%
0.94%
Expenses
</TABLE>
11
<PAGE>
Limited Term
Portfolio Balanced(8) High Income (8)
Annual Expenses
(as a percentage of Portfolio
average net assets after fee waiver
and/or expense reimbursement )
Management Fees 0.75% 0.65%
Other Expenses 0.50% 0.35%
Total Portfolio Annual 1.25% 1.00%
Expenses
Expense information regarding the Portfolios has been provided by the Funds.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. In preparing the table above and
the examples that follow, Transamerica has relied on the figures provided by the
Funds. Actual expenses in future years may be higher or lower than the figures
above.
Notes to Fee Table:
(1) The Contract Transaction Expenses apply to each Contract, regardless of
how Account Value is allocated between the Variable Account and the
Fixed Account. The Variable Account Annual Expenses do not apply to the
Fixed Account.
(2) A portion of the Purchase Payments may be withdrawn each year after the
first Contract Year without imposition of any Contingent Deferred Sales
Load; after a Purchase Payment has been held by Transamerica for seven
Contract Years, the remaining Purchase Payment may be withdrawn free of
any Contingent Deferred Sales Load ("CDSL"); accumulated earnings may
always be withdrawn without imposition of a CDSL.
(See Contingent Deferred Sales Load" page 35.)
(3) Transamerica currently does not impose a Transfer Fee. However, a
Transfer Fee of $10 may be imposed for each transfer in excess of six in
a Contract Year. Transamerica may also impose a fee (of up to $25
per year) if the systematic withdrawal option is elected. (See "Charges and
Deductions" page 35.)
(4) The current annual Account Fee is $30 (or 2% of the Account Value, if
less) per Contract Year. The fee may be changed annually, but it may
not exceed $60 (or 2% of the Account Value, if less). (See "Charges and
Deductions" page 35.)
(5) The current annual Administrative Expense Charge is 0.15%; it may be
increased to 0.25%. The total of the charges described in notes (2),
(3) and (4) will never exceed the anticipated or estimated costs to
administer the Contract and the Variable Account. (See "Charges and
Deductions" page 35.)
(6) From time to time, the Portfolios' investment adviser, in its sole
discretion, may waive all or part of their fees and/or voluntarily
assume certain Portfolio expenses. For fiscal year 1996, certain fees
were waived or expenses assumed, in each case on a voluntary basis.
With such waivers or reimbursements, the Management Fees, Other
Expenses and Total Portfolio Annual Expenses that were paid for the
last completed fiscal year, December 31, 1996, for the Socially
Responsible Fund were 0.72%, 0.24% and 0.96%. The International Value,
Disciplined Stock, and Small Company Stock Portfolios did not commence
operations until April 30, 1996. The Management Fee, Other Expenses and
Total Portfolio Annual Expenses that were paid, on an annualized basis
because of such waivers or reimbursements, for the last completed
fiscal year, December 31, 1996, for these Portfolios were:
International Value: 0.66%, 0.35%, 1.01%; Disciplined Stock: 0.59%,
0.21%, 0.80%; and Small Company Stock: 0.56%; 0.19%; and 0.75%. During
Calendar year 1997, the adviser has undertaken to waive fees and
reimburse expenses as follows: Stock Index with a cap at 0.40%;
Balanced with a cap of 1.25% on an annualized basis; and Limited Term
High Income with a cap of 1% on an annualized basis.
For a more complete description of the Portfolios' fees and expenses,
see the Funds' prospectuses.
(7) The International Value, Disciplined Stock and Small Company Stock
Portfolios did not commence operations until April 30, 1996. These
numbers show the expenses annualized as though the Portfolio had been
in operation throughout 1996.
(8) The Balanced and Limited Term High Income Portfolios did not commence
operations during 1996. These numbers are annualized estimates of the
expenses that each of these Portfolios expects to incur with waivers
and reimbursements during fiscal year 1997.
12
<PAGE>
Examples*
The following three examples reflectno Account Fee deduction because
the approximate average Account Value is more than $50,000 and the Account Fee
is waived for Account Values of $50,000. The tabular information assumes that
the entire Account Value is allocated to the Variable Account.
These examples all assume no Transfer Fees, systematic withdrawal fee
or premium tax have been assessed. Premium
taxes may be applicable. (See "Premium Taxes" page 37.)
These examples show expenses without reflecting fee waivers and
reimbursements for 1996. Except for the Stock Index, Balanced and Limited Term
High Income Portfolios, it is not anticipated that there will be any fee waivers
or expense reimbursements in the future.
Example 1
If the Owner surrenders the Contract at the end of the applicable time
period, he/she would pay the following expenses on a $1,000 Initial Purchase
Payment assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
Sub-Account One Year Three Years Five Years Ten Years
<S> <C> <C> <C> <C>
Money Market $73.29 $110.46 $148.80 $234.80
Managed Assets $76.21 $119.35 $164.16 $266.60
Zero Coupon 2000 $73.67 $111.61 $150.84 $238.97
Quality Bond $74.89 $115.35 $157.40 $252.37
Small Cap $74.89 $115.35 $157.40 $252.37
Capital Appreciation $75.37 $116.78 $159.82 $257.48
Stock Index $70.26 $101.19 $132.30 $200.86
Socially Responsible $76.78 $121.07 $176.92 $272.63
Growth and Income $75.27 $116.49 $159.34 $256.46
International Equity $79.50 $129.30 $180.85 $301.24
International Value $80.16 $131.27 $184.15 $308.01
Disciplined Stock $76.50 $120.21 $165.61 $269.62
Small Company Stock $76.31 $119.64 $164.64 $267.60
Balanced $79.22 $128.45 $179.43
$298.32
Limited Term High Income $76.87 $121.35 $167.53 $273.63
</TABLE>
<TABLE>
<CAPTION>
Example 2
If the Owner does not surrender and does not annuitize the Contract,
they would pay the following expenses on a $1,000 Initial Purchase Payment
assuming a 5% annual return on assets:
Sub-Account One Year Three Years Five Years Ten Years
- ----------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Money Market $20.50 $63.35 $108.80 $234.80
Managed Assets $23.61 $72.74 $124.53 $266.60
Zero Coupon 2000 $20.90 $64.57 $110.84 $238.97
Quality Bond $22.21 $68.51 $117.46 $252.37
13
<PAGE>
Small Cap $22.21 $68.51 $117.46 $252.37
Capital Appreciation $22.71 $70.02 $119.99 $257.48
Stock Index $17.28 $53.57 $92.30 $200.86
Socially Responsible $24.21 $74.55 $127.55 $272.63
Growth and Income $22.61 $69.72 $119.48 $256.46
International Equity $27.11 $83.23 $141.99 $301.24
International Value $27.81 $85.32 $145.45 $308.01
Disciplined Stock $23.91 $73.65 $126.04 $269.62
Small Company Stock $23.71 $73.04 $125.03 $267.60
Balanced $26.81 $82.34 $140.51 $298.32
Limited Term High Income $24.31 $74.85 $128.05 $273.63
</TABLE>
14
<PAGE>
Example 3
If the Owner elects to annuitize at the end of the applicable period
under an Annuity Form with life contingencies,** they would pay the following
expenses on a $1,000 Initial Purchase Payment assuming a 5% annual return on
assets:
<TABLE>
<CAPTION>
Sub-Account One Year Three Years Five Years Ten Years
<S> <C> <C> <C> <C>
Money Market $73.29 $63.35 $108.80 $234.80
Managed Assets $76.21 $72.74 $124.53 $266.60
Zero Coupon 2000 $73.67 $64.57 $110.84 $238.97
Quality Bond $74.89 $68.51 $117.46 $252.37
Small Cap $74.89 $68.51 $117.46 $252.37
Capital Appreciation $75.37 $70.02 $119.99 $257.48
Stock Index $70.26 $53.57 $92.30 $200.86
Socially Responsible $76.78 $74.55 $127.55 $272.63
Growth and Income $75.27 $69.72 $119.48 $256.46
International Equity $79.50 $83.23 $141.99 $301.24
International Value $80.16 $85.32 $145.45 $308.01
Disciplined Stock $76.50 $73.65 $126.04 $269.62
Small Company Stock $76.31 $73.04 $125.03 $267.60
Balanced $79.22 $82.34 $140.51 $298.32
Limited Term High Income $76.87 $74.85 $128.05 $273.63
</TABLE>
15
<PAGE>
*In preparing the examples above, Transamerica has relied on the data provided
by the Funds. Transamerica has no reason to doubt the accuracy of that
information, but Transamerica has not verified those figures. **For
annuitizations before the third Contract Anniversary, or for annuitization under
a form that does not include life contingencies, a Contingent Deferred Sales
Load may apply.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST
OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE
SHOWN, SUBJECT
TO THE GUARANTEES
IN THE CONTRACT. The assumed 5% annual return is only hypothetical. It is not
a representation of past or future returns.
Actual returns could be greater or less than this assumed rate.
Annuity Payments
Annuity Payments will be made either on a fixed basis or a variable
basis or a combination of a fixed and variable basis as the Owner selects. The
Owner has flexibility in choosing the Annuity Date for his or her Contract. In
no event may the Annuity Date be a date later than the first day of the month
immediately preceding the month of the Annuitant's 85th birthday or the first
day of the month coinciding with or next following the tenth Contract
Anniversary, whichever occurs last. This extension of the Annuity Date to the
tenth Contract Anniversary may not be available in all states. The Annuity Date
16
<PAGE>
may not be earlier than the first day of the month coinciding with or
immediately following the third Contract Anniversary except for Qualified
Contracts. Annuity Payments will begin on the first day of the calendar month
following the Annuity Date. (See "Annuity Payments" page 38.)
Four Annuity Forms are available under the Contract: (1) Life Annuity;
(2) Life and Contingent Annuity; (3) Life
Annuity with Period Certain; and (4) Joint and Survivor Annuity. (See "Annuity
Forms" page 40.)
Payments on Death Before the Annuity Date
The Death Benefit for a Contract will be equal to the greatest of (1)
the Account Value; (2) a "seven-year step-up" benefit, which is the greatest
Account Value determined as of the seventh Contract Anniversary and at each
succeeding Contract Anniversary occurring at seven year intervals thereafter
(adjusted for additional Purchase Payments and withdrawals since that
anniversary less premium taxes applicable to those withdrawals); or (3) Purchase
Payments, less withdrawals and premium taxes applicable to those withdrawals,
plus interest compounded at 5% annual effective interest rate (the 5% interest
stops when an Owner or the Annuitant reaches age 75, or when it has doubled the
amount of your investment less withdrawals and any premium taxes applicable to
those withdrawals, whichever is earlier). (See "Death Benefit" page 33.) The
death benefit will generally be paid within seven days of receipt of the
required Proof of Death of an Owner or the Annuitant and election of the method
of settlement or as soon thereafter as Transamerica has sufficient information
about the Beneficiary to make the payment, but if no settlement method is
elected the death benefit will be paid no later than one year from the date of
death. No Contingent Deferred Sales Load or interest adjustment is imposed. The
death benefit may be paid as either a lump sum or as an annuity.
(See "Death Benefit" page 33.)
Federal Income Tax Consequences
An Owner who is a natural person generally should not be taxed on
increases in the Account Value until a distribution under the Contract occurs
(e.g., a withdrawal or Annuity Payment) or is deemed to occur (e.g., a pledge,
loan, or assignment of a Contract). Generally, a portion (up to 100%) of any
distribution or deemed distribution is taxable as ordinary income. The taxable
portion of distributions is generally subject to income tax withholding unless
the recipient elects otherwise except that mandatory withholding may apply for
certain Qualified Contracts. In addition, a federal penalty tax may apply to
certain distributions. (See "Federal Tax Matters" page 41.) Right to Cancel
The Owner has the right to examine the Contract for a limited period,
known as a "Free Look Period." The Owner can cancel the Contract by delivering
or mailing a written notice of cancellation, or sending a telegram to the
Service Center and by returning the Contract before midnight of the tenth day
(or longer if required by state law) after receipt of the Contract. Notice given
by mail and the return of the Contract by mail will be effective on the date
received by Transamerica. The amount of the refund may depend on the state of
issuance. In most cases, Transamerica will refund the Purchase Payments
allocated to the Fixed Account plus the Variable Accumulated Value as of the
date the written notice and the Contract are received by Transamerica. In other
cases, including for certain ages of Owners in some states, and in all states
for IRAs, Transamerica will refund the greater of the Purchase Payments or the
Account Value as of the date the written notice and the Contract are received by
Transamerica. In certain situations, the Purchase Payments received before or
during the Free Look period will be allocated among the Guarantee Period(s) of
the Fixed Account and Sub-Account(s) of the Variable Account in accordance with
the Owner's instructions. In certain situations, the Purchase Payment(s)
received before or during the Free Look Period which the Owner has allocated to
the Fixed Account will be allocated to the Guarantee Period(s) in accordance
with the Owner's instructions, but Purchase Payments which are to be allocated
to the Sub-Accounts of the Variable Accounts will be held in the Money Market
Sub-Account until the estimated end of the Free Look Period (allowing 5 days for
delivery of the Contract by mail). Owners should consult their registered
representative or investment adviser (or see their Contract) for the applicable
provision. (See "Application and Purchase Payments" page 27 and "Account Value"
page 28.) Questions
Any questions about procedures or the Contract will be answered by the
Transamerica Annuity Service Center ("Service Center"), at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, or call 800-258-4260. All inquiries should
include the Contract Number and the Owner's and Annuitant's names.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this Prospectus and in the prospectuses
for Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund and The Dreyfus
Socially Responsible Growth Fund, Inc., which should be referred to for more
detailed information. With respect to Qualified Contracts, it should be noted
that the requirements of a particular retirement plan, an endorsement to the
Contract, or limitations or penalties imposed by the Code or the Employee
Retirement Income Security Act of 1974, as amended, may
17
<PAGE>
impose additional limits or restrictions on Purchase Payments, Withdrawals,
distributions, or benefits, or on other provisions
of the Contract. This Prospectus does not describe such limitations or
restrictions. (See "Federal Tax Matters" page 41.)
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Variable Account. The data should be read in conjunction with
the financial statements, related notes, and other financial information
included in the Statement of Additional Information.
The following table sets forth certain information regarding the
Sub-Accounts for the period from commencement of business operations of the
Sub-Account through December 31, 1996. The Balanced Fund and Limited Term High
Income Fund are not included because these Sub-Accounts did not commence
operations during 1996.
The Variable Accumulation Unit values and the number of Variable
Accumulation Units outstanding for each Sub-Account for the periods shown are as
follows:
<TABLE>
<CAPTION>
Year Ending December 31, 1993
-----------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
(Inception 1/4/93)(Inception 1/4/93)(Inception 1/4/93)(Inception 1/4/93)
(Inception 1/4/93)
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $1.00 $10.09 $11.85 $11.00 $22.54
Accumulation Unit Value
at End of Period.. $1.018 $12.861 $13.373 $12.445 $37.702
Number of Accumulation
Units Outstanding
at End of Period.. 3,654,791.776 287,4509.768 206,103.348 255,350.340
254,839.860
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Stock Index Socially Responsible
Sub-Account Sub-Account Sub-Account
(Inception- (Inception- (Inception-
April 5, January 4 October 7,
1993) 1993) 1993)
Accumulation Unit Value at
<S> <C> <C> <C>
Beginning of Period..... $12.50 $15.31 $12.49
Accumulation Unit Value at
End of Period........... $13.160 $16.521 $13.326
Number of Accumulation Units
Outstanding at End of Period 237,733.021 93,536.733 26,089.821
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31, 1994
-----------------------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $1.018 $12.861 $13.373 $12.445 $37.702
Accumulation Unit Value
at End of Period.. $1.048 $12.496 $12.672 $11.711 $40.064
Number of Accumulation
Units Outstanding
at End of Period.. 23,559,789.7951,486,438.137 476,355.738 931,527.691 1,250,237.625
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
International
Growth and Income
Equity
Sub-Account
Sub-Account
Capital Appreciation Stock Index Socially Responsible (Inception
(Inception
Sub-Account Sub-Account Sub-Account December 15, 1994)
December 15, 1994)
Accumulation Unit Value
<S> <C> <C> <C> <C>
at Beginning of Period. $13.160 $16.521 $13.326 $12.177
$12.247
Accumulation Unit Value
at End of Period..... $13.373 $16.437 $13.377 $12.167
$12.240
Number of Accumulation
Units Outstanding
at End of Period..... 919,622.615 348,937.285 135,018.350 4,300.380
8,552.073
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31, 1995
-----------------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small
Cap
Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $1.048 $12.496 $12.672 $11.711
$40.064
Accumulation Unit Value
at End of Period $1.093 $12.292 $14.740 $13.908
$51.121
Number of Accumulation
Units Outstanding
at End of Period 31,807,563.947 1,288,429.555 903,799.152 2,052,313.888
2,155,879.198
</TABLE>
<TABLE>
<CAPTION>
International
Capital Appreciation Stock Index Socially Responsible Growth and
Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C>
at Beginning of Period $13.373 $16.437 $13.377 $12.167
$12.240
Accumulation Unit Value
at End of Period $17.610 $22.172 $17.752 $19.426
$12.964
Number of Accumulation
Units Outstanding
at End of Period 2,077,029.504 997,271.816 295,077.936 2,565,038.589
530,374.642
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31, 1996
---------------------------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small
Cap
Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $1.093 $12.292 $14.740 $13.908 $51.121
Accumulation Unit Value
at End of Period $1.132 $11.682 $14.911 $14.142 $58.773
Number of Accumulation
Units Outstanding
at End of Period 38,983,053.941 1,232,530.711 1,320,168.687 3,072,774.847 2,736,720.675
</TABLE>
<TABLE>
<CAPTION>
International
Capital Appreciation Stock Index Socially Responsible Growth and
Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $17.610 $22.172 $17.752 $19.426 $12.964
Accumulation Unit Value
at End of Period $21.802 $26.791 $21.221 $23.131 $14.267
Number of Accumulation
Units Outstanding
at End of Period 3,665,146.389 2,030,280.057 708,680.320 6,332,649.215 1,480,395.223
</TABLE>
<TABLE>
<CAPTION>
International Value Disciplined Stock Small Company Stock
Sub-Account Sub-Account Sub-Account
(Inception 5/1/96) (Inception 5/1/96) (Inception 5/1/96)
Accumulation Unit Value
<S> <C> <C> <C>
at Beginning of Period $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $10.244 $11.776 $10.772
Number of Accumulation
Units Outstanding
at End of Period 23,868.491 618,809.191 543,949.419
</TABLE>
Financial Statements for the Variable Account and Transamerica
The financial statements and reports of independent auditors for the
Variable Account and Transamerica are contained in the Statement of Additional
Information.
20
<PAGE>
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the Sub-Accounts of the Variable Account. In addition,
Transamerica may advertise the effective yield of the Money Market Sub-Account.
These figures will be based on historical information and are not intended to
indicate future performance.
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in that
Sub-Account is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Sub-Account (other than the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Sub-Account
over a specified thirty-day period. The yield is calculated by assuming that the
income generated by the investment during that thirty-day period is generated
each thirty-day period over a twelve-month period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any Contingent
Deferred Sales Load or premium taxes that may be applicable to a particular
Contract. To the extent that the Contingent Deferred Sales Load is applicable to
a particular Contract, the yield of that Contract will be reduced. For
additional information regarding yields and total returns calculated using the
standard formats briefly described herein, please refer to the Statement of
Additional Information.
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for various
periods of time including, but not limited to, a period measured from the date
the Sub-Account commenced operations. When a Sub-Account has been in operation
for 1, 5, and 10 years, respectively, the average annual total return for these
periods will be provided. The average annual total return quotations will
represent the average annual compounded rates of return that would equate an
initial investment of $1,000 to the redemption value of that investment
(including the deduction of any applicable Contingent Deferred Sales Load but
excluding deduction of any premium taxes) as of the last day of each of the
periods for which total return quotations are provided.
Performance information for any Sub-Account reflects only the
performance of a hypothetical Contract under which Account Value is allocated to
a Sub-Account during a particular time period on which the calculations are
based. Performance information should be considered in light of the investment
objectives and policies and characteristics of the Portfolios in which the
Sub-Account invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and total
returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any Sub-Account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report, Financial
Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and Poor's
Indices, Dow Jones Industrial Average, and other rating services, companies,
publications, or other persons who rank separate accounts or other investment
products on overall performance or other criteria, and (2) the effect of tax
deferred compounding on Sub-Account investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may include
a comparison, at various points in time, of the return from an investment in a
Contract (or returns in general) on a tax-deferred basis (assuming one or more
tax rates) with the return on a currently taxable basis. Other ranking services
and indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the Contract, the effects of the Contract's lifetime
payout option, and the operation of certain special investment features of the
Contract -- such as the Dollar Cost Averaging option. Transamerica may explain
and depict in charts, or other graphics, the effects of certain investment
strategies, such as allocating purchase payments between the Fixed Account and
an equity Sub-Account. Transamerica may also discuss the Social Security system
and its projected payout levels and retirement plans generally, using graphs,
charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the 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 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.
21
<PAGE>
Transamerica may also advertise performance figures for the
Sub-Accounts based on the performance of a Portfolio prior to the time the
Variable Account commenced operations.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY AND THE VARIABLE ACCOUNT
Transamerica Occidental Life Insurance Company
Transamerica Occidental Life Insurance Company ("Transamerica") is a
stock life insurance company incorporated under the laws of the State of
California in 1906. It is principally engaged in the sale of life insurance and
annuity policies. Transamerica is a wholly-owned subsidiary of Transamerica
Insurance Corporation of California, which in turn is a direct subsidiary of
Transamerica Corporation. The address of Transamerica is 1150 South Olive
Street, Los Angeles, California, 90015. Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Moody's, and Duff & Phelps. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of Transamerica and
should not be considered as bearing on the safety or investment performance of
assets held in the Variable Account. Each year the A.M. Best Company reviews the
financial status of thousands of insurers, culminating in the assignment of
Best's Ratings. These ratings reflect their current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. In addition, the
claims-paying ability of Transamerica as measured by Standard & Poor's Insurance
Ratings Services, Moody's, or Duff & Phelps may be referred to in advertisements
or sales literature or in reports to Owners. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of its
insurance and annuity policies in accordance with their terms, including its
obligations under the Fixed Account provisions of this Contract. Such ratings do
not reflect the investment performance of the Variable Account or the degree of
risk associated with an investment in the Variable Account. The Variable Account
Separate Account VA-2L of Transamerica (the "Variable Account") was
established by Transamerica as a separate account under the laws of the State of
California on May 22, 1992 pursuant to resolutions of Transamerica's Board of
Directors. The Variable Account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the Variable Account.
The assets of the Variable Account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 10506 of the
California Insurance Law provides that the assets of a separate account are not
chargeable with liabilities incurred in any other business operation of the
insurance company (except to the extent that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the Variable Account, whether or not
realized, are credited to or charged against the Variable Account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the Variable Account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica.
The Variable Account has fifteen Sub-Accounts, each of which invests
solely in a specific corresponding Portfolio.
(See "The Funds" page 21.) Changes to the Sub-Accounts may be made at the
discretion of Transamerica. (See "Addition,
Deletion, or Substitution" page 24.) All Sub-Accounts may not be available in
all states.
THE FUNDS
The Variable Account invests exclusively in Series of Dreyfus Variable
Investment Fund (the "Variable Fund"), Dreyfus Stock Index Fund (the "Stock
Index Fund") and The Dreyfus Socially Responsible Growth Fund, Inc. (the
"Socially Responsible Fund"). The Variable Fund was organized as an
unincorporated business trust under Massachusetts law pursuant to an Agreement
and Declaration of Trust dated October 29, 1986, commenced operations on August
31, 1990, and is registered with the Commission as an open-end management
investment company under the 1940 Act. Currently, thirteen Series (i.e.,
Portfolios) of the Variable Fund are available for the Contracts. Each of these
Portfolios has separate investment objectives and policies. As a result, each
Portfolio operates as a separate investment Portfolio, and the investment
performance of one Portfolio has no effect on the investment performance of any
other Portfolio. The Stock Index Fund was incorporated under Maryland law on
January 24, 1989, commenced operations on September 29, 1989, and is
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registered with the Commission as an open-end, non-diversified, management
investment company. The Socially Responsible Fund was incorporated under
Maryland law on July 20, 1992, commenced operations on October 7, 1993, and is
registered with the Commission as an open-end, diversified, management
investment company. However, the Commission does not supervise the management or
the investment practices and policies of any of the Funds. The assets of the
Variable Fund, the Socially Responsible Fund and the Stock Index Fund are each
separate from the assets of the other Funds.
The Dreyfus Corporation provides investment advisory and administrative
services to the Variable Fund and the Socially Responsible Fund. Mellon Equity
Associates provides index fund management services to the Stock Index Fund, with
The Dreyfus Corporation serving as the manager, in accordance with applicable
agreements with the Fund. Fayez Sarofim & Co. provides sub-investment advisory
services for the Capital Appreciation Portfolio. NCM Capital Management Group,
Inc., provides sub-investment advisory services for the Socially Responsible
Fund.
The Portfolios are described below. See the Variable Fund, the Stock
Index Fund and the Socially Responsible Fund
prospectuses for more information.
Money Market Portfolio
The Money Market Portfolio's investment objective is to achieve as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. It seeks to achieve its objective by investing in
short-term money market instruments. The investment advisory fee is payable
monthly at the annual rate of 0.50 of 1% of the value of the Portfolio's average
daily net assets. This Portfolio is neither insured nor guaranteed by the United
States Government, and there can be no assurance that it will be able to
maintain a stable net asset value of $1.00 per share. Managed Assets Portfolio
The Managed Assets Portfolio's investment objective is to maximize
total return, consisting of capital appreciation and current income. It seeks to
achieve its objective by investing in a wide range of equity and debt securities
and money market instruments. An investment advisory fee is payable monthly to
The Dreyfus Corporation at the annual rate of 0.75% of 1% of the value of the
Portfolio's average daily net assets. Zero Coupon 2000 Portfolio
The Zero Coupon 2000 Portfolio's investment objective is to provide as
high an investment return as is consistent with the preservation of capital. It
seeks to achieve its objective by investing primarily in debt obligations of the
U.S. Treasury that have been stripped of their unmatured interest coupons,
interest coupons that have been stripped from debt obligations issued by the
U.S. Treasury and receipts and certificates for stripped debt obligations and
stripped coupons including U.S. Government trust certificates (collectively,
"Stripped Treasury Securities"). The Portfolio also may purchase certain other
types of stripped government or corporate securities. The Portfolio's assets
will consist primarily of Portfolio securities which will mature on or about
December 31, 2000. The investment advisory fee is payable monthly at the annual
rate of 0.45 of 1% of the value of the Portfolio's average daily net assets.
Quality Bond Portfolio
The Quality Bond Portfolio's investment objective is to provide the
maximum amount of current income to the extent consistent with the preservation
of capital and the maintenance of liquidity. It seeks to achieve its objective
by investing principally in debt obligations of corporations, the U.S.
Government and its agencies and instrumentalities, and major banking
institutions. The investment advisory fee is payable monthly at the annual rate
of 0.65 of 1% of the value of the Portfolio's average daily net assets. Small
Cap Portfolio
The Small Cap Portfolio's investment objective is to maximize capital
appreciation. It seeks to achieve its objective by investing principally in
common stocks; under normal market conditions, the Series will invest at least
65% of its total assets in companies with market capitalizations of less than
$1.5 billion at the time of purchase which The Dreyfus Corporation believes to
be characterized by new or innovative products, services or processes which
should enhance prospects for growth in future earnings. The investment advisory
fee is payable monthly at the annual rate of 0.75 of 1% of the value of the
Portfolio's average daily net assets. Capital Appreciation Portfolio
The Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary goal. It seeks to achieve its goals by investing
in common stocks of domestic and foreign issuers. An investment advisory fee is
payable monthly to The Dreyfus Corporation and a sub-investment advisory fee is
payable monthly to Fayez Sarofim & Co. at the aggregate annual rate of 0.75 of
1% of the value of the Portfolio's average daily net assets. Growth and Income
Portfolio
The Growth and Income Portfolio's investment objective is to provide
long-term capital growth, current income and
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growth of income, consistent with reasonable investment risk. This Portfolio
invests primarily in equity and debt securities and money market instruments of
domestic and foreign issuers. The proportion of the Portfolio's assets invested
in each type of security will vary from time to time in accordance with The
Dreyfus Corporation's assessment of economic conditions and investment
opportunities. An investment advisory fee is payable monthly to The Dreyfus
Corporation at the annual rate of 0.75 of 1% of the value of the Portfolio's
average daily net assets. International Equity Portfolio
The International Equity Portfolio's investment objective is to
maximize capital appreciation. This Portfolio invests
primarily in the equity securities of foreign issuers located throughout the
world. An investment advisory fee at an annual rate
of 0.75 of 1% of the value of the Portfolio's average daily net assets is
payable monthly to The Dreyfus Corporation.
International Value Portfolio
The International Value Portfolio's investment objective is long-term
capital growth. This Series invests primarily in a portfolio of publicly traded
equity securities of foreign issuers which would be characterized as "value"
companies according to criteria established by the Portfolio's investment
adviser. An investment advisory fee is payable monthly to The Dreyfus
Corporation at the annual rate of 1.00% of the value of the Portfolio's average
daily net assets. Disciplined Stock Portfolio
The Disciplined Stock Portfolio's investment objective is to provide
investment results that are greater than the total return performance of
publicly traded common stocks in the aggregate, as presented by the Standard &
Poor's 500 Composite Stock Price Index. This Portfolio will use quantitative
statistical modeling techniques to construct a portfolio in an attempt to
achieve its investment objective, without assuming undue risk relative to the
broad stock market. An investment advisory fee is payable monthly to The Dreyfus
Corporation at the annual rate of 0.75 of 1% of the value of the Portfolio's
average daily net assets. Small Company Stock Portfolio
The Small Company Stock Portfolio's investment objective is to provide
investment results that are greater than the total return performance of
publicly traded common stocks in the aggregate, as represented by the Russell
2500(TM) Index. This Portfolio invests primarily in a portfolio of equity
securities of small- to medium-sized domestic issuers, while attempting to
maintain volatility and diversification similar to that of the Russell 2500(TM)
Index. An investment advisory fee is payable monthly to The Dreyfus Corporation
at the annual rate of 0.75 of 1% of the value of the Portfolio's average daily
net assets. Balanced Portfolio
The Balanced Portfolio's investment objective is to provide investment
results that are greater than the total return performance of common stocks and
bonds in the aggregate, as represented by a hybrid index 60% of which is
composed of the common stocks in the Standard & Poor's 500 Composite Stock Price
Index and 40% of which is composed of the bonds in the Lehman Brothers
Intermediate Government/Corporate Bond Index. This Portfolio invests primarily
in common stocks and bonds in proportion consistent with their expected returns
and risks as determined by The Dreyfus Corporation. An investment advisory fee
is payable monthly to The Dreyfus Corporation at the annual rate of 0.75% of 1%
of the value of the Portfolio's average daily net assets. Limited Term High
Income Portfolio
The Limited Term High Income Portfolio's investment objective is to
maximize total return, consisting of capital appreciation and current income.
This Portfolio seeks to achieve its objective by investing up to all of its
assets in a portfolio of lower rated fixed-income securities, commonly known as
"junk bonds" that, under normal market conditions, has an effective duration of
three and one-half years or less and an effective average portfolio maturity of
four years or less. Investments of this type are subject to a greater risk of
loss of principal and non-payment of interest. Investors should carefully assess
the risks associated with an investment in the Portfolio (those risks are
described in the Portfolio's Prospectus). An investment advisory fee is payable
monthly to The Dreyfus Corporation at the annual rate of 0.65% of 1% of the
value of the Portfolio's average daily net assets. Stock Index Fund
The Stock Index Fund's investment objective is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. The Stock Index Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation. The Stock Index Fund pays a
monthly management fee to The Dreyfus Corporation at the annual rate of 0.245%
of the value of the Stock Index Fund's average daily net assets. The Dreyfus
Corporation has agreed to pay Mellon Equity Associates a monthly fee at the
annual rate of 0.095% of the value of the Fund's average daily net assets. The
Socially Responsible Fund
The Socially Responsible Fund's primary goal is to provide capital
growth. It seeks to achieve this goal by investing principally in common stocks,
or securities convertible into common stock, of companies which, in the opinion
of the Fund's management, not only meet traditional investment standards, but
also show evidence that they conduct their business in a
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manner that contributes to the enhancement of the quality of life in America.
Current income is a secondary goal. A management fee is payable monthly to The
Dreyfus Corporation at the annual rate of 0.75 of 1% of the value of the
Socially Responsible Fund's average daily net assets. The Dreyfus Corporation
pays NCM Capital Management Group, Inc. a sub- investment advisory fee at the
annual rate of 0.10 of 1% of the Portfolio's average daily net assets up to $32
million; 0.15 of 1% of the Portfolio's average daily net assets in excess of $32
million up to $150 million; 0.20 of 1% of the Portfolio's average daily net
assets in excess of $150 million up to $300 million; and 0.25 of 1% of the
Portfolio's average daily net assets in excess of $300 million.
Meeting 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, the Federal Reserve Board, or any
other government agency. Investing in the Contract involves certain investment
risks, including possible loss of principal.
Since all of the Portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the Variable Account and one or more
other separate accounts investing in the Funds. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate accounts from investing in
the Funds. See the Funds' prospectuses for greater details.
Transamerica receives fees from The Dreyfus Corporation or its
affiliates for providing certain administrative and or other services.
Additional information concerning the investment objectives and
policies of all of the Portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the Funds which accompany this Prospectus. The Funds' prospectuses should be
read carefully before any decision is made concerning the allocation of Purchase
Payments to, or transfers among, the Sub-Accounts. Addition, Deletion, or
Substitution
Transamerica does not control the Funds and cannot guarantee that any
of the Sub-Accounts of the Variable Account or any of the Portfolios will always
be available for allocation of Purchase Payments or transfers. Transamerica
retains the right to make changes in the Variable Account and in its
investments.
Transamerica reserves the right to eliminate the shares of any
Portfolio held by a Sub-Account and to substitute shares of another Portfolio or
of another investment company for the shares of any Portfolio, if the shares of
the Portfolio are no longer available for investment or if, in Transamerica's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Variable Account. To the extent required by the 1940 Act, a
substitution of shares attributable to the Owner's interest in a Sub-Account
will not be made without prior notice to the Owner and the prior approval of the
Commission. Nothing contained herein shall prevent the Variable Account from
purchasing other securities for other series or classes of variable annuity
policies, or from effecting an exchange between series or classes of variable
policies on the basis of requests made by Owners.
New Sub-Accounts may be established when, in the sole discretion of
Transamerica, marketing, tax, investment or other conditions so warrant. Any new
Sub-Accounts will be made available to existing Owners on a basis to be
determined by Transamerica. Each additional Sub-Account will purchase shares in
a Portfolio or in another mutual fund or investment vehicle. Transamerica may
also eliminate one or more Sub-Accounts if, in its sole discretion, marketing,
tax, investment or other conditions so warrant. In the event any Sub-Account is
eliminated, Transamerica will notify Owners and request a re-allocation of the
amounts invested in the eliminated Sub-Account.
In the event of any substitution or change, Transamerica may make such
changes in the Contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the Contracts, the Variable Account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
THE FIXED ACCOUNT
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 Fixed Account is not available
in all states.
Purchase Payments allocated to and amounts transferred to the Fixed
Account become part of the general account of Transamerica, which supports
insurance and annuity obligations. Because of exemptive and exclusionary
provisions,
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interests in the general account have not been registered under the Securities
Act of 1933 (the "1933 Act"), nor is the general account registered as an
investment company under the 1940 Act. Accordingly, neither the general account
nor any interests therein are generally subject to the provisions of the 1933
Act or the 1940 Act, and Transamerica has been advised that the staff of the
Securities and Exchange Commission has not reviewed the disclosures in this
Prospectus which relate to the Fixed Account.
The Guarantee Periods of the Fixed Account are part of the general
account of Transamerica. The general account of Transamerica consists of all the
general assets of Transamerica, other than those in the Variable Account, or in
any other segregated asset account. Instead of the Owner bearing the investment
risk as is the case for values in the Variable Account, Transamerica bears the
full investment risk for all values in the Fixed Account. Transamerica has sole
discretion to invest the assets of its general account subject to applicable
law.
The allocation or transfer of funds to the Fixed Account does not
entitle the Owner to share in the investment experience of Transamerica's
general account. Instead, Transamerica guarantees that the funds allocated or
transferred to the Fixed Account will accrue a specified annual rate of interest
for a specific duration. The rate of interest credited will always be at least
3% per year. Consequently, if the Owner allocates all Net Purchase Payments only
to the Fixed Account and makes no transfers or withdrawals, the minimum amount
of the Account Value will be determinable and guaranteed.
The Owner bears the risk that, after the initial Guarantee Period, Transamerica
will not credit interest in excess of 3% per year to amounts allocated to the
Fixed Account.
Net Purchase Payments allocated to the Fixed Account will establish a
new Guarantee Period of a duration selected by the Owner from among those then
being offered by Transamerica. Every Guarantee Period offered by Transamerica
will have a duration of at least one year. The minimum amount that may be
allocated or transferred to a Guarantee Period is $1,000. Net Purchase Payments
allocated to the Fixed Account will be credited on the date the payment is
received at the Service Center. Any amount transferred from another Guarantee
Period or from a Sub-Account of the Variable Account to the Fixed Account will
establish a new Guarantee Period as of the effective date of the transfer.
Transamerica may delay payment of any withdrawal from the Fixed Account
for up to six months after Transamerica
receives the request for such withdrawal. If Transamerica delays payment for
more than 30 days, Transamerica will pay
interest on the withdrawal amount up to the date of payment. (See "The Fixed
Account" page 24.)
Guarantee Periods
Each Guarantee Period will have its own Guaranteed Interest Rate and
Expiration Date. The Guaranteed Interest Rate applicable to a Guarantee Period
will depend on the date the Guarantee Period is established and the duration
chosen by the Owner. A Guarantee Period chosen may not extend beyond the Annuity
Date.
Transamerica reserves the right to change the maximum number of
Guarantee Periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
Guarantee Period. The effective annual rate of interest established by
Transamerica for a Guarantee Period will remain in effect for the duration of
the Guarantee Period.
Interest will be credited to a Guarantee Period based on its daily
balance at a daily rate which is equivalent to the Guaranteed Interest Rate
applicable to that Guarantee Period for amounts held during the entire Guarantee
Period. Amounts withdrawn or transferred from a Guarantee Period prior to its
Expiration Date will be subject to an interest adjustment as described below. In
no event will the effective annual rate of interest applicable to a Guarantee
Period be less than 3% per year. Interest Adjustment
Except in certain circumstances, an interest adjustment will be made to
any amount withdrawn or transferred from a Guarantee Period before its
Expiration Date. ANY SUCH AMOUNT WITHDRAWN OR TRANSFERRED FROM
A GUARANTEE
PERIOD WILL BE CREDITED WITH INTEREST AT A RATE OF ONLY 3% PER
YEAR FROM THE
DATE THE GUARANTEE PERIOD WAS ESTABLISHED TO THE DATE OF
PAYMENT OR TRANSFER,
REGARDLESS OF THE GUARANTEED INTEREST RATE. THIS MEANS THAT
ANY INTEREST IN
EXCESS OF 3% WILL BE FORFEITED ON THE AMOUNT WITHDRAWN OR
TRANSFERRED.
Exceptions to the interest adjustment include : 1) amounts withdrawn
within 30 days before the Expiration Date of
the Guarantee Period; 2) amounts withdrawn from a Guarantee Period serving as
the Source Account, if available, for Dollar
Cost Averaging transfers (see "Dollar Cost Averaging", page ); and 3) amounts
paid as part of a Death Benefit (see "Death
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Benefit" page___). Whether interest adjustment applies to a withdrawal relates
to whether the Guarantee period has ended, not to whether a Contingent Deferred
Sales Load applies to the withdrawal.
Expiration of Guarantee Period
At least 45 days, but not more than 60 days, prior to the Expiration
Date of a Guarantee Period, Transamerica will notify the Owner as to the options
available when a Guarantee Period expires. The Owner may elect one of the
following options:
(a) transfer the Guarantee Amount of that Guarantee Period to a
new Guarantee Period from among those being offered by
Transamerica at such time. The new Guarantee Period will be
established on the later of (i) the date selected by the
Owner, or (ii) the date the notice, in a form and manner
acceptable to Transamerica, is received by Transamerica at the
Service Center, but in no event later than the day immediately
following the Expiration Date of the previous Guarantee
Period; or
(b) transfer the Guarantee Amount of that Guarantee Period to one
or more Sub-Accounts of the Variable
Account.
Transamerica must receive the Owner's notice electing one of these
options at the Service Center by the expiration date of the Guarantee Period. If
such election has not been received by Transamerica at the Service Center, the
Guarantee Amount of that Guarantee Period will remain in the Fixed Account and a
new Guarantee Period of the same duration as the expiring Guarantee Period, if
offered, will automatically be established by Transamerica with a new Guaranteed
Interest Rate declared by Transamerica for that Guarantee Period. The new
Guarantee Period will start on the day following the expiration date of the
previous Guarantee Period.
If Transamerica is not currently offering Guarantee Periods having the
same duration as the expiring Guarantee Period, the new Guarantee Period will be
the next longer duration, or if Transamerica is not offering Guarantee Periods
longer than the duration of the expiring Guarantee Period, the next shorter
duration.
If the Guarantee Amount of an expiring Guarantee Period is less than
$1,000, Transamerica reserves the right to transfer such amount to the Money
Market Sub-Account of the Variable Account.
A transfer from a Guarantee Period made within the 30-day period ending
on its Expiration Date will not be counted for the purpose of determining the
eighteen allowable transfers per Contract Year, nor will such transfer be
subject to any interest adjustment.
THE CONTRACT
The Contract is a Flexible Purchase Payment Multi-Funded Deferred
Annuity Contract. The rights and benefits are described below and in the
individual contract or in the certificate and group contract; however,
Transamerica reserves the right to make any modification to conform the
individual contract and the group contract and certificates thereunder to, or
give the Owner the benefit of, any federal or state statute or rule or
regulation. The obligations under the Contract are obligations of Transamerica.
The Contracts are available on a non-qualified basis and as individual
retirement annuities (IRAs) that qualify for special federal income tax
treatment and whose initial Purchase Payment is a rollover from a qualified
retirement plan. With Transamerica's prior permission, the Contracts may also be
available as a contributory IRAs, as Section 403(b) annuities and for use in
qualified pension and profit sharing plans established by corporate employers.
Generally, Qualified Contracts contain certain restrictive provisions limiting
the timing and amount of payments to and from distributions from the Qualified
Contract.
The Owner designates the Annuitant. The Annuitant can be the same
person as the Owner and must be the same person in the case of a Qualified
Contract.
Annuity Payments will be made to the Annuitant after the Annuity Date
unless, in the case of a Non-Qualified Contract, the Owner changes the Payee
after the Annuity Date.
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.
APPLICATION AND PURCHASE PAYMENTS
Purchase Payments
All Purchase Payments must be paid to the Service Center. A
confirmation will be issued to the Owner upon the acceptance of each Purchase
Payment.
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The Initial Purchase Payment for each Contract must generally be at
least $5,000. Only upon its grant of prior permission will Transamerica accept
lower initial Purchase Payments for certain Qualified Contracts.
The Contract will be issued and the Net Purchase Payment derived from
the Initial Purchase Payment will generally be accepted and credited within two
business days after the later of receipt of sufficient information to issue a
Contract and receipt of the Initial Purchase Payment at the Service Center. (A
Net Purchase Payment is the Purchase Payment less any applicable premium taxes,
including retaliatory premium taxes.) Acceptance is subject to sufficient
information being provided in a form acceptable to Transamerica, and
Transamerica reserves the right to reject any application or Purchase Payment.
Contracts normally will not be issued with respect to Annuitants more than 80
years old, although Transamerica in its discretion may waive this restriction in
certain cases.
If the Initial Purchase Payment cannot be credited within two days of
receipt of the Purchase Payment and information requesting issuance of a
Contract because the information is incomplete or for any other reason, then
Transamerica will contact the Owner, explain the reason for the delay and will
refund the Initial Purchase Payment within five business days, unless the Owner
consents to Transamerica retaining the Initial Purchase Payment and crediting it
as soon as the requirements are fulfilled.
Each Contract provides for a Free Look Period of 10 days (or longer if
required by state law) after receipt of the Contract during which the Owner may
cancel the Contract. To cancel, the Contract must be returned to Transamerica
with a written notice of cancellation. In some states, including for some ages
of Owners in some states, and in all states for IRAs, Transamerica will refund
the greater of the Purchase Payments or Account Value as of the date the written
notice and the Contract are received by Transamerica. In other states, the
Purchase Payments allocated to the Fixed Account plus the Variable Accumulated
Value will be returned with any adjustments required by applicable law or
regulation (and without imposition of any Contingent Deferred Sales Load) as of
the date the notice and Contract are received. Owners should consult their
registered representative or investment adviser (or see their Contract) for the
applicable provision.
Additional Purchase Payments may be made at any time prior to the
Annuity Date, as long as the Annuitant or Contingent Annuitant is living.
Additional Purchase Payments must be at least $500, or at least $100 if made
pursuant to an automatic payment plan under which the Additional Purchase
Payment is automatically deducted from a bank account. In addition, minimum
allocation amounts apply (see "Allocation of Purchase Payments" on page 28).
Additional Net Purchase Payments are credited to the Contract as of the date the
payment is received.
Total Purchase Payments for any Contract may not exceed $1,000,000
without prior approval of Transamerica. In no event may the sum of all
Purchase Payments for a Contract during any taxable year exceed the
limits imposed
by any applicable federal or state law, rules, or regulations.
Allocation of Purchase Payments
The Owner specifies how Purchase Payments will be allocated under the
Contract. The Owner may allocate the Net Purchase Payments between and among one
or more of the Sub-Accounts of the Variable Account and the Guarantee Periods of
the Fixed Account as long as the portions are whole number percentages and any
allocation percentage for a Sub-Account is at least 10%. In addition, the
initial allocation to any Inactive Sub-Account is subject to a minimum of $500;
the initial allocation to a new Guarantee Period is subject to a minimum of
$1,000. The Owner may choose to allocate nothing to a particular Sub-Account or
Guarantee Period.
With regard to the allocation of Purchase Payments during the Free Look
Period for any portion of the Net Purchase Payments allocated to the Fixed
Account, the amounts specified by the Contract Owner will be allocated to the
Guarantee Period(s) specified by the Contract Owner. With regard to Purchase
Payments allocated to the Variable Account, in most situations where the
Purchase Payment allocated to the Fixed Account plus Variable Accumulation Value
will be refunded upon exercise of the Free Look right, the Net Purchase
Payment(s) derived from the Initial Purchase Payment(s) will be allocated
between and among the Sub-Accounts of the Variable Account and the Guarantee
Periods of the Fixed Account in accordance with the allocation percentages
selected by the Owner. In most situationswhere the greater of Purchase Payments
or Account Value will be refunded on exercise of the Free Look right (and in all
states for IRAs), the Net Purchase Payment derived from the portion of Initial
Purchase Payment allocated to the Variable Account will first be allocated to
the Money Market Sub-Account of the Variable Account and will remain in that
Sub-Account until the estimated end of the Free Look Period (allowing 5 days for
delivery of the Contract by mail). The dollar value of the Variable Accumulation
Units held in the Money Market Sub-Account attributable to such Net Purchase
Payment will then be allocated among the Sub-Accounts of the Variable Account in
accordance with the allocation percentages selected by the Owner. This initial
allocation after the Free Look Period from the Money Market Sub-Account to the
Sub- Account(s) selected by the Owner does not count toward the limit of 18
transfers per Contract Year.
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Each Net Purchase Payment will be subject to the allocation percentages
in effect at the time of receipt of such Purchase Payment. The allocation
percentages for new Purchase Payments between and among the Sub-Accounts of the
Variable Account and the Guarantee Period of the Fixed Account may be changed by
the Owner at any time by submitting a request for such change, in a form and
manner acceptable to Transamerica, to the Service Center. Any changes to the
allocation percentages are subject to the limitation above. Any change will take
effect with the first Purchase Payment received with or after receipt by the
Service Center of the request for such change, in a form and manner acceptable
to Transamerica and will continue in effect until subsequently changed.
If an allocation of an additional Net Purchase Payment is directed to
an Inactive Sub-Account of the Variable Account, then the amount allocated must
be at least $500 if an allocation of an additional Net Purchase Payment is
directed to a new Guaranteed Period of the Fixed Account, then the amount
allocated must be at least $1000.
ACCOUNT VALUE
Before the Annuity Date, the Account Value is equal to: (a) the Fixed
Accumulated Value plus (b) the Variable Accumulated Value. The Fixed Accumulated
Value is the total dollar amount of all Guarantee Amounts held under the Fixed
Account for the Contract prior to the Annuity Date. The Fixed Accumulated Value
is determined without regard to any interest adjustment. The Variable
Accumulated Value is the total dollar amount of all Variable Accumulation Units
under each Sub-Account of the Variable Account held for the Contract prior to
the Annuity Date. The Variable Accumulated Value prior to the Annuity Date is
equal to: (a) Net Purchase Payments allocated to the Sub-Accounts; plus or minus
(b) any increase or decrease in the value of the assets of the Sub-Accounts due
to investment results; less (c) the daily Mortality and Expense Risk Charge;
less (d) the daily Administrative Expense Charge; less (e) any reductions for
the annual Account Fee; plus or minus (f) amounts transferred from or to the
Fixed Account; less (g) any applicable Transfer Fees and Systematic Withdrawal
Option fees; and less (h) any withdrawals from the Sub-Accounts less any premium
tax applicable to those withdrawals.
A Valuation Period is the period between successive Valuation Days. It
begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on
each Valuation Day and ends at the close of the New York Stock Exchange on the
next succeeding Valuation Day. A Valuation Day is each day that the New York
Stock Exchange is open for regular business. The value of the Variable Account
assets is determined at the end of each Valuation Day. To determine the value of
an asset on a day that is not a Valuation Day, the value of that asset as of the
end of the next Valuation Day will be used.
The Variable Accumulated Value is expected to change from Valuation
Period to Valuation Period, reflecting the investment experience of all of the
selected Portfolios as well as the deductions for charges.
Net Purchase Payments which the Owner allocates to a Sub-Account of the
Variable Account are used to purchase Variable Accumulation Units in that
Sub-Account. The number of Variable Accumulation Units to be credited for each
Sub-Account will be determined by dividing the portion of each Net Purchase
Payment allocated to the Sub-Account by the Variable Accumulation Unit Value
determined at the end of the Valuation Period during which the Net Purchase
Payment was received. In the case of the Initial Net Purchase Payment, Variable
Accumulation Units for that payment will be credited to the Account Value within
two Valuation Days of the later of: (a) the date an acceptable and properly
completed application is received at our Service Center; or (b) the date our
Service Center receives the Initial Purchase Payment. In the case of any
subsequent Purchase Payment, Variable Accumulation Units for that payment will
be credited at the end of the Valuation Period during which Transamerica
receives the payment. The value of a Variable Accumulation Unit for each
Sub-Account for a Valuation Period is established at the end of each Valuation
Period and is calculated by multiplying the value of that unit at the end of the
prior Valuation Period by the Sub-Account's Net Investment Factor for the
Valuation Period. The value of a Variable Accumulation Unit may go up or down.
The Net Investment Factor is used to determine the value of
Accumulation and Annuity Unit Values for the end of a Valuation Period. The
applicable formula can be found in the Statement of Additional Information.
Transfers involving Sub-Accounts will result in the purchase and/or
cancellation of Variable Accumulation Units having a total value equal to the
dollar amount being transferred to or from a particular Sub-Account. The
purchase and cancellation of such units generally are made using the Variable
Accumulation Unit value of the applicable Sub-Account as of the end of the
Valuation Day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the Annuity Date, the Owner may transfer all or any portion of
the Account Value among and between the Sub-Accounts of the Variable Account and
the Guarantee Periods of the Fixed Account currently being offered by
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Transamerica.
Transfers among and between the Sub-Accounts and the Guarantee Periods
of the Fixed Account may be made by submitting a request, in a form and manner
acceptable to Transamerica, to the Service Center. No transfers will be
processed until the later of (a) 30 days after the Contract Date or (b) the
estimated end of the Free Look Period (allowing 5 days for delivery of contract
by mail). The transfer request must specify: (a) the Sub-Account(s) and/or
Guarantee Period(s) from which the transfer is to be made; (b) the amount of the
transfer, subject to the minimum transfer amount described in the Contract; and
(c) the Sub-Account(s) and/or Guarantee Period(s) to receive the transferred
amount. The transfer request is subject to the following conditions: (1) not
more than 18 transfers between and among the Guarantee Periods of the Fixed
Account and the Sub-Accounts may be made in any Contract Year; (2) the minimum
amount which may be transferred is $500; (3) the minimum transfer to an Inactive
Sub-Account is $500; and (4) the minimum transfer required to establish a new
Guarantee Period under the Fixed Account is $1,000. Transfers among the
Sub-Accounts are also subject to such terms and conditions as may be imposed by
the Portfolios.
Currently, there is no charge for transfers. However, Transamerica
reserves the right to impose a charge of the lesser of 2% of the amount
transferred or $10 for each transfer after six in any Contract Year. All
requests received during a single Valuation Period will be treated as a single
transfer. A transfer generally will be effective on the date the request for
transfer is received by the Service Center. Transfers involving the Fixed
Account are counted as transfers for purposes of assessing the Transfer Fee
charge for more than six (6) transfers in a Contract Year.
When a transfer is made from a Guarantee Period before its Expiration
Date, the amount transferred will generally be subject to an interest
adjustment. (See "The Fixed Account" page 24.) A transfer from a Guarantee
Period made within the 30-day period ending on its Expiration Date will not be
counted for the purpose of the eighteen allowable transfers per Contract Year,
nor will such transfer be subject to any interest adjustment.
If a transfer reduces the value in a Sub-Account to less than $500,
then Transamerica reserves the right to
transfer the remaining amount along with the amount requested to be transferred
in accordance with the transfer instructions
provided by the Owner. Under current law, there will not be any tax liability to
the Owner if the Owner makes a transfer.
Telephone Transfers
Transamerica will allow telephone transfers if the Owner has provided
proper authorization for such transfers in a form and manner acceptable to
Transamerica. Limitations and rules for these transfers will be provided to the
Owner by Transamerica. Transamerica reserves the right to suspend telephone
transfer privileges at any time, for some or all Contracts, for any reason.
Withdrawals are not permitted by telephone.
Transamerica will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to unauthorized or
fraudulent instructions. Transamerica, however, may be liable for such losses if
it does not follow those reasonable procedures. The procedures Transamerica will
follow for telephone transfers may include requiring some form of personal
identification prior to acting on instructions received by telephone, providing
written confirmation of the transaction, and/or tape recording the instructions
given by telephone. Possible Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect Owners from adverse impacts on Portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant Sub-Account values from one
Sub-Account to another may prevent the underlying Portfolio from taking
advantage of investment opportunities because the Portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in Portfolio transaction costs which must be
indirectly borne by Contract Owners. Therefore, Transamerica reserves the right
to require that all transfer requests be made by the Contract Owner and not by a
third party holding a power of attorney and to require that each transfer
request be made by a separate communication to Transamerica. Transamerica also
reserves the right to request that each transfer request be submitted in writing
and be manually signed by the Contract Owner(s); facsimile transfer requests may
not be allowed. Dollar Cost Averaging
Prior to the Annuity Date, the Owner may request that amounts be
automatically transferred from one (and only one) of the Sub-Accounts which
invest in the Money Market or Quality Bond Portfolios (the "Source Account"), to
any of the Sub-Accounts of the Variable Account on a monthly basis by submitting
a request to the Service Center in a form and manner acceptable to Transamerica.
Transfers may be allowed from Source Accounts in addition to the Money Market
and Quality Bond Sub-Accounts and may include the shortest Guarantee Period of
the Fixed Account; call the Service Center for the availability of other Source
Account options. The transfers will begin the month following, but no sooner
than one week following, receipt of such request, provided that
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Dollar Cost Averaging transfers will not commence until the later of (a) 30 days
after the Contract Date, or (b) the estimated end of the Free Look Period
(allowing 5 days for delivery of the Contract by mail). Transfers will continue
for twelve consecutive months unless (1) terminated by the Owner, (2)
Transamerica has provided for a longer term, (3) automatically terminated by
Transamerica because there are insufficient funds in the Source Account, or (4)
for other reasons as set forth in the Contract. The Owner may request that
monthly transfers be continued for a term then available by giving notice to the
Service Center in a form and manner acceptable to Transamerica within 30 days
prior to the last monthly transfer. If no request to continue the monthly
transfers is made by the Owner, this option will terminate automatically with
the last transfer.
In order to be eligible for Dollar Cost Averaging, the Owner must meet
the following conditions: (1) the value of the Source Account must be at least
$5,000; (2) the minimum amount that can be transferred out of the Source Account
is $250 per month; and (3) the minimum amount transferred into any other
Sub-Account is the greater of $250 or 10% of the amount being transferred.
Dollar Cost Averaging transfers can not be made from a Source Account from which
Systematic Withdrawals or Automatic Payouts are being made.
There is no charge for the Dollar Cost Averaging service and transfers
due to Dollar Cost Averaging will not count toward the number of transfers
allowed without charge or the limit of 18 transfers per Contract Year. There
will be no interest adjustments on Dollar Cost Averaging transfers from the
Fixed Account, if allowed as a Source Account by Transamerica.
Dollar Cost Averaging transfers may not be made to the Fixed Account.
Automatic Asset Rebalancing
After Purchase Payments have been allocated among the variable
Sub-Accounts, the performance of each Sub- Account may cause this allocation to
change. The Owner may instruct Transamerica to automatically rebalance the
amounts in the Variable Accumulated Value by reallocating amounts among the
variable Sub-Accounts, at the time, and in the percentages, specified in the
Owner instructions to Transamerica and accepted by Transamerica. The Owner may
elect to have the rebalancing done on an annual, semi-annual or quarterly basis.
The Owner may elect to have amounts allocated among the Sub-Accounts using whole
percentages, with a minimum of 10% allocated to each Sub-Account.
The Owner may elect to establish, change or terminate the Automatic
Asset Rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. Automatic Asset Rebalancing will not count
towards the limit of 18 transfers in a Contract Year. There is currently no
charge for the Automatic Asset Rebalancing, however, Transamerica reserves the
right to charge a nominal amount for this feature. Transamerica reserves the
right to discontinue offering Automatic Asset Rebalancing any time for any
reason. After the Annuity Date
If a Variable Annuity Payout Option is elected, the Owner may make
transfers among Sub-Accounts after the Annuity Date by giving a request to the
Service Center in a form acceptable to Transamerica, subject to the following
provisions: (1) transfers after the Annuity Date may be made no more than four
times during any Annuity Year; and (2) the minimum amount transferred from one
Sub-Account to another is the amount supporting a then current $75 monthly
payment.
Transfers among Sub-Accounts during the Annuity Period will be
processed based on the formula outlined in the Statement of Additional
Information.
CASH WITHDRAWALS
Withdrawals
The Owner may withdraw all or part of the Cash Surrender Value for a
Contract at any time during the life of the Annuitant(s) and prior to the
Annuity Date by giving a written request to the Service Center and subject to
the rules below. Federal or state laws, rules or regulations may also apply. No
Withdrawals may be made after the Annuity Date. The amount payable to the Owner
if the Contract is surrendered on or before the Annuity Date is the Cash
Surrender Value which is equal to the Account Value, less the Account Fee, less
any interest adjustment, less any applicable Contingent Deferred Sales Load, and
less applicable premium taxes. If the Account Value exceeds $50,000 on the date
the Contract is surrendered, and where permitted by state law, the Account Fee
will be waived.
Partial withdrawals must be at least $500. In some states, only one
partial withdrawal will be permitted while the Systematic Withdrawal Option is
in effect. In other states, no partial withdrawals will be permitted while the
Systematic Withdrawal Option is in effect.
In the case of a partial withdrawal, the Owner may direct the Service
Center to withdraw amounts from specific Sub-
Account(s) and/or from the Fixed Account. If the Owner does not specify the
Sub-Account(s) from which the withdrawal
is to be made, the withdrawal will be taken pro rata from all Sub-Accounts of
the Variable Account with current values. If
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the requested withdrawal reduces the value of a Sub-Account from which the
withdrawal was made to less than $500, Transamerica reserves the right to
transfer the remaining value of that Sub-Account pro rata among the other Active
Sub-Accounts with values equal to or greater than $500. If no such Sub-Accounts
exist, such transfer will be made to the Money Market Sub-Account. The Owner
will be notified in writing of any such transfer.
A partial withdrawal request will not be processed if it would reduce
the Account Value to less than $2,000. In that case, the Owner will be notified
that he or she will have 10 days from the date notice is mailed to: (a) withdraw
a lesser amount (subject to the $500 minimum), leaving an Account Value of at
least $2,000; or (b) surrender the Contract for its Cash Surrender Value.
(Amounts payable will be determined as of the end of the Valuation Period during
which the subsequent instructions are received.) If, after the expiration of the
10-day period, no written election is received from the Owner, the withdrawal
request will be considered null and void, and no withdrawal will be processed.
A full surrender will result in a cash withdrawal payment equal to the
Cash Surrender Value at the end of the Valuation Period during which the
election is received along with all completed forms. Any applicable Contingent
Deferred Sales Load will be deducted from the amount paid.
The Account Fee, unless waived, will be deducted from a full surrender
before the application of any Contingent Deferred Sales Load (see "Charges and
Deductions" page 35).
Withdrawals may be taxable transactions. The Code requires Transamerica
to withhold federal income tax from withdrawals. Generally, an Owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the withdrawal which is includible in income and
subject to federal income tax. The federal income tax withholding rate is
currently 10% of the taxable amount of the withdrawal. Withholding applies only
if the taxable amount of the withdrawal is at least $200. Some states also
require withholding for state income taxes. Moreover, the Code provides that a
10% penalty tax may be imposed on the taxable portions of distributions for
certain early withdrawals. (See "Federal Tax Matters" page 41.)
Withdrawal (including surrender) requests generally will be processed
as of the end of the Valuation Period during which the request, including all
completed forms, is received. Payment of any cash withdrawal or lump sum death
benefit due from the Variable Account will occur within seven days from the date
the election is received, except that Transamerica may postpone such payment if:
(1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted; or (2) an
emergency exists as defined by the Commission, or the Commission requires that
trading be restricted; or (3) the Commission permits a delay for the protection
of Owners. The withdrawal request will be effective when all appropriate
withdrawal request forms are received. Payments of any amounts derived from a
Purchase Payment paid by check may be delayed until the check has cleared the
Owner's bank.
When a withdrawal is made from a Guarantee Period before its Expiration
Date, the amount withdrawn will generally be subject to an interest adjustment.
(See "Interest Adjustment" page 24.)
Transamerica may delay payment of any withdrawal from the Fixed Account
for up to six months after Transamerica receives the request for such
withdrawal. If Transamerica delays payment for more than 30 days, Transamerica
will pay interest on the withdrawal amount up to the date of payment. (See "The
Fixed Account" page 24.)
SINCE THE OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE
CERTAIN
WITHDRAWALS ARE SUBJECT TO A CONTINGENT DEFERRED SALES LOAD,
THE TOTAL AMOUNT
PAID UPON SURRENDER OF THE CONTRACT (TAKING INTO ACCOUNT ANY
PRIOR WITHDRAWALS)
MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS PAID.
After a withdrawal of the total Cash Surrender Value, or at any time
that the Account Value is zero, all rights of the Owner will terminate.
An Owner may elect, under the Systematic Withdrawal Option or Automatic
Payout Option (but not both), to
withdraw certain amounts on a periodic basis from the Sub-Accounts prior to the
Annuity Date.
Systematic Withdrawal Option
Prior to the Annuity Date, the Owner, by giving Written Notice to the
Service Center, may elect to have withdrawals automatically made from one or
more Sub-Account(s) of the Variable Account on a monthly basis. (Other
distribution modes may be permitted.) The withdrawals will commence the month
following, but no sooner than one week following, receipt of Written Notice,
except that they will not commence sooner than the later of (a) 30 days after
the Contract Date or (b) the end of the Free Look Period. Upon written notice to
the Owners, Transamerica may change the day of the month on which withdrawals
are made under this option. Withdrawals will be from the Sub-Account(s) and in
the percentage allocations specified by the Owner. If no specifications are
made, withdrawals will be pro-rata from all Sub-Account(s) with value.
Systematic Withdrawals can not be made from a Sub-Account from which Dollar Cost
Averaging transfers are being made.
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. The maximum monthly amount that
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can be withdrawn on an annual basis is equal to the sum, as of the date of the
first withdrawal, of (a) 10% of Purchase Payments that are less than seven
Contract Years old and (b) 10% of remaining Purchase Payments that are at least
seven Contract Years old.
Systematic withdrawals are not subject to the Contingent Deferred Sales
Load but can be reduced by any applicable
premium tax. Systematic withdrawals may be taxable, subject to withholding, and
subject to the 10% penalty tax. (See
"Federal Tax Matters" page 41.)
The systematic withdrawals will continue unless terminated by the Owner
or automatically terminated by Transamerica as set forth in the Contract. If
this option is terminated it may not be elected again until the next Contract
Anniversary. In some states, no partial withdrawal may be made while the
Systematic Withdrawal Option is in effect and any partial withdrawal will
automatically terminate the Systematic Withdrawal Option and any portion of such
partial withdrawal, which exceeds the Allowed Amount for withdrawals after the
first withdrawal in a Contract Year will be subject to a Contingent Deferred
Sales Load (see page 40). In other states, only one partial withdrawal can be
made while the Systematic Withdrawal Option is in effect and more than one
partial withdrawal while this option is in effect will automatically terminate
the Systematic Withdrawal Option and the amounts taken as the first and second
partial withdrawals which exceed the Allowed Amount for withdrawals after the
first withdrawal in a Contract Year, will be subject to a Contingent Deferred
Sales Load (see page ).
Transamerica reserves the right to impose an annual fee of an amount
not to exceed $25 per Contract year for administrative expenses associated with
processing the systematic withdrawals. This fee, which is currently waived, will
be deducted from each systematic withdrawal in equal installments during a
Contract Year.
The Systematic Withdrawal Option is not available with respect to the
Fixed Account. Consult your tax adviser and,
if applicable, the particular retirement plan, before requesting withdrawals
from a Qualified Contract. There may be severe
restrictions with regard to withdrawals from Qualified Contracts.
Automatic Payout Option
Prior to the Annuity Date, the Owner may elect the Automatic Payout
Option ("APO") to satisfy minimum distribution requirements under the Code for
Qualified Contracts, including under Section 408(b)(3) of the Code with regard
to IRA's. See the Automatic Payout Option discussion under Qualified Plans on
page 41.
DEATH BENEFIT
If an Owner or Annuitant dies before the Annuity Date, a death benefit
is payable.
The death benefit will be equal to the greatest of (1) the Account
Value, (2) the greatest Account Value determined as of the seventh Contract
Anniversary and at each succeeding Contract Anniversary occurring at subsequent
seven year intervals thereafter, adjusted for any subsequent Purchase Payments
paid by the Owner (less the sum of all subsequent withdrawals and any premium
taxes applicable to those withdrawals), or (3) the sum of all Purchase Payments,
less withdrawals and any premium taxes applicable to those withdrawals, plus
interest thereon equal to a 5% annual effective rate, credited on a daily basis
up to (i) the Contract Anniversary following the earlier of any Owner's or
Annuitant's 75th birthday, or (ii) the date the sum of all Purchase Payments,
(less the sum of all withdrawals and any premium taxes), together with credited
interest, has grown to two times the amount of all Purchase Payments (less all
withdrawals and any premium taxes) as a result of such interest accumulation, if
earlier. For Contracts purchased by any Owner or with an Annuitant age 75 or
older, the death benefit available under option three above will be the sum of
all Purchase Payments, less withdrawals and any premium taxes applicable to
these withdrawals.
The death benefit will be determined as of the end of the Valuation
Period during which the later of (a) Proof of Death of the Owner or Annuitant is
received by the Service Center and (b) a written notice of the method of
settlement elected by the Beneficiary is received at the Service Center. If no
settlement method is elected, the death benefit will be paid no later than one
year after the date of death. No Contingent Deferred Sales Load will apply.
Until the death benefit is paid, the Account Value allocated to the Variable
Account will remain in the Sub-Accounts as previously specified by the Owner or
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in the Sub-Accounts as reallocated pursuant to instructions received by
Transamerica from all Beneficiaries. Therefore, the value of the Variable
Account will fluctuate with investment performance of the applicable
Sub-Account(s), and accordingly, the amount of the death benefit depends on the
Account Value at the time the death benefit is paid.
There is no extra charge for the death benefit, and it applies
automatically (i.e. no election by the Owner is necessary).
Payment of Death Benefit
The death benefit is generally payable upon receipt of Proof of Death
of the Annuitant or Owner. Where the Owner is not an individual, the death
benefit is generally payable upon receipt of Proof of Death of the Annuitant.
Upon receipt of this proof and an election of a method of settlement, the death
benefit generally will be paid within seven days, or as soon thereafter as
Transamerica has sufficient information about the Beneficiary to make the
payment. The Beneficiary may receive the amount payable in a lump sum cash
benefit or, subject to any limitations under any state or federal law, rule, or
regulation, under one of the Annuity Forms unless a settlement agreement is
effective under the Contract preventing such election. If no settlement method
is elected within one year of the date of death, the death benefit will be paid
in a lump sum. The payment of the death benefit may be subject to certain
distribution requirements under the federal income tax laws. (See "Federal Tax
Matters" page 41.) Designation of Beneficiaries
The Owner may select one or more Beneficiaries and name them in a form
and manner acceptable to Transamerica. If the Owner selects more than one
Beneficiary, unless otherwise indicated by the Owner they will share equally in
any death benefits payable in the event of the Annuitant's death before the
Annuity Date if there is no Contingent Annuitant, or the Owner's death if there
is no Joint Owner and the Owner is an individual other than the annuitant.
Different Beneficiaries may be named with respect to the Annuitant's death
(Annuitant's Beneficiary) and the Owner's death (Owner's Beneficiary). Before
the Annuitant's death, the Owner may change the Beneficiary by notice to the
Service Center. The Owner may also make the designation of Beneficiary
irrevocable by sending notice to and obtaining approval from the Service Center.
Irrevocable Beneficiaries may be changed only with the written consent of the
designated Irrevocable Beneficiaries, except to the extent required by law.
The interest of any Beneficiary who dies before the Owner or Annuitant
will terminate at the death of the Beneficiary. The interest of any Beneficiary
who dies at the time of, or within 30 days after, the death of the Owner or
Annuitant will also terminate if no benefits have been paid unless the Contract
has been endorsed to provide otherwise. The benefits will then be paid as though
the Beneficiary had died before the Owner or Annuitant. If the interest of all
Beneficiaries has terminated, any benefits payable will be paid to the Owner's
or Owners' estate.
Transamerica may rely on an affidavit by any responsible person in
determining the identity or non-existence of any Beneficiary not identified by
name.
Death of Annuitant Prior to the Annuity Date
If the Annuitant dies prior to the Annuity Date and the Annuitant is
not an Owner and there is no Contingent Annuitant, a death benefit under the
Contract relating to that Annuitant will be paid to the Annuitant's Beneficiary.
If there is a Contingent Annuitant, then upon the death of the Annuitant the
Contingent Annuitant will become the Annuitant and no death benefit will be paid
at that time. Death of Owner Prior to the Annuity Date
If an Owner die before the Annuity Date, a death benefit will be paid
to that Owner's Beneficiary. If the Contract has Joint Owner's, the surviving
Joint Owner will be the Owner's Beneficiary. If the surviving Owner's
Beneficiary is the deceased Owner's spouse, then that spouse may elect to treat
the Contract as his or her own or receive payment of the Death Benefit. The
payment of the death benefit may be subject to certain distribution requirements
under the federal income tax laws. (See "Federal Tax Matters," page 41.)
Death of Annuitant or Owner After the Annuity Date
If the Annuitant or an Owner dies after the annuity starts, the
remaining undistributed portion, if any, of the Contract will be distributed at
least as rapidly as under the method of distribution being used as of the date
of such death. Under some Annuity Forms, there will be no death benefit. If the
Owner is not the Annuitant, upon an Owner's death, any remaining ownership
rights will pass to the Owner's Beneficiary.
CHARGES AND DEDUCTIONS
No deductions are made from Purchase Payments except for any applicable
premium taxes. Therefore, the full amount, less any premium taxes, of the
Purchase Payments are invested in one or more of the Sub-Accounts of the
Variable Account and/or in the Guarantee Periods of the Fixed Account.
As more fully described below, charges under the Contract are assessed
in three ways: (1) as deductions for the
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Account (or Annuity) Fees, any Transfer Fees, any Systematic Withdrawal Option
or Asset Rebalancing fees, any interest adjustment (for withdrawals from the
Fixed Account) and, if applicable, for premium taxes; (2) as charges against the
assets of the Variable Account for the assumption of mortality and expense risks
and administrative expenses; and (3) as Contingent Deferred Sales Loads. In
addition, certain deductions are made from the assets of the Portfolios for
investment management fees and expenses. These fees and expenses are described
in the Funds' prospectuses and in their statements of additional information.
Contingent Deferred Sales Load
No deduction for sales charges is made from Purchase Payments (although
premium tax may be deducted). However, a Contingent Deferred Sales Load of up to
6% of Purchase Payments made may be imposed on certain withdrawals or surrenders
from the Account Value to partially cover certain expenses incurred by
Transamerica relating to the sale of the Contract, including commissions paid to
salespersons, the costs of preparation of sales literature and other promotional
costs and acquisition expenses.
The Contingent Deferred Sales Load percentage varies according to the
number of Contract Years between the Contract Year in which a Net Purchase
Payment was credited to the Contract and the Contract Year in which the
withdrawal is made. The amount of the Contingent Deferred Sales Load is
determined by multiplying the amount withdrawn subject to the Contingent
Deferred Sales Load by the Contingent Deferred Sales Load percentage in
accordance with the following table. In no event shall the aggregate Contingent
Deferred Sales Load assessed against the Contract exceed 6% of the aggregate
Purchase Payments.
Number of Contingent Deferred
Contract Years Sales Load As a
Since Receipt of Each Percentage of
Purchase Payment Purchase Payment
Less than one year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more years 0%
The Owner may make withdrawals from the Account Value up to the
"Allowed Amount" (described below) without incurring a Contingent Deferred Sales
Load each Contract Year before the Annuity Date. During the first Contract Year,
the Allowed Amount is equal to accumulation earnings not previously withdrawn.
For the first withdrawal, and only the first withdrawal, in a Contract Year
after the first Contract Year, the available Allowed Amount is equal to the sum
of: (a) all Purchase Payments not previously withdrawn and received at least
seven Contract Years before the date of withdrawal; plus (b) the greater of (i)
the accumulated earnings not previously withdrawn or (ii) 15% of Purchase
Payments received at least one but less than seven complete Contract Years
before the date of withdrawal not reduced to take into account any withdrawals
deemed to be made from such purchase payments. For withdrawals after the first
withdrawal in a Contract Year after the first Contract Year, the available
Allowed Amount is equal to the sum of: (a) all Purchase Payments, not previously
withdrawn and received at least seven complete Contract Years before the date of
withdrawal; plus (b) accumulated earnings not previously withdrawn. Withdrawals
will always be made first from accumulated earnings, and then from Purchase
Payments on a first in first out basis. Therefore, accumulation earnings could
be withdrawn as part of the first withdrawal in a Contract Year and, therefore,
not be available for withdrawals made later that Contract Year. If an Allowed
Amount is not withdrawn during a Contract Year, it does not carry over to the
next Contract Year. However, accumulated earnings, if any, in an Owner's Account
Value are always available as the Allowed Amount. No withdrawals are allowed
with regard to Purchase Payments made by a check which has not cleared. A
withdrawal not subject to a Contingent Deferred Sales Load will generally
receive an interest adjustment if made from a Guarantee Period before its
expiration (see "Interest Adjustment" page ).
Some Contract Owners may hold Contracts which, when originally issued,
provided for an Allowed Amount which was equal to the sum of (1) all Purchase
Payments, not previously withdrawn and held more then seven Contract Years plus
(2) 10% of Purchase Payments held between one and seven Contract Years not
reduced by any withdrawals made from such Purchase Payments. Under these
Contracts, withdrawals were made first to Purchase Payments (on a first in first
out basis). The Allowed Amount applicable to these Contract Owners will be
determined by whichever formula provides them with the larger amount available,
for full surrenders only, without a Contingent Deferred Sales Load.
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No Contingent Deferred Sales Load will be charged on the Allowed Amount
if a Contract is surrendered and the Owner was eligible to withdraw the amount
without charge but had not made such a withdrawal during the Contract Year in
which the date of surrender occurs. In addition, no Contingent Deferred Sales
Load is assessed: (a) upon annuitization after the first three Contract Years to
an option involving life contingencies; (b) upon payment of the Death Benefit;
(c) upon transfers of Account Value among and between the Sub-Accounts of the
Variable Account and the Guarantee Periods of the Fixed Account; (d) under the
Systematic Withdrawal Option; (e) or, in some circumstances, under the Automatic
Payout Option. Any applicable Contingent Deferred Sales Load will be deducted
from the amount requested for both partial withdrawals and full surrenders. The
Contingent Deferred Sales Load and any premium tax applicable to a withdrawal
from the Fixed Account will be deducted from the amount withdrawn after the
interest adjustment, if any, is applied and before payment is made to the Owner.
The Contingent Deferred Sales Load arising from a withdrawal or
surrender of the Contract will be waived if the Owner receives extended medical
care in a licensed hospital or nursing care facility for a least 45 days (30
days for Contracts issued in Pennsylvania) during any continuous 60 day period
beginning on or after the first Contract Anniversary and the request for the
withdrawal or surrender, together with proof of such extended care, is received
at the Service Center during the term of such care or within 90 days after the
last day upon which the Owner received such extended care. This waiver of the
Contingent Deferred Sales Load may not be available in all states and does not
apply if the Owner is receiving extended medical care in a licensed hospital or
nursing care facility at the time the Owner applied for the Contract or at the
Contract Date.
Additionally, in some states, the Contingent Deferred Sales Load
arising from a withdrawal or surrender of the Contract will be waived if the
Owner is diagnosed with a terminal illness, reasonably expected to result in
death within twelve months, after the first Contract Year. Proof of the terminal
illness must be received by the Service Center at the time the withdrawal or
surrender request is received. Administrative Charges
At the end of each Contract Year before the Annuity Date, Transamerica
deducts an annual Account Fee as partial compensation for expenses relating to
the issue and maintenance of the Contract, and the Variable Account. The annual
Account Fee is equal to the lesser of $30 or 2% of the Account Value. The
Account Fee may be changed upon 30 days advance written notice, but in no event
may it exceed the lesser of $60 or 2% of the Account Value. Such increases in
the Account Fee will apply only to future deductions after the effective date of
the change. If the Contract is surrendered on other than the end of a Contract
Year, the Account Fee will be deducted in full at the time of such surrender.
The Account Fee will be deducted on a pro rata basis from each Sub-Account in
which the Account is invested at the time of such deduction. If the entire
Account is in the Fixed Amount, then the annual Account Fee will be deducted on
a pro rata basis from all Guarantee Periods under the Fixed Account. The Account
Fee for a Contract Year may be waived if the Account Value exceeds $50,000 on
the last business day of that Contract Year or as of the date the Contract is
surrendered. This waiver of the Account Fee may not be available in all states.
After the Annuity Date, an annual Annuity Fee of $30 will be deducted
in equal amounts from each Variable Annuity
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Payment made during the year ($2.50 each month if monthly payments). This fee
will not be changed. No Annuity Fee will be deducted from Fixed Annuity
Payments.
Transamerica also makes a deduction (the Administrative Expense Charge)
from the Variable Account at the end of each Valuation Period (both before and
after the Annuity Date) at an effective current annual rate of 0.15% of assets
held in each Sub-Account for those administrative expenses attributable to the
Contract and the Variable Account which exceed the revenues received from the
Account Fee, any Transfer Fee, and any fee imposed for Systematic Withdrawals.
Transamerica has the ability to increase or decrease this charge, but the charge
is guaranteed not to exceed 0.25%. Transamerica will provide 30 days written
notice of any change in fees. The administrative charges do not bear any
relationship to the actual administrative costs of a particular Contract. The
Administrative Expense Charge is reflected in the Variable Accumulation or
Variable Annuity Unit Values for each Sub-Account. Mortality and Expense Risk
Charge
Transamerica imposes a charge called the Mortality and Expense Risk
Charge to compensate it for bearing certain mortality and expense risks under
the Contract. For assuming these risks, Transamerica makes a daily charge equal
to .003403% corresponding to an effective annual rate of 1.25% of the value of
the net assets in the Variable Account. This charge is imposed before the
Annuity Date and if an Annuity Purchase Amount is applied to a Variable Payment
Option, also after the Annuity Date. Transamerica guarantees that this charge of
1.25% will never increase.
The Mortality and Expense Risk Charge is reflected in the Variable
Accumulation and Variable Annuity Unit Values for each Sub-Account.
Variable Accumulated Values and Variable Annuity Payments are not
affected by changes in actual mortality experience incurred by Transamerica. The
mortality risks assumed by Transamerica arise from its contractual obligations
to make Annuity Payments (determined in accordance with the annuity tables and
other provisions contained in the Contract) and to pay death benefits prior to
the Annuity Date. Thus Owners are assured that neither the Annuitant's own
longevity nor an unanticipated improvement in general life expectancy will
adversely affect the Annuity Payments under the Contract.
Transamerica also bears substantial risk in connection with the death
benefit before the Annuity Date, since it will pay a death benefit that may
exceed the Cash Surrender Value. In this way, Transamerica bears the risk of
unfavorable experience in the Sub-Accounts.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the Contracts and the Variable
Account will exceed the amount recovered through the Administrative Expense
Charge, Account Fees, Transfer Fees and any fees imposed for Systematic
Withdrawals.
If the Mortality and Expense Risk Charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the Contingent Deferred Sales Load will
not generate sufficient funds to pay the cost of distributing the Contracts. To
the extent that the Contingent Deferred Sales Load is insufficient to cover the
actual cost of Contract distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the Mortality and Expense Risk Charge. Premium Taxes
Transamerica may be required to pay premium or retaliatory taxes
currently ranging from 0% to 3.5% in connection with Purchase Payments or values
under the Contracts. Depending upon applicable state law, Transamerica may
deduct the premium taxes which are payable with respect to a particular Contract
from the Purchase Payments, from amounts withdrawn, or from amounts applied on
the Annuity Date. In some states, charges for both direct premium taxes and
retaliatory premium taxes may be imposed at the same or different times with
respect to the same Purchase Payment, depending upon applicable state law.
In certain limited circumstances, a broker-dealer or other entity
distributing the Contracts may elect to pay to
Transamerica an amount equal to the premium taxes that would otherwise be
attributable to that entity's customers. In such
cases, Transamerica will not impose a premium tax charge on those Contracts.
Transfer Fees
Transamerica currently does not charge for transfers including
Automatic Asset Rebalancing. However, Transamerica may impose a fee for each
transfer in excess of the first six in a single Contract Year. Transamerica will
deduct the charge from the amount transferred. This fee would be no more than
$10 and would be used to help cover Transamerica's costs of
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processing transfers. Currently, no fee is charged for Automatic Asset
Rebalancing. However, Transamerica reserves the
right to impose a nominal fee.
Systematic Withdrawal Option
Transamerica reserves the right to impose an annual fee of an amount
not to exceed $25 for administrative expenses
associated with processing systematic withdrawals. This fee, which is currently
waived, will be deducted from each systematic
withdrawal in equal installments during a Contract Year.
Taxes
Under present laws, Transamerica will incur state or local taxes (in
addition to the premium taxes described above) in several states. No charges are
currently made for taxes other than state premium taxes. However, Transamerica
reserves the right to deduct charges in the future for federal, state, and local
taxes or the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the Contracts. Portfolio Expenses
The value of the assets in the Variable Account reflects the value of
Portfolio shares and therefore the fees and
expenses paid by each Portfolio. A complete description of the fees, expenses,
and deductions from the Portfolios are found
in the Funds' prospectuses. (See "The Funds" page 21.)
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from the Guarantee Periods of the Fixed Account, see
"The Fixed Account" page 24.
ANNUITY PAYMENTS
Annuity Date
Initially, the Annuity Date is selected by the Owner at the time the
Initial Purchase Payment is made. Thereafter, the Annuity Date may be changed
from time to time by the Owner by giving notice, in a form and manner acceptable
to Transamerica, to the Service Center, provided that notice of each change is
received by the Service Center at least thirty (30) days prior to the
then-current Annuity Date. The Annuity Date must not be earlier than the third
Contract Anniversary, except for IRAs. The latest Annuity Date which may be
elected is the later of (a) the first day of the calendar month immediately
preceding the month of the Annuitant's 85th birthday, or (b) the first day of
the month coinciding with or next following the tenth Contract Anniversary. This
Annuity Date extension to the tenth Contract Anniversary may not be available in
all states.
The Annuity Date must be the first day of a calendar month. The first
Annuity Payment will be made on the first
day of the month immediately following the Annuity Date.
Annuity Payment
The Annuity Date is the date that the Annuity Purchase Amount is
applied to provide the Annuity Payments under the Contract under the selected
Annuity Form and Payment Option, unless the entire Account Value has been
withdrawn or the death benefit has been paid to the Beneficiary prior to that
date. The Annuity Purchase Amount is the Account Value, less any interest
adjustment, less any applicable Contingent Deferred Sales Load and less any
applicable premium taxes. Any Contingent Deferred Sales Load will be waived if
values are applied to an Annuity Form involving life contingencies on or after
the third Contract Anniversary.
If the amount of the monthly Annuity Payment from any of the Payment
Options selected by the Owner would result in a monthly annuity payment of less
than $150, or if the Annuity Purchase Amount is less than $5,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the Cash
Surrender Value in a cash payment. Monthly Annuity Payments from the Variable
Annuity Payment Option will further be subject to a minimum monthly annuity of
$75 from each Sub-Account of the Variable Account from which such payments are
made.
The Owner may choose from the Annuity Forms below. Transamerica may
consent to other plans of payment before the Annuity Date. For Annuity Forms
involving life income, the actual age and/or sex of the Annuitant, or a Joint or
Contingent Annuitant will affect the amount of each payment. Sex-distinct rates
generally are not allowed under certain Qualified Contracts. Transamerica
reserves the right to ask for satisfactory proof of the Annuitant's (or Joint or
Contingent Annuitant's) age. Transamerica may delay Annuity Payments until
satisfactory proof is received. Since payments to older Annuitants are expected
to be fewer in number, the amount of each Annuity Payment shall be greater for
older Annuitants than for younger Annuitants.
The Owner may choose from the two Annuity Payment Options described
below. The Annuity Date and Annuity Forms available for Qualified Contracts may
also be controlled by endorsements, the plan or applicable law.
A portion or the entire amount of the Annuity Payments may be taxable
as ordinary income. If, at the time the Annuity Payments begin, Transamerica has
not received a proper written election not to have federal income taxes
withheld,
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Transamerica must by law withhold such taxes from the taxable portion of such
annuity payments and remit that amount to the federal government. Federal income
tax withholding is mandatory for certain distributions from Section 401
retirement plans and 403(b) annuities. State income tax withholding may also
apply. (See "Federal Tax Matters" page 41.)
Election of Annuity Forms and Payment Options
The Annuity Form and Payment Option for each Contract is set as a 120
month period certain and life Annuity Form, under the Variable Payment Option.
Before the Annuity Date, and while the Annuitant is living, the Owner
may, by Written Request, change the Annuity Form or Annuity Payment Option or
may request payment of the Cash Surrender Value for the Contract. The request
for change of the Annuity Date or Annuity Payment Option must be received by the
Service Center at least 30 days prior to the Annuity Date.
In the event that an Annuity Form and Payment Option is not selected at
least 30 days before the Annuity Date,
Transamerica will make Variable Annuity Payments in accordance with the 120
month period certain and life Annuity Form
and the applicable provisions of the Contract.
Annuity Payment Options
The Annuity Forms may be paid under Fixed or Variable Annuity Payment
Options. Under the Fixed Annuity Payment Option, the amount of each payment will
be determined on the Annuity Date and will not subsequently be affected by the
investment performance of the Sub-Accounts. Under the Variable Annuity Payment
Option, the Annuity Payments, after the first Annuity Payment, will reflect the
investment experience of the Sub-Account or Sub-Accounts chosen by the Owner.
Owners may elect a Fixed Annuity, a Variable Annuity, or a combination
of both (in 25% increments of the Annuity Purchase Amount). If the Owner elects
a combination, he or she must specify what part of the Annuity Purchase Amount
is to be applied to the Fixed and Variable Payment Options. Unless specified
otherwise, the applied Annuity Purchase Amount will be used to provide a
Variable Annuity. In this event, the initial allocation of Variable Annuity
Units to the Variable Sub-Accounts will be in the proportion of the Account
Value to the value in the Sub-Accounts on the Annuity Date. Fixed Annuity
Payment Option
A Fixed Annuity provides for Annuity Payments which will remain
constant pursuant to the terms of the Annuity Form elected. If a Fixed Annuity
is selected, the portion of the Annuity Purchase Amount used to provide the
Fixed Annuity will be transferred to the general account assets of Transamerica,
and the amount of Annuity Payments will be established by the fixed annuity
provisions selected and the age and sex (if sex-distinct rates are allowed by
law) of the Annuitant and will not reflect investment experience after the
Annuity Date. The Fixed Annuity Payment amounts are determined by applying the
Annuity Purchase Rate specified in the Contract to the portion of the Annuity
Purchase Amount applied to the Fixed Annuity Option by the Owner. Payments may
vary after the death of the Annuitant under some Annuity Options; the amounts of
these variances are fixed on the Annuity Date. Variable Annuity Payment Option
A Variable Annuity provides for payments that vary in dollar amount,
based on the investment performance of the selected Sub-Account(s) of the
Variable Account. The Variable Annuity Purchase Rate Tables in the Contract
reflect an assumed annual interest rate of 4%, so if the actual net investment
performance of the Sub-Account(s) is less than this rate, then the dollar amount
of the actual Annuity Payments will decrease. If the actual net investment
performance of the Sub-Account(s) is higher than this rate, then the dollar
amount of the actual Annuity Payments will increase. If the net investment
performance exactly equals the 4% rate, then the dollar amount of the actual
Annuity Payments will remain constant.
Variable Annuity Payments will be based on the Sub-Accounts selected by
the Owner, and on the allocations among the Sub-Accounts.
For further details as to the determination of Variable Annuity
Payments, see the Statement of Additional Information.
Annuity Forms
The Owner may choose any of the Annuity Forms described below. Subject
to approval by Transamerica, the Owner may select any other Annuity Forms then
being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the Annuity Date, if the Annuitant is living. Payments end
with the payment due just before the Annuitant's death. There is no death
benefit under this form. It is possible that only one payment will be made under
this form if the Annuitant dies before the second payment is due; only two
payments will be made if the Annuitant dies before the third payment is due, and
so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the Annuity
Date, if the Annuitant is living. Payments will continue for as long as the
Annuitant lives. After the Annuitant dies, payments
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will be made to the Contingent Annuitant, if living, for as long as the
Contingent Annuitant lives. The continued payments can be in the same amount as
the original payments, or in an amount equal to one-half or two-thirds thereof.
Payments will end with the payment due just before the death of the Contingent
Annuitant. There is no death benefit after both die. If the Contingent Annuitant
does not survive the Annuitant, payments will end with the payment due just
before the death of the Annuitant. It is possible that only one payment or very
few payments will be made under this form, if the Annuitant and Contingent
Annuitant die shortly after payments begin.
The written request for this form must: (a) name the Contingent
Annuitant; and (b) state the percentage of payments for the Contingent
Annuitant. Once Annuity Payments start under this Annuity Form, the person named
as Contingent Annuitant for purposes of being the measuring life, may not be
changed. Transamerica will require proof of age for the Annuitant and for the
Contingent Annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the first day
of the month immediately following the Annuity
Date, if the Annuitant is living. Payments will be made for the longer of: (a)
the Annuitant's life; or (b) the period certain.
The period certain may be 120 or 180 or 240 months, but in no event may it
exceed the life expectancy of the Annuitant.
If the Annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the Annuitant's
death. No benefit will then be payable to the Annuitant's Beneficiary.
If the Annuitant dies during the period certain, the rest of the period
certain payments will be made to the Annuitant's Beneficiary, unless the Owner
provides otherwise. The Owner may elect to have the commuted value of these
payments paid in a single sum. Transamerica will determine the commuted value by
discounting the rest of the payments at the then current rate of interest used
for commuted values.
If the Owner does not elect to have the commuted value paid in a single
sum after the Annuitant's death, the Owner may designate a Payee to receive any
remaining payments payable if the Annuitant's Beneficiary dies before all of the
payments under the period certain have been made. If the Annuitant's Beneficiary
dies before receiving all of the remaining period certain payments and a
designated Payee does not survive the Annuitant's Beneficiary for at least 30
days, then the remaining payments will be paid to the Owner, if living,
otherwise in a single sum to the Owner's estate.
The written request for this form must: (a) state the length of the
period certain; and (b) name the Annuitant's
Beneficiary.
(4) Joint and Survivor Annuity. Payments will be made, 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. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that only one
payment or very few payments will be made under this form if the Annuitant and
Joint Annuitant both die shortly after payments begin.
The written request for this form must: (a) name the Joint Annuitant;
and (b) state the percentage of continued payments for the survivor. Once
payments start under this Annuity Form, the person named as Joint Annuitant, for
the purpose of being the measuring life, may not be changed. Transamerica will
need proof of age for the Joint Annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
Annuity Form not described in this section subject to Transamerica's agreement
and any applicable state or federal law or regulation. Requests for any other
Annuity Form must be made in writing to the Service Center at least 30 days
before the Annuity Date.
Once payments start under the Annuity Form and Payment Option selected
by the Owner: (a) no changes can be made in the Annuity Form and Payment Option;
(b) no additional Purchase Payment will be accepted under the Contract; and (c)
no further withdrawals will be allowed.
The Owner may, at any time after the Annuity Date by written notice to
us at our Service Center, change the Payee
of annuity benefits being provided under the Contract. The effective date of
change in Payee will be the later of: (a) the date
we receive the Written Request for such change; or (b) the date specified by
the Owner. If the Contract is issued as an IRA,
the Owner may not change the Payee on or after the Annuity Date.
Alternate Fixed Annuity Rates
The amount of any Fixed Annuity Payments will be determined on the
Annuity Date by using either the guaranteed fixed annuity rates or
Transamerica's current single premium fixed annuity rates at the time, whichever
would result in a higher amount of monthly Fixed Annuity Payments.
QUALIFIED CONTRACTS
The Contracts may be used to fund IRA rollovers and, with
Transamerica's prior permission, to fund contributory IRA's, for use in
connection with Section 408(b) of the Code. A rollover IRA is one whose initial
Purchase Payment is from
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the rollover of certain kinds of distributions from qualified plans, Section
403(b) tax sheltered annuities and individual retirement plans, following the
rules set out in the Code to maintain favorable tax treatment for the individual
retirement annuity. A contributory IRA is one to which initial and subsequent
Purchase Payments are subject to limitations imposed by the Code.
With Transamerica's prior permission, the Contracts may also be used
for various types of qualified pension and profit sharing plans under Section
401 of the Code, which permits corporate employers to establish various types of
retirement plans for employees, and as Section 403(b) annuities. The tax rules
applicable to distribution from qualified retirement plans, including
restrictions on contributions and benefits, taxation of distributions, any tax
penalties, vary according to the type of plan and the terms and conditions of
the plan itself. Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of specified amount,
distributions prior to age 59 1/2 (subject to certain exceptions), distributions
that do not satisfy specified requirements and certain other transactions with
subject to qualified plans. Purchasers of the contracts for use in qualified
plans should seek competent advice regarding the suitability of the proposed
plan documents and the Contract to their specific needs. Transamerica reserves
the right to decline to sell the Contract to certain qualified plans or
terminate the contract if in Transamerica's judgment the Contract is not
appropriate for the plan.
If a Contract is purchased to fund an IRA, the Annuitant must also be
the Owner. In addition, under current tax law, minimum distributions from IRA's
must commence not later than April 1st of the calendar year following the
calendar year in which the Owner attains age 70 1/2. The Owner should consult
his/her tax adviser concerning these matters. Withholding
A distributee receiving withdrawals from certain Qualified Contracts
may not be entitled to elect in writing, not to have income tax withholding
apply. The federal income withholding rate in the case of certain Qualified
Contracts, but not IRA's, is 20% of the taxable amount of the withdrawal.
Since the Qualified Contracts offered by the Prospectus, with
Transamerica's prior permission, will be issued in connection with retirement
plans which meet the requirements of Sections 401, 403(b), or 408(b) of the
Code, reference should be made to the terms of the particular retirement plan
and the Code for any additional limitations or restrictions on cash withdrawals.
Automatic Payout Option ("APO")
Prior to the Annuity Date, for Qualified Contracts only, the Owner may
elect the Automatic Payout Option ("APO") to satisfy minimum distribution
requirements under Sections 401(a)(9), 403(b), and 408(b)(3) of the Code with
regard to this Contract. This may be elected no earlier than six months prior to
the calendar year in which the Owner attains age 701/2, but payments may not
begin earlier than January of such calendar year. Additionally, APO withdrawals
may not begin before the later of (a) 30 days after the Contract Date or (b) the
end of the Free Look Period. APO may be elected in any calendar month, but no
later than the month in which the Owner attains age 84. APO withdrawals will not
be made from the Fixed Account.
APO withdrawals will be from the Sub-Account(s) and in the percentage
allocations specified by the Owner. If no specifications are made, withdrawals
will be pro-rata from all Sub-Account(s) with value. Withdrawals cannot be made
from a Sub-Account from which Dollar Cost Averaging transfers are being made.
Payments will be made annually, and will continue unless terminated by
the Owner or automatically terminated by Transamerica as set forth in the
Contract. Once terminated, APO may not be elected again.
If only APO withdrawals are made, no Contingent Deferred Sales Load
will apply, regardless of the "Allowed Amount" (described on page 40). However,
if a partial withdrawal is taken, that partial withdrawal and any subsequent
withdrawals that Contract Year will be subject to a CDSL to the extent they
exceed the "Allowed Amount." (See "Contingent Deferred Sales Load" page 35.)
To be eligible for this option, the following conditions must be met:
(1) the Account Value must be at least $12,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500; and (3) the minimum amount
per payment (if not annual) must be at least $100.
APO allows the required minimum distribution to be paid from the
Sub-Account(s) of the Variable Account. If there are insufficient funds in the
Variable Account to make a withdrawal, or for other reasons as set forth in the
Contract, this option will terminate. In which case, if there are amounts in a
Contract's Account Value remaining in the Fixed Account, the minimum
distribution requirements with regard to the Account Value may not be met. If
amounts are transferred to Sub-Accounts from a Guaranteed Period before its
Expiration
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Date, an interest adjustment will be made to such amounts.
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If you have more than one qualified plan subject to the Code's minimum
distribution requirements, you must consider all such plans in the calculation
of your minimum distribution requirement, but Transamerica will make
calculations and distribution with regard to this Contract only. Restrictions
Under Section 403(b) Programs
Certain restrictions apply to annuity contracts used in connection with
Internal Revenue Code Section 403(b) retirement plans. Section 403(b) of the
Internal Revenue Code provides for tax-deferred retirement savings plans for
employees of certain non-profit and educational organizations. In accordance
with the requirements of the Code, Section 403(b) annuities generally may not
permit distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributable to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon death of the employee, on or after attainment of age 591/2,
separation from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Contract may be purchased on a non-tax qualified basis
("Non-Qualified Contract") or purchased and used in connection with plans
qualifying for special tax treatment ("Qualified Contract"). Qualified Contracts
are designed for use in connection with plans entitled to special income tax
treatment under Sections 401, 403(b), and 408 of the Code. The ultimate effect
of federal income taxes on the amounts held under a Contract, on Annuity
Payments, and on the economic benefit to the Owner, the Annuitant, or the
Beneficiary may depend on the type of retirement plan, and on the tax status of
the individual concerned. In addition, certain requirements must be satisfied in
purchasing a Qualified Contract with proceeds from a tax qualified retirement
plan and receiving distributions from a Qualified Contract in order to continue
receiving special tax treatment. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of the
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of the Contract. The following discussion assumes
that a Qualified Contract is purchased with proceeds from and/or contributions
under retirement plans that qualify for the intended special federal income tax
treatment.
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that the Owner who is a natural person generally is not
taxed on increases in the value of an Account until distribution occurs by
withdrawing all or part of the Account Value (e.g., withdrawals or Annuity
Payments under the Annuity Option elected). For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Account Value (and
in the case of a Qualified Contract, any portion of an interest in the plan)
generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
The Owner of any Non-Qualified Contract who is not a natural person
generally must include in income any increase in the excess of the Account Value
over the "investment in the contract" (discussed below) during the taxable year.
There are some exceptions to this rule and a prospective Owner that is not a
natural person may wish to discuss these with a competent tax adviser.
The following discussion generally applies to Contracts owned by
natural persons. Withdrawals In the case of a withdrawal under a
Qualified Contract, 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. The
"investment in the
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contract" generally equals the amount of any non-deductible Purchase Payments
paid by or on behalf of any individual. For a Qualified Contract , the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.
With respect to Non-Qualified Contracts, partial withdrawals, including
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" is generally equal to the amount of non-deductible
Purcahse Payments made. If a partial withdrawal from the Fixed Account is
subject to an interest adjustment, the Account Value immediately before the
withdrawal will not be altered to take into account the interest adjustment. As
a result, for purposes of determining the taxable portion of the partial
withdrawal, the Account Value will be treated as including the amount deducted
from the Fixed Account due to the interest adjustment. Full surrenders are
treated as taxable income to the extent that the amount received exceeds the
"investment in the contract."
Annuity Payments
Although the tax consequences may vary depending on the Annuity Payment
elected under the Contract, in general, only the portion of the Annuity Payment
that represents the amount by which the Account Value exceeds the "investment in
the contract" will be taxed; after the "investment in the contract" is
recovered, the full amount of any additional Annuity Payments is taxable. For
Variable Annuity 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 Annuity 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 Annuity Payments for the term of the payments; however, the remainder of
each Annuity Payment is taxable. Once the "investment in the contract" has been
fully recovered, the full amount of any additional Annuity Payments is taxable.
If Annuity Payments cease as a result of an Annuitant's death before full
recovery of the "investment in the contract," consult a competent tax advisor
regarding deductibility of the unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified Contract,
there may be imposed a federal income tax penalty equal to 10% of the amount
treated as taxable income. In general, however, there is no penalty tax on
distributions: (1) made on or after the date on which the Owner attains age
591/2; (2) made as a result of death or disability of the Owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the lives or life expectancies of the Owner and a Joint
Owner. Other tax penalties may apply to certain distributions pursuant to a
Qualified Contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the death of an
Owner or Annuitant. Generally such amounts are includible in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in the
same manner as a full surrender as described above, or (2) if distributed under
an Annuity Option, they are taxed in the same manner as Annuity Payments, as
described above. For these purposes, the investment in the Contract is not
affected by the Owner's or Annuitant's death. That is, the investment in the
Contract remains the amount of any Purchase Payments paid which are not excluded
from gross income. Other rules relating to distributions at death apply to
Qualified Contracts. You should consult your legal counsel and tax adviser
regarding these rules and their impact on Qualified Contracts.
Required Distributions upon Owner's Death
Notwithstanding any provision of the Contract or this prospectus to the
contrary, no payment of benefits provided under the Contract will be allowed
that does not satisfy the requirements of Section 72(s) of the Code.
Notwithstanding any other provision of the Contract or this prospectus,
if the Owner dies before the Annuity Date, the Death Benefit payable to the
Owner's Beneficiary will be distributed as follows:
(a) the Death Benefit must be completely distributed within five years
of the Owner's date of death; or (b) the Owner's Beneficiary may elect,
within the one year period after the Owner's date of death, to receive
the Death Benefit in the form of an annuity from us, provided
that: (1) such annuity is distributed in substantially equal
installments over the life of such Owner's Beneficiary or over
a period not extending beyond the life expectancy of such
Owner's Beneficiary; and (2) such distributions begin not
later than one year after the Owner's date of death.
Notwithstanding (a) and (b) above, if the sole Owner's Beneficiary is
the deceased Owner's surviving spouse, then such spouse may elect, within the
one year period after the Owner's date of death, to continue the contract under
the same terms as before the Owner's death. Upon receipt of such election from
the spouse, in a form and manner acceptable to us,
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at our Service Office: (1) all rights of the spouse as Owner's Beneficiary under
the contract in effect prior to such election will cease; (2) the spouse will
become the Owner of the contract and will also be treated as the Contingent
Annuitant, if none has been named and only if the deceased Owner was the
Annuitant; and (3) all rights and privileges granted by the contract or allowed
by Transamerica will belong to the spouse as Owner of the Contract. This
election will be deemed to have been made by the spouse if such spouse makes a
Purchase Payment to the contract or fails to make a timely election as described
in this paragraph.
If the Owner's Beneficiary is a nonspouse, the distribution provisions
described in subparagraphs (a) and (b) above, will apply even if the Annuitant
and/or Contingent Annuitant are alive at the time of the Owner's death. If the
nonspouse Owner's Beneficiary is not an individual, then only a cash payment
will be paid.
If no election is received by us from a nonspouse Owner's Beneficiary
within the one year period after the Owner's date of death, then we will pay the
Death Benefit to the Owner's Beneficiary in a cash payment. The Death Benefit
will be determined as of the date we make the cash payment. Such cash payment
will be in full settlement of all our liability under the contract.
If Annuitant Dies After Annuity Starts - If the Annuitant dies after
the annuity starts, any benefit payable will be distributed at least as rapidly
as under the Annuity Form then in effect.
If Owner Dies After Annuity Starts - If the Owner dies after the
annuity starts, any benefit payable will continue to be distributed at least as
rapidly as under the Annuity Form then in effect. All of the Owner's rights
granted under the contract or allowed by us will pass to the Owner's
Beneficiary.
Joint Ownership - For purposes of this section, if the contract has
Joint OPwners we will consider the date of death of the first Joint Owner as the
death of the Owner and the surviving Joint Owner will become the Owner of the
Contract.
Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a Non-Qualified 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. Certain Qualified Contracts
cannot be transferred or assigned.
Multiple Contracts
All deferred non-qualified annuity contracts that are issued by
Transamerica (or its affiliates) to the same Owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract and
separate deferred annuity contracts as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws. Qualified Contracts
In General
The Qualified Contract is designed for use as a rollover IRA. With
Transamerica's prior permission, the Contract may also be used as a contributory
IRA, as a Section 403(b) annuity, and for use in qualified pension and profit
sharing plans established by Corporate employers. The tax rules applicable to
participants and beneficiaries in retirement plans vary according to the type of
plan and the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 591/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances. We make no attempt to provide more than general
information about use of the Contracts with the various types of retirement
plans. Owners and participants under retirement plans as well as annuitants and
beneficiaries are cautioned that the rights of any person to any benefits under
Qualified Contracts may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract 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,
distributions 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.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the Contract in order to provide retirement savings under the plans. The
Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10," also permits
45
<PAGE>
self-employed individuals to establish qualified plans for themselves and their
employees. Adverse tax consequences to the plan, to the participant or to both
may result if this Contract is assigned or transferred to any individual as a
means to provide benefits payments. Purchasers of a Contract for use with such
plans should seek competent advice regarding the suitability of the proposed
plan documents and the Contract to their specific needs. The Contract is
designed to invest retirement savings and not to distribute retirement benefits.
Individual Retirement Annuities
The Contract is designed for use with IRA rollovers and direct
transfers. Section 408 of the Code permits eligible individuals to contribute to
an individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as an "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA. The sale of a Contract for use with an IRA
may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of a Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke their purchase
within 7 days of the earlier of the establishment of the IRA or their purchase.
Various tax penalties may apply to contributions in excess of specified limits,
aggregate distributions in excess of certain annual limits, distributions that
do not satisfy specified requirements, and certain other transactions. A
Qualified Contract will be amended as necessary to conform to the requirements
of the Code. Purchasers should seek competent advice as to the suitability of
the Contract for use with IRAs.
Section 403(b) Plans
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to FICA (Social
Security) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Withholding
Pension and annuity distributions generally are subject to withholding
for the recipient's federal income tax liability at rates that vary according to
the type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Federal income tax withholding is mandatory for certain
distributions from Section 401 or Section 403(b) retirement plans.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified
Contracts or under the terms of the plans in respect of which Qualified
Contracts are issued.
Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change). Other Tax
Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the Contract depend on the individual
circumstances of each Owner or recipient of the distribution. A competent tax
adviser should be consulted for further information. General
At the time the Initial Purchase Payment is paid, a prospective
purchaser must specify whether he or she is purchasing a Non-Qualified Contract
or a Qualified Contract. If the Initial Premium is derived from an exchange or
surrender of another annuity contract, Transamerica may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. Transamerica will require that persons
purchase separate Contracts if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate Contract
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would require the minimum Initial Purchase Payment stated above. Additional
Purchase Payments under a Contract must qualify for the same federal income tax
treatment as the Initial Purchase Payment under the Contract; Transamerica will
not accept an additional Purchase Payment under a Contract if the federal income
tax treatment of such Purchase Payment would be different from that of the
Initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the Contracts. 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
a wholly-owned subsidiary of Transamerica Insurance Corporation of California,
which is a subsidiary of the Transamerica Corporation. TSSC is registered with
the Commission as a broker/dealer and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). Its principal offices are located at 1150
South Olive Street, Los Angeles, California 90015. 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, Contracts will be sold by broker/dealers which
will generally receive compensation of up to 6.25% of any Initial and additional
Purchase Payments made (although higher amounts may be paid in certain
circumstances). Additional amounts may be paid in certain circumstances (such as
upon certain annuitizations, when an additional commission of 2.5% of the
Account Value annuitized may be paid). Additional amounts, including asset based
trail commissions, may be paid in some situations.
Transamerica Financial Resources, Inc. ("TFR") also is an underwriter
and distributor of the Contracts. TFR is a
wholly-owned subsidiary of Transamerica Insurance Corporation of California and
is registered with the Commission and the
NASD as a broker/dealer.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Variable
Account. Transamerica is involved in various
kinds of routine litigation which, in management's judgment, are not of material
importance to Transamerica's assets or to the
Variable Account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal securities laws
applicable to the issue and sale of the
Contract has been provided by Sutherland, Asbill & Brennan, LLP. The
organization of Transamerica, its authority to issue
the Contract and the validity of the form of the Contract have been passed upon
by James W. Dederer, Executive Vice
President, Secretary and General Counsel of Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica for each
of the three years in the period ended December 31, 1996, and the financial
statements for the Variable Account at
December 31, 1996, have been audited by Ernst & Young LLP, Independent Auditors,
as set forth in their reports
appearing in the Statement of Additional Information, and are included in
reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
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 Funds in accordance with instructions
received from persons having voting interests in the corresponding Sub-Account.
If, however, the 1940 Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, or if 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
Sub-Account of the Variable Account. Before the Annuity Date, that number will
be determined by applying his or her percentage interest, if any, in a
particular Sub-Account to the total number of votes attributable to that
Sub-Account. The Owner holds a voting interest in each Sub-Account to which the
Account Value is allocated. After the Annuity Date, the number of votes
decreases as Annuity 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
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Portfolio for determining shareholders eligible to vote at the meeting of the
Funds. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by the respective Funds.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in the Sub-Account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the appropriate
Portfolio.
It should be noted that the Funds are not required, and do not intend,
to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission under the 1933 Act
relating to the Contract offered by this Prospectus. This Prospectus has been
filed as a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto, and
reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the Contract. Statements contained in
this Prospectus, as to the content of the Contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
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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
DOLLAR COST AVERAGING.....................................................3
NET INVESTMENT FACTOR.....................................................3
ANNUITY PERIOD............................................................3
Variable Annuity Units and Payments..............................4
Variable Annuity Unit Value......................................4
Transfers After the Annuity Date.................................4
GENERAL PROVISIONS........................................................4
IRS Required Distributions.......................................4
Non-Participating................................................4
Misstatement of Age or Sex.......................................4
Proof of Existence and Age.......................................4
Assignment.......................................................5
Annuity Data.....................................................5
Annual Report....................................................5
Incontestability.................................................5
Ownership........................................................5
Entire Contract..................................................5
Changes in the Contract..........................................5
Protection of Benefits...........................................6
Delay of Payments................................................6
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
Hypothetical Performance Data....................................8
Other Performance Data...........................................8
HISTORIC PERFORMANCE DATA.................................................8
General Limitations..............................................8
Sub-Account Performance Figures..................................9
Hypothetical Sub-Account Performance Figures....................11
FEDERAL TAX MATTERS......................................................13
Taxation of Transamerica........................................13
Tax Status of the Contract......................................13
DISTRIBUTION OF THE CONTRACT.............................................14
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...................................15
TRANSAMERICA.............................................................15
General Information and History.................................15
STATE REGULATION.........................................................15
RECORDS AND REPORTS......................................................15
FINANCIAL STATEMENTS.....................................................15
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Appendix A
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 .003814% (the daily equivalent of the current charge of 1.40%
on an annual basis) gives a Net Investment Factor of 1.002449. 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
15.537966 (15.5 x 1.002449). 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 13.531613
(13.5 x 1.002449 (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 Sub-Account.
Also suppose that the Variable Accumulation Unit Value and the Variable
Annuity Unit Value for the particular 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 option 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).
A-1
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"BACK COVER"
Issued by:
Transamerica Occidental
Life Insurance Company
(Certificate Form GNC-33, Individual Contract Form 1-502)
1150 South Olive
Los Angeles, CA 90015
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE
VARIABLE ANNUITY
Issued By
Transamerica Occidental Life Insurance Company
The Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the Dreyfus/Transamerica Triple Advantage Variable
Annuity (Contract) issued by Transamerica Occidental Life Insurance Company. The
Owner may obtain a copy of the Prospectus dated May 1, 1997, as supplemented
from time to time, by writing to Transamerica Occidental Life Insurance Company,
Annuity Service Center, at P.O. Box 31848 Charlotte, North Carolina 28231or
calling 800-258-4260. Terms used in the current Prospectus for the Contract are
incorporated in 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.
Dated May 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT (page 26)......................................3
DOLLAR COST AVERAGING (page 30).............................3
NET INVESTMENT FACTOR (page 29).............................3
ANNUITY PERIOD (page 38)....................................3
Variable Annuity Units and Payments................4
Variable Annuity Unit Value........................4
Transfers After the Annuity Date...................4
GENERAL PROVISIONS..........................................4
IRS Required Distributions.........................4
Non-Participating..................................4
Misstatement of Age or Sex.........................4
Proof of Existence and Age.........................4
Assignment.........................................5
Annuity Data.......................................5
Annual Report......................................5
Incontestability...................................5
Ownership..........................................5
Entire Contract....................................5
Changes in the Contract............................5
Protection of Benefits.............................6
Delay of Payments..................................6
Notices and Directions.............................6
CALCULATION OF YIELDS AND TOTAL RETURNS (page 19)...........6
Money Market Sub-Account Yield Calculation.........6
Other Sub-Account Yield Calculations...............7
Standard Total Return Calculations.................7
Hypothetical Performance Data......................8
Other Performance Data.............................8
HISTORIC PERFORMANCE DATA...................................8
General Limitations................................8
Sub-Account Performance Data.......................9
Hypothetical Sub-Account Performance Figures......11
FEDERAL TAX MATTERS (page 41)..............................13
Taxation of Transamerica..........................13
Tax Status of the Contract........................13
DISTRIBUTION OF THE CONTRACT (page 45).....................14
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS (page 20)...........15
TRANSAMERICA (page 20).....................................15
General Information and History...................15
STATE REGULATION (page 21).................................15
RECORDS AND REPORTS........................................15
FINANCIAL STATEMENTS.......................................15
(Additional page references refer to the current Prospectus.)
<PAGE>
THE CONTRACT
As a supplement to the description in the Prospectus, the following
provides additional information about the Contract which may be of interest to
some Owners.
DOLLAR COST AVERAGING
We reserve the right to send written notification to the Owner as to
the options available if termination of Dollar Cost Averaging, either by the
Owner or by Transamerica, results in the value of the receiving Sub-Account(s)
to which monthly transfers were made to be less than $500. The Owner will have
10 days from the date our notice is mailed to:
(a) transfer the value of the Sub-Account(s) to another Sub-Account
with a value equal to or greater than $500; or (b) transfer funds from
another Sub-Account into the receiving Sub-Account(s) to bring the
value of that Sub-Account to at least $500; or (c) submit an additional
Purchase Payment to make the value of the Sub-Account equal to or
greater than $500; or (d) transfer the entire value of the receiving
Sub-Account(s) back into the Source Account from which the automatic
transfers were made. If no election, in a form and manner acceptable to
Transamerica, is made by the Owner prior to the end
of the 10 day period, we reserve the right to transfer the value of the
receiving Sub-Account(s) back into the Source Account from which the automatic
transfers were made. Transfers made as a result of (a), (b), or (d) above will
not be counted for purposes of the eighteen allowable transfers per Contract
Year limitation.
NET INVESTMENT FACTOR
For any Sub-Account of the Variable Account, the Net Investment Factor
for a Valuation Period, before the Annuity Date, is (a) divided by (b), minus
(c) minus (d).
Where (a) is
The net asset value per share held in the Sub-Account, as of the
end of the Valuation Period,
plus or minus
The per-share amount of any dividend or capital gain distributions
if the "exdividend" date occurs in the Valuation Period, plus or minus
A per-share charge or credit as Transamerica may determine, as of
the end of the Valuation Period,
for taxes.
Where (b) is
The net asset value per share held in the Sub-Account as of the end
of the last prior Valuation
Period.
Where (c) is
The daily charge of 0.003403% (1.25% annually) for the Mortality
and Expense Risk Charge under the Contract times the number of calendar
days in the current Valuation Period. Where (d) is
The daily Administrative Expense Charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current Valuation
Period. This charge may be increased, but will not exceed 0.000684%
(0.25% annually).
A Valuation Day is defined as any day that both the New York Stock
Exchange and our Service Office are open. We currently expect that
there are no days in which the Exchange is open and our Service Office
is closed.
ANNUITY PERIOD
The Variable Annuity Options provide for payments that fluctuate or
vary in dollar amount, based on the investment performance of the elected
Variable Account Sub-Account(s).
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<PAGE>
Variable Annuity Units and Payments
For the first monthly payment, the number of Variable Annuity Units
credited in each Sub-Account will be determined by dividing (a) the product of
the portion of the value to be applied to the 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 Annuity Payment equals the
product of the number of Variable Annuity Units in each Sub-Account and the
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 Sub-Account on any Valuation
Day is determined as described below.
The Net Investment Factor for the Valuation Period (for the appropriate
Annuity 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.
Transfers After the Annuity Date
After the Annuity Date, the Owner may transfer Variable Annuity Units
from one Sub-Account to another, subject to certain limitations. (See
"Transfers" page 29 of the Prospectus.) The dollar amount of each subsequent
monthly Variable Annuity Payment after the transfer must be determined using the
new number of Variable Annuity Units multiplied by the Sub-Account's Variable
Annuity Unit Value.
The formula used to determine a transfer after the Annuity Date can be
found in the Appendix to this Statement of Additional Information.
GENERAL PROVISIONS
IRS Required Distributions
The Contract is intended to qualify as an annuity contract for federal
income tax purposes. All provisions in the Contract will be interpreted to
maintain such tax qualification. We may make changes in order to maintain this
qualification or to conform the Contract to any applicable changes in the tax
qualification requirements. We will provide you with a copy of any changes made
to the Contract. If any Owner under a Non-Qualified Contract dies before the
entire interest in the Contract is distributed, the value generally must be
distributed to the designated Beneficiary so that the Contract qualifies as an
annuity under the Code. (See "Federal Tax Matters" page 13.)
Non-Participating
The Contract is non-participating. No dividends are payable and the
Contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any other measuring life has been
misstated in the application, the Annuity Payments under the Contract will be
whatever the Annuity Purchase Amount applied on the Annuity Date would purchase
on the basis of the correct age or sex of the Annuitant and/or other measuring
life. Any overpayments or underpayments by Transamerica as a result of any such
misstatement may be respectively charged against or credited to the Annuity
Payment or Annuity Payments to be made after the correction so as to adjust for
such overpayment or underpayment.
4
<PAGE>
Proof of Existence and Age
Before making any payment under the Contract, Transamerica may require
proof of the existence and/or proof of the age of the Annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the Contract.
Assignment
No assignment of a Contract will be binding on Transamerica unless made
in writing and given to Transamerica at its Service Office. Transamerica is not
responsible for the adequacy of any assignment. The Owner's rights and the
interest of any Annuitant or non-irrevocable Beneficiary will be subject to the
rights of any assignee of record.
Annuity Data
Transamerica will not be liable for obligations which depend on
receiving information from a Payee or measuring life until such information is
received in a satisfactory form.
Annual Report
At least once each Contract Year prior to the Annuity Date, the Owner
will be given a report of the current Account Value allocated to each
Sub-Account of the Variable Account and each Guarantee Period of the Fixed
Account. 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 Date.
Ownership
Only the Owner(s) will be entitled to the rights granted by the
Contract, or allowed by Transamerica under the Contract. If an Owner dies, the
rights of the Owner belong to the estate of the Owner unless the Owner has
previously named an Owner's Beneficiary. A surviving Joint Owner automatically
becomes the Owner's Beneficiary.
Entire Contract
Transamerica has issued the Contract in consideration and acceptance of
the payment of the Initial Purchase Payment and, 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. All statements made by the Owner are
considered representations and not warranties. Transamerica will not use any
statement in defense of a claim unless it is made in the application and a copy
of the application is attached to the Contract when issued.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. The Owner has all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any change in the individual contract
or the group contract or individual certificates thereunder and then only in
writing. Transamerica will not be bound by any promise or representation made by
any other persons.
Transamerica may not change or amend the individual contract or the
group contract or individual certificates thereunder, except as expressly
provided therein, without the Owner's consent. However, Transamerica may change
or amend the individual contract or the group contract or individual
certificates thereunder if such change or amendment is necessary for the
individual contract or the group contract or
5
<PAGE>
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 or lump sum death benefit due from the
Variable Account will occur within seven days from the date the election becomes
effective, except that Transamerica may be permitted to postpone such payment
if: (1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted; or (2) an
emergency exists as defined by the Securities and Exchange Commission
(Commission), or the Commission requires that trading be restricted; or (3) the
Commission permits a delay for the protection of Owners.
In addition, while it is our intention to process all transfers from
the Sub-Accounts immediately upon receipt of a transfer request, the Contract
gives us the right to delay effecting a transfer from a Sub-Account for up to
seven days, but only in certain limited circumstances. However, the staff of the
Commission currently interprets the Investment Company Act of 1940 to require
the immediate processing of all transfers, and in compliance with that
interpretation we will process all transfers immediately unless and until the
Commission or its staff changes its interpretation or otherwise permits us to
exercise this right. Subject to such approval, we may delay effecting such a
transfer only if there is a delay of payment from an affected Portfolio. If this
happens, and if the prior approval of the Commission or its staff is obtained,
then we will calculate the dollar value or number of units involved in the
transfer from a Sub-Account on or as of the date we receive a written transfer
request, 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
Sub-Account.
Transamerica may delay payment of any withdrawal from the Fixed Account
for a period of not more than six months after Transamerica receives the request
for such withdrawal. If Transamerica delays payment for more than 30 days,
Transamerica will pay interest on the withdrawal amount up to the date of
payment. (See "Cash Withdrawals" page 31 of the Prospectus.)
Notices and Directions
Transamerica will not be bound by any authorization, direction,
election or notice which is not in writing, in a form and manner acceptable to
Transamerica, and received at our Service Office.
Any written notice requirement by Transamerica to the Owner will be
satisfied by our mailing of any such required written notice, by first-class
mail, to the Owner's last known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, Transamerica
is required to compute the Money Market Sub-Account's current annualized yield
for a seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the Money Market Series or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of realized gains and losses on the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market
Sub-Account at the beginning of such seven-day period, dividing such net change
in Account Value by the value of the account at the beginning of the period to
determine the base period return and annualizing this quotient on a 365-day
basis. The net change in Account Value reflects the deductions for the annual
Account Fee, the Mortality and Expense Risk Charge and
6
<PAGE>
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
Portfolio or any comparable substitute funding vehicle.
The Commission also permits Transamerica to disclose the effective
yield of the Money Market Sub-Account for the same seven-day period, determined
on a compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Portfolio or substitute funding vehicle, the types and quality of
portfolio securities held by the Money Market Series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any Contingent Deferred Sales Load (of up to 6% of Purchase
Payments) that may be applicable to a Contract.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current annualized
yield of one or more of the Sub-Accounts (except the Money Market Sub-Account)
for 30-day periods. The annualized yield of a Sub-Account refers to the income
generated by the Sub-Account over a specified 30-day period. Because this yield
is annualized, the yield generated by a Sub-Account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per Variable Accumulation Unit earned during the
period by the price per unit on the last day of the period, according to the
following formula:
YIELD = 2{a-b + 1}6 - 1
cd
Where:
a = net investment income earned during the period by the
Portfolio attributable to the shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period (net of
reimbursements).
c = the average daily number of Variable Accumulation Units
outstanding during the period.
d = the maximum offering price per Variable Accumulation Unit on
the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all Contracts. The yield calculations do not reflect the
effect of any Contingent Deferred Sales Load that may be applicable to a
particular Contract. Contingent Deferred Sales Load range from 6% to 0% of the
amount of Account Value withdrawn depending on the elapsed time since the
receipt of each Purchase Payment attributable to the portion of the Account
Value withdrawn.
Because of the charges and deductions imposed by the Variable Account,
the yield for the Sub-Account will be lower than the yield for the corresponding
Portfolio. The yield on amounts held in the Sub-Accounts normally will fluctuate
over time. Therefore, the disclosed yield for any given period is not an
indication or representation of future yields or rates of return. The
Sub-Account's actual yield will be affected by the types and quality of
portfolio securities held by the Portfolio, and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average annual total
returns for one or more of the Sub-Accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
7
<PAGE>
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 thereof).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
Contingent Deferred Sales Loads that may be applicable to a particular period.
Hypothetical Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Subaccount, for periods before the Subaccount commenced operations. Such
performance information for the Subaccount will be calculated based on the
performance of the corresponding Portfolio and the assumption that the
Subaccount was in existence for the same periods as those indicated for the
Portfolio, with a level of Contract charges currently in effect. The Portfolio
used for these calculations will be the actual Portfolio that the Subaccount
will invest in.
This type of hypothetical performance data may be disclosed on both an
average annual total return and a cumulative total return basis. Moreover, it
may be disclosed assuming that the Contract is not surrendered (i.e., with no
deduction for the Contingent Deferred Sales Load) and assuming that the Contract
is surrendered at the end of the applicable period (i.e., reflecting a deduction
for any applicable Contingent Deferred Sales Load).
Other Performance Data
Transamerica may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard described
above. The non-standard format will be identical to the standard format except
that the Contingent Deferred Sales Load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total
returns in conjunction with the standard format described above. The cumulative
returns will be calculated using the following formula assuming that the
Contingent Deferred Sales Load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring charges
for the period. ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one, five, or
ten-year period at the end of the one, five, or ten-year
period (or fractional portion thereof). P = a hypothetical initial
payment of $1,000. All non-standard performance data will be advertised
only if the standard performance data is also disclosed.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent the past performance of the Sub-Accounts
and are not indicative of future performance. The figures may reflect the waiver
of advisory fees and reimbursement of other expenses.
8
<PAGE>
The Variable Fund has provided the performance data for the Money
Market, Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap, Capital
Appreciation, Growth and Income, International Equity, International Value,
Disciplined Stock and Small Company Stock Sub-Accounts.. The Stock Index Fund
and Socially Responsible Fund have provided their performance data. The
Sub-Account performance data is derived from the data provided by the Funds.
None of the Funds are affiliated with Transamerica. In preparing the tables
below, Transamerica has relied on the data provided by the Funds. While
Transamerica has no reason to doubt the accuracy of the figures provided by the
Funds, Transamerica has not verified those figures. No data is provided for the
Balanced and Limited Term High Income Sub-Accounts and Portfolios since, prior
to May 1, 1997, these Sub-Accounts, and their related Portfolios, had not yet
commenced operations.
9
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10
<PAGE>
11
<PAGE>
Money Market Sub-Account Yields
The annualized yield for the Money Market Sub-Account for the seven-day
period ending December 31, 1996 was 3.59%. The effective yield for the Money
Market Sub-Account for the seven-day period ending December 31, 1996 was 3.65%.
Sub-Account Performance Figures Including Hypothetical Performance
The charts below show historical performance data for the Sub-Accounts,
including, for six Sub-Accounts, "hypothetical" data for the periods prior to
the inception of the Sub-Accounts, based on the performance of the corresponding
Portfolios since their inception date, with a level of charges equal to those
currently assessed under the Contracts. These figures are not an indication of
the future performance of the Sub-Accounts. Some of the figures reflect the
waiver of advisory fees and reimbursement of other expenses for part or all of
the periods indicated.
The dates to the left of the Sub-Account names below indicate the date
of commencement of operation of the Portfolios, which coincide with the date of
commencement of operation of the corresponding Sub-Account, with these six
exceptions: the Money Market; Managed Assets, Zero Coupon 2000, Qualify Bond,
Small Cap and Stock Index Sub-Accounts commenced operations January 4, 1993.
Hence, the performance data given for these six Sub-Accounts which precedes the
date of January 4, 1993, is "hypothetical."
Standard average annual total returns for periods since inception of
the Portfolio, including hypothetical performance, for each Sub-Account are as
follows. These figures include mortality and expenses charges deducted at 1.25%,
the administrative expenses charge of 0.15% per annum, the administration charge
of $30 per annum adjusted for average account size and the maximum contingent
deferred sales load of 6%.
<TABLE>
<CAPTION>
SUB-ACCOUNT For the 1-year For the 5-year For the
period from
(date of commencement of period ending period ending
commencement of Portfolio
operation of Corresponding Portfolio) 12/31/96 12/31/96 operations to
12/31/96
<S> <C> <C> <C> <C> <C>
Money Market (8/31/90) (2.09%) 2.28% 3.12%
Managed Assets (8/31/90) (11.07%) 2.00% 3.51%
Zero Coupon 2000 (8/31/90) (4.37%) 5.64% 8.41%
Quality Bond (8/31/90) (3.87%) 6.72% 7.84%
Small Cap (8/31/90) 9.06% 34.03% 46.73%
Capital Appreciation (4/5/93) 16.71% n/a 15.16%
Stock Index (9/29/89) 13.80% 12.49% 12.05%
Socially Responsible (10/7/93) 13.00% n/a 16.64%
Growth & Income (12/15/94) 12.63% n/a 35.20%
International Equity (12/15/94) 3.83% n/a 5.91%
</TABLE>
Data for the International Value, Disciplined Stock, and Small Company Stock
Sub-Accounts is not included since the related Portfolios were not in
operartions for all of 1996.
Nnon-standard cumulative total returns for periods since inception of the
Portfolio, including hypothetical performance, for each Sub-Account are as
follows. These figures include mortality and expenses charges deducted at 1.25%,
the administrative expenses charge of 0.15% per annum, the administration charge
of $30 per annum adjusted for average account size but do not reflect the
maximum contingent deferred sales load of 6%, which if reflected would reduce
the figures. Nonstandard performance data will only be disclosed if
12
<PAGE>
standard performance data for the required periods is also disclosed.
<TABLE>
<CAPTION>
For the period
from
SUB-ACCOUNT For the 1-year For the 3-year For the 5-year
commencement of
(date of commencement of period ending period ending period ending
Portfolio operations
operation of Corresponding Portfolio) 12/31/96 12/31/96 12/31/96
to 12/31/96
<S> <C> <C> <C> <C> <C>
Money Market (8/31/90) 3.53% 10.96% 15.93%
23.55%
Managed Assets (8/31/90) (5.67%) (9.39%) 14.43%
26.48%
Zero Coupon 2000 (8/31/90) 1.10% 11.27% 35.58%
68.88%
Quality Bond (8/31/90) 1.63% 13.40% 42.44%
63.33%
Small Cap (8/31/90) 15.06% 55.61% 336.48%
1036.31%
Capital Appreciation (4/5/93) 22.71% 65.39% n/a
74.69%
Stock Index (9/29/89) 19.80% 61.87% 84.14%
128.83%
Socially Responsible (10/7/93) 19.00% 58.97% n/a
69.61%
Growth & Income (12/15/94) 18.63% n/a n/a
90.41%
International Equity (12/15/94) 9.82% n/a n/a
17.48%
International Value (5/1/96) n/a n/a n/a
2.44%
Disciplined Stock (5/1/96) n/a n/a n/a
17.76%
Small Company Stock (5/1/96) n/a n/a n/a
7.72%
</TABLE>
13
<PAGE>
14
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FEDERAL TAX MATTERS
The Dreyfus/Transamerica Triple Advantage Variable Annuity may be
purchased on a non-tax qualified basis ("Non-Qualified Contract") or purchased
and used in connection with plans qualifying for special tax treatment
("Qualified Contract"). Qualified Contracts are designed for use by retirement
plans qualified for special tax treatment under Sections 401, 403(b) or 408 of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of federal income taxes on the Account Value, on Annuity Payments, and on the
economic benefit to the Owner, the Annuitant or the Beneficiary may depend on
the type of retirement plan for which the Contract is purchased, on the tax and
employment status of the individual concerned and on Transamerica's tax status.
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX
ADVICE. Any
person concerned about these tax implications should consult a competent tax
adviser. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the likelihood
of continuation of these present federal income tax laws or of the current
interpretations by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the Contracts. Under existing federal income tax law,
Transamerica believes that the Variable Account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contracts.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the Variable Account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the Variable
Account, then Transamerica may impose a charge against the Variable Account
(with respect to some or all Contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contract
Section 817(h) of the Code requires that with respect to
Non-Qualified Contracts, the investments of the Funds 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 Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the Funds'
assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control for the investments of a
segregated asset account may cause the investor (i.e., the Owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the Contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that Contract owners were not owners of separate account assets. For
example, the Owner has additional flexibility in allocating premium payments and
Account
15
<PAGE>
values. These differences could result in an Owner being treated as the owner of
a pro rata portion of the assets of the Variable Account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the Contract as
necessary to attempt to prevent an Owner from being considered the owner of a
pro rata share of the assets of the Variable Account.
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any Non-Qualified Contract to
provide that (a) if any Owner dies on or after the Annuity Date but prior to the
time the entire interest in the Contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death; and (b)
if any Owner dies prior to the Annuity Date, the entire interest in the Contract
will be distributed within five years after the date of the Owner's death. These
requirements will be considered satisfied as to any portion of the Owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that Beneficiary, provided
that such distributions begin within one year of the Owner's death. The Owner's
"designated beneficiary" refers to a natural person designated by such Owner as
a Beneficiary and to whom ownership of the Contract passes by reason of death.
However, if the Owner's "designated beneficiary" is the surviving spouse of the
deceased Owner, the Contract may be continued with the surviving spouse as the
new owner.
The Non-Qualified Contracts contain provisions which are intended to
comply with the requirements of section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. Transamerica
intends to review such provisions and modify them if necessary to assure that
they comply with the requirements of Code section 72(s) when clarified by
regulation or otherwise. Other rules may apply to Qualified Contract.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the Contracts. TSSC may also serve as principal underwriter and
distributor of other contracts issued through the Variable Account and certain
other separate accounts of Transamerica and any affiliates of Transamerica. TSSC
is a wholly owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker/dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Transamerica pays
TSSC for acting as the principal underwriter under a distribution agreement.
TSSC has entered into sales agreements with other broker/dealers to
solicit applications for the Contracts through registered representatives who
are licensed to sell securities and variable insurance products. These
agreements provide that applications for the Contracts may be solicited by
registered representatives of the broker/dealers appointed by Transamerica to
sell its variable life insurance and variable annuities. These broker/dealers
are registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Transamerica Financial Resources, Inc. ("TFR") is an underwriter and
distributor of the Contracts. TFR
is a wholly-owned subsidiary of Transamerica Insurance Corporation of California
and is registered with the
Commission and the NASD as a broker/dealer.
Under the agreements, applications for the 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 neither
TSSC nor TFR anticipate discontinuing the offering of the Contracts. However,
TSSC and TFR reserve the right to discontinue the offering of the Contracts.
During fiscal year 1996, $15,506,834.71 in commissions were paid to TSSC as
underwriter of the Contracts; no amounts were retained by TSSC. During fiscal
year 1996, $2,283,845.07 in commissions were paid to TFR as underwriter of the
Contracts;
no amounts were retained by TFR. During fiscal year 1995, $9,421,052.81 in
commissions
were paid to TSSC as underwriter of the Contracts; no amounts were retained by
TSSC. During fiscal year 1995, $1,485,889.71 in commissions were paid to TFR as
underwriter of the Contracts; $496,781.00 was retained
16
<PAGE>
by TFR. During fiscal year 1994, Dreyfus Service Corporation served as
co-underwriter until August 24, 1994; thereafter, TSSC served as underwriter.
Throughout fiscal year 1994, TFR served as principal underwriter. Total
commissions paid these three entities during 1994 were $5,926,028.01.
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.
TRANSAMERICA
General Information and History
Transamerica Occidental Life Insurance Company was formerly known as
Occidental Life Insurance Company of California. The name change occurred on or
about September 1, 1981.
Transamerica is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn, wholly-owned by Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in two primary businesses: finance and insurance.
Finance consists of consumer lending, commercial lending, leasing and real
estate services. Insurance comprises life insurance, asset management, and
insurance brokerage.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain Contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the Contract will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Variable Account will be
maintained by Transamerica or by its 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
This Statement of Additional Information contains the financial
statements of the Variable Account as of December 31, 1996.
The consolidated financial statements of Transamerica included in this
Statement of Additional Information should be considered only as bearing on the
ability of Transamerica to meet its obligations under the Contract. They should
not be considered as bearing on the investment performance of the assets held in
the Variable Account.
17
<PAGE>
(This page has been left blank intentionally.)
18
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1996
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1996
Audited Consolidated Financial Statements
Report of Independent Auditors............................. 1
Consolidated Balance Sheet................................. 2
Consolidated Statement of Income........................... 3
Consolidated Statement of Shareholder's Equity............. 4
Consolidated Statement of Cash Flows....................... 5
Notes to Consolidated Financial Statements................. 6
<PAGE>
-2-
2721:T-10
3/20/97
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying consolidated balance sheet of Transamerica
Occidental Life Insurance Company and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note A, the Company changed its method of accounting for certain
debt securities effective January 1, 1994.
ERNST & YOUNG LLP
February 12, 1997
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1996 1995
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 26,980,676 $
25,997,403
Equity securities available for sale 471,734
307,881
Mortgage loans on real estate 716,669
565,086
Real estate 24,876
38,376
Policy loans 442,607
426,377
Other long-term investments 66,686
62,536
Short-term investments 135,726
211,500
--------------------- ---------------------
28,838,974
27,609,159
Cash 35,817
49,938
Accrued investment income 404,866
394,008
Accounts receivable 297,967
174,266
Reinsurance recoverable on paid and unpaid losses 829,653
1,957,160
Deferred policy acquisitions costs 2,138,203
1,974,211
Other assets 256,382
257,333
Separate account assets 3,527,950
2,533,424
--------------------- ---------------------
$ 36,329,812 $
34,949,499
=====================
=====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 22,718,955 $
22,057,773
Reserves for future policy benefits 5,275,149
5,245,233
Policy claims and other 502,331
542,511
--------------------- ---------------------
28,496,435
27,845,517
Income tax liabilities 388,852
587,801
Accounts payable and other liabilities 560,663
534,866
Separate account liabilities 3,527,950
2,533,424
--------------------- ---------------------
32,973,900
31,501,608
Shareholder's equity:
Common stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587
27,587
Additional paid-in capital 335,619
333,578
Retained earnings 2,467,406
2,171,412
Foreign currency translation adjustments (24,472)
(23,618)
Net unrealized investment gains 549,772
938,932
--------------------- ---------------------
3,355,912
3,447,891
--------------------- ---------------------
$ 36,329,812 $
34,949,499
=====================
=====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1996 1995 1994
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,798,034 $ 1,811,888
$ 1,430,019
Net investment income 2,077,232 1,972,759
1,771,575
Other operating revenue - -
13,273
Net realized investment gains 17,471 28,112
20,730
--------------- --------------- ---------------
TOTAL REVENUES 3,892,737 3,812,759
3,235,597
Benefits:
Benefits paid or provided 2,714,841 2,587,468
2,116,125
Increase in policy reserves and liabilities 57,968 236,205
204,159
--------------- --------------- ---------------
2,772,809 2,823,673
2,320,284
Expenses:
Amortization of deferred policy acquisition costs 235,180 182,123
176,033
Salaries and salary related expenses 158,699 145,681
133,591
Other expenses 224,084 200,339
190,500
--------------- --------------- ---------------
617,963 528,143
500,124
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,390,772
3,351,816 2,820,408
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 501,965
460,943 415,189
Provision for income taxes 164,685 149,647
143,491
--------------- --------------- ---------------
NET INCOME $ 337,280 $ 311,296
$ 271,698
===============
=============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Foreign
Unrealized
Additional Currency
Investment
Common Stock Paid-in Retained
Translation Gains
Shares Amount Capital Earnings
Adjustments (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 2,206,933 $ 27,587 $ 319,279 $ 1,689,534
$ (21,054) $ 63,582
Cumulative effect of change in
accounting for investments
795,187
Net income 271,698
Dividends declared (40,000)
Change in foreign currency
translation adjustments (7,293)
Change in net unrealized
investment gains (losses)
(1,180,229)
Balance at December 31, 1994 2,206,933 27,587 319,279 1,921,232
(28,347) (321,460)
Net income 311,296
Capital contributions from 14,299
parent
Dividends declared (61,116)
Change in foreign currency
translation adjustments 4,729
Change in net unrealized
investment gains (losses)
1,260,392
Balance at December 31, 1995 2,206,933 27,587 333,578 2,171,412
(23,618) 938,932
Net income 337,280
Capital contributions from
parent 2,041
Dividends declared (41,286)
Change in foreign currency
translation adjustments (854)
Change in net unrealized
investment gains
(389,160)
Balance at December 31, 1996 2,206,933 $ 27,587 $ 335,619 $ 2,467,406
$ (24,472) $ 549,772
============ ========== ===========
============= =========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December
31
1996 1995
1994
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 337,280 $ 311,296
$ 271,698
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (73,328) (466,669)
(290,926)
Accounts receivable (159,309) (58,866)
(31,934)
Policy liabilities 949,108 1,273,723
804,296
Other assets, accounts payable and other
liabilities, and income taxes (32,662) (252,362)
133,499
Policy acquisition costs deferred (388,003) (381,806)
(394,858)
Amortization of deferred policy acquisition costs 268,770
191,313 182,312
Net realized gains on investment transactions (51,061)
(37,302) (27,009)
Other (15,758) (22,862)
(124,643)
--------------- ----------------
- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 835,037
556,465 522,435
INVESTMENT ACTIVITIES
Purchases of securities (7,362,635) (5,667,539)
(9,354,375)
Purchases of other investments (334,895)
(330,503) (143,771)
Sales of securities 5,064,780 3,587,367
4,607,572
Sales of other investments 175,001 155,084
143,815
Maturities of securities 506,941 341,485
2,251,763
Net change in short-term investments 75,774
(67,337) 38,597
Other (21,358) (35,384)
(25,354)
--------------- ----------------
- ---------------
NET CASH USED BY
INVESTING ACTIVITIES (1,896,392)
(2,016,827) (2,481,753)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,260,653
5,151,428 4,434,726
Withdrawals from policyholder contract deposits (5,173,419)
(3,624,044) (2,419,915)
Dividends paid to parent (40,000) (60,000)
(40,000)
--------------- ----------------
- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,047,234
1,467,384 1,974,811
--------------- ----------------
- ---------------
INCREASE (DECREASE) IN CASH (14,121)
7,022 15,493
Cash at beginning of year 49,938 42,916
27,423
--------------- ----------------
- ---------------
CASH AT END OF YEAR $ 35,817 $
49,938 $ 42,916
===============
================ ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engage in providing life insurance,
pension and annuity products, reinsurance, structured settlements and
investments, which are distributed through a network of independent and
company-affiliated agents and independent brokers. The Company's customers are
primarily in the United States and Canada.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1996, the Financial Accounting Standards
Board issued a new standard on accounting for transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. The Company
must adopt the standard in 1997. The standard requires that a transfer of
financial assets be accounted for as a sale only if certain specified conditions
for surrender of control over the transferred assets exist. When adopted, the
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans, which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
In 1994, the Company adopted the Financial Accounting Standards Board's standard
on accounting for certain investments in debt and equity securities which
requires the Company to report at fair value, with unrealized gains and losses
excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs, with any resultant adjustment also excluded
from earnings and reported on an after tax basis in shareholder's equity. As of
January 1, 1994, the impact of adopting the standard was to increase
shareholder's equity by $795.2 million (net of deferred policy acquisition cost
adjustment of $367.2 million and deferred taxes of $428.2 million) with no
effect on net income.
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TOLIC and its subsidiaries, all of which operate
primarily in the life insurance industry. TOLIC is a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which is a wholly owned
subsidiary of Transamerica Corporation. All significant intercompany balances
and transactions have been eliminated in consolidation.
Investments: Investments are reported on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes, as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if unrealized gains or losses on securities available for sale were realized.
Changes in such adjustments are included in net unrealized investment gains or
losses on an after tax basis as a separate component of shareholder's equity
and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Investment risks associated with fair value
changes are borne by the contract holders. Accordingly, investment income and
realized gains and losses attributable to Separate Accounts are not reported in
the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 2.6% to 9.8% in 1996 and from 2.8% to 10% in 1995 and 1994.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and certain annuities with life
contingencies. The reserve for future policy benefits for traditional life
insurance products has been provided on a net-level premium method based upon
estimated investment yields, withdrawals, mortality, and other assumptions which
were appropriate at the time the policies were issued. Such estimates are based
upon past experience with a margin for adverse deviation. Interest assumptions
range from 2.5% in earlier years to 11.25%. Reserves for future policy benefits
are evaluated as if unrealized gains or losses on securities available for sale
were realized and adjusted for any resultant premium deficiencies. Changes in
such adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating the foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1996, 1995, or 1994.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
In 1996, the receivables and payables under certain modified coinsurance
arrangements are presented on a net basis to the extent that such receivables
and payables are with the same ceding company.
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns
filed by Transamerica Corporation, which by the terms of a tax sharing
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
agreement generally requires TOLIC to accrue and settle income tax obligations
in amounts that would result from filing separate tax returns with federal
taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturates consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
NOTE B--INVESTMENTS
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale and equity
securities are as follows (in thousands):
Gross Gross
Unrealized Unrealized
Fair
Cost Gain Loss
Value
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C>
corporations and agencies $ 288,605 $ 25,118 $ 1,628
$ 312,095
Obligations of states and political
subdivisions 258,596 8,508 538
266,566
Foreign governments 110,283 4,479 520
114,242
Corporate securities 15,171,041 779,904 108,999
15,841,946
Public utilities 4,462,063 203,604 35,769
4,629,898
Mortgage-backed securities 5,548,067 252,094 56,293
5,743,868
Redeemable preferred stocks 66,856 10,281 5,076
72,061
---------------- ---------------- ----------------
- ----------------
Total fixed maturities $ 25,905,511 $ 1,283,988 $ 208,823
$ 26,980,676
================ ================
================ ================
Equity securities $ 199,494 $ 281,418 $ 9,178
$ 471,734
================ ================
================ ================
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 92,958 $ 6,840
$ 99,798
Obligations of states and political
subdivisions 229,028 7,832 $ 572
236,288
Foreign governments 109,632 9,068 -
118,700
Corporate securities 11,945,631 1,126,903 30,581
13,041,953
Public utilities 4,338,637 390,237 2,909
4,725,965
Mortgage-backed securities 7,277,976 487,190 15,092
7,750,074
Redeemable preferred stocks 21,372 3,757 504
24,625
---------------- ---------------- ----------------
- ----------------
Total fixed maturities $ 24,015,234 $ 2,031,827 $ 49,658
$ 25,997,403
================ ================
================ ================
Equity securities $ 150,968 $ 163,264 $ 6,351
$ 307,881
================ ================
================ ================
</TABLE>
The cost and fair value of fixed maturities available for sale at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1997 $ 482,813 $ 511,576
Due in 1998-2001 3,688,424 3,761,584
Due in 2002-2006 4,725,231 4,839,666
Due after 2006 11,394,120 12,051,921
---------------- ----------------
20,290,588 21,164,747
Mortgage-backed securities 5,548,067 5,743,868
Redeemable preferred stock 66,856 72,061
---------------- ----------------
$ 25,905,511 $ 26,980,676
================
================
The components of the carrying value of real estate are as follows (in
thousands):
1996 1995
--------------- ----------
Investment real estate $ 22,814 $ 27,095
Properties held for sale 2,062 11,281
---------------- ---------------
$ 24,876 $ 38,376
================
===============
</TABLE>
As of December 31, 1996, the Company held a total investment in one issuer,
other than the United States Government or a Unites States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands) (See Note H.):
Name of Issuer Carrying Value
Transamerica Corporation $ 613,922
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $20.8 million at December 31, 1996.
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Net investment income (expense) by major investment category is summarized as follows (in
thousands):
1996 1995 1994
<S> <C> <C> <C>
Fixed maturities $ 2,005,764 $ 1,904,519 $
1,705,618
Equity securities 5,458 3,418
5,587
Mortgage loans on real estate 58,165 40,702
40,030
Real estate (7,435) 3,209
5,024
Policy loans 27,012 25,641
24,614
Other long-term investments 978 2,353
7,173
Short-term investments 10,616 13,286
9,689
---------------- ---------------- ----------------
2,100,558 1,993,128
1,797,735
Investment expenses (23,326) (20,369)
(26,160)
---------------- ---------------- ----------------
$ 2,077,232 $ 1,972,759 $
1,771,575
================ ================
================
Significant components of net realized investment gains are as follows (in
thousands):
1996 1995 1994
---------------- ---------------- ----------
Net gains on disposition of investments in:
Fixed maturities $ 40,967 $ 52,889 $
7,181
Equity securities 15,750 5,637
32,374
Other 3,424 2,327 2,546
---------------- ---------------- ----------------
60,141 60,853 42,101
Provision for impairment (9,080) (23,551)
(15,092)
Accelerated amortization of DPAC (33,590) (9,190)
(6,279)
---------------- ---------------- ----------------
$ 17,471 $ 28,112 $
20,730
================ ================
================
The components of net gains on disposition of investment in fixed maturities are as follows
(in thousands):
1996 1995 1994
Gross gains $ 74,817 $ 61,504 $
46,702
Gross losses (33,850) (8,615)
(39,521)
---------------- ---------------- ----------------
$ 40,967 $ 52,889 $
7,181
================ ================
================
</TABLE>
Proceeds from disposition of investment in fixed maturities available for sale
were $5,476.1 million in 1996, $3,802.6 million in 1995 and $6,737.7 million in
1994.
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1996 1995
---------------- -----------
<S> <C> <C>
Fixed maturities $ 54,160 $ 71,429
Mortgage loans on real estate 22,654 21,516
Real estate 9,146 16,207
Other long-term investments 11,025 11,025
---------------- ----------------
$ 96,985 $ 120,177
================
================
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1996 1995
---------------- ----------
Unrealized gains on investment in:
Fixed maturities $ 1,075,165 $ 1,982,169
Equity securities 272,240 156,913
---------------- ---------------
1,347,405 2,139,082
Fair value adjustments to:
DPAC (306,602) (355,571)
Reserves for future policy benefits (195,000) (339,000)
---------------- ---------------
(501,602) (694,571)
Related deferred taxes (296,031) (505,579)
---------------- ---------------
$ 549,772 $ 938,932
================
===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 1,974,211 $ 2,480,474 $
1,929,332
Cumulative effect of change in
accounting for investments - -
(367,154)
Amounts deferred:
Commissions 290,512 298,698
305,858
Other 97,491 83,108
89,000
Amortization attributed to:
Net gain on disposition of investments (33,590) (9,190)
(6,279)
Operating income (235,180) (182,123)
(176,033)
Fair value adjustment 48,969 (706,915)
718,498
Foreign currency translation adjustment (4,210) 10,159
(12,748)
---------------- ---------------- ----------------
Balance at end of year $ 2,138,203 $ 1,974,211 $
2,480,474
================ ================
================
</TABLE>
NOTE D--POLICY LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1996 1995
---------------- -----------
<S> <C> <C>
Liabilities for investment-type products $ 18,126,119 $
17,948,652
Liabilities for non-traditional life insurance
products 4,592,836 4,109,121
--------------- ---------------
$ 22,718,955 $ 22,057,773
===============
===============
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $195 million as of December 31, 1996 and $339 million as
of December 31, 1995.
<PAGE>
NOTE E--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1996 1995
---------------- -----------
<S> <C> <C>
Current tax liabilities (receivables) $ (13,752) $ 35,689
Deferred tax liabilities 402,604 552,112
---------------- ----------------
$ 388,852 $ 587,801
================
================
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1996 1995
---------------- -----------
Deferred policy acquisition costs $ 726,011 $
696,728
Unrealized investment gains 296,031 505,579
Life insurance policy liabilities (578,823) (601,875)
Provision for impairment of investments (33,945)
(42,062)
Other-net (6,670) (6,258)
---------------- ----------------
$ 402,604 $ 552,112
================
================
</TABLE>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
<TABLE>
<CAPTION>
Components of provision for income taxes are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
<S> <C> <C> <C>
Current tax expense $ 99,692 $ 115,614 $
204,087
Deferred tax expense (benefit):
Domestic 55,261 21,784
(69,490)
Foreign 9,732 12,249
8,894
---------------- --------------- ---------------
$ 164,685 $ 149,647 $
143,491
================ ===============
===============
<PAGE>
NOTE E--INCOME TAXES (Continued)
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1996 1995 1994
---------------- ---------------- ----------
Income before income taxes:
Income from U.S. operations $ 474,160 $ 425,946 $
389,778
Income from foreign operations 27,805 34,997
25,411
--------------- --------------- ---------------
501,965 460,943
415,189
Tax rate 35% 35%
35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 175,688 161,330
145,316
Income not subject to tax (2,262) (685)
(910)
Low income housing credits (8,175) (3,137)
(902)
Other, net (566) (7,861)
(13)
--------------- --------------- ---------------
$ 164,685 $ 149,647 $
143,491
=============== ===============
===============
</TABLE>
Low income housing credits are recognized over the productive life of acquired
assets. In 1995, the Company recognized a $4.4 million tax benefit related to
the favorable settlement of a prior year tax matter.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1996 was $138 million. At
December 31, 1996, $1,950 million was available for payment of dividends without
such tax consequences. No income taxes have been provided on the policyholders'
surplus account since the conditions that would cause such taxes are remote.
Income taxes of $149.1 million, $153.3 million and $195.4 million were paid
principally to the Company's parent in 1996, 1995 and 1994, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
NOTE F--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other
Net
Amount Companies Companies
Amount
1996
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 220,162,932 $ 195,158,214 $ 201,560,322 $
226,565,040
==================== ===================
=================== ===================
Premiums and other
considerations $ 1,702,975 $ 1,033,201 $ 1,128,260 $
1,798,034
==================== ===================
=================== ===================
Benefits paid or
provided $ 2,922,967 $ 1,112,561 $ 904,435 $
2,714,841
==================== ===================
=================== ===================
1995
Life insurance in force,
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $
264,153,296
==================== ===================
=================== ===================
Premiums and other
considerations $ 1,857,439 $ 1,079,303 $ 1,033,752 $
1,811,888
==================== ===================
=================== ===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 849,800 $
2,587,468
==================== ===================
=================== ===================
1994
Life insurance in force,
at end of year $ 191,884,093 $ 115,037,553 $ 158,882,366 $
235,728,906
==================== ===================
=================== ===================
Premiums and other
considerations $ 1,085,555 $ 689,615 $ 1,034,079 $
1,430,019
==================== ===================
=================== ===================
Benefits paid or
provided $ 2,338,370 $ 867,341 $ 645,096 $
2,116,125
==================== ===================
=================== ===================
</TABLE>
<PAGE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly traded stocks and
bonds.
The Company's total pension costs (benefits) recognized for all plans were
$(3.1) million in 1996, $2.5 million in 1995 and $4.9 million in 1994, of which
$(3.7) million in 1996, $2.0 million in 1995 and $4.7 million in 1994,
respectively, related to the plan sponsored by Transamerica Corporation. The
plans sponsored by the Company are not material to the consolidated financial
position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1996, 1995 and 1994.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include premiums received for employee benefit services (none in 1996 and 1995,
and $5.5 million in 1994), loans and advances, investments in a money market
fund managed by an affiliated company, rental of space, and other specialized
services. At December 31, 1996, pension funds administered for these related
companies aggregated $1,067.9 million and the investment in an affiliated money
market fund, included in short-term investments, was $44.6 million.
During 1996, The Company transferred certain below investment grade bonds with
an aggregate book value of $424.9 million, including an aggregate interest
receivable of $9.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $438.9 million,
comprised of collateralized higher-rated bond obligations of $413.9 million
issued by the special purpose subsidiary and cash of $25 million. The excess of
fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies
<PAGE>
NOTE H--RELATED PARTY TRANSACTIONS (Continued)
in exchange for assets with a fair value of $49.7 million, comprising mortgage
loans of $35.1 million and cash of $14.6 million. The excess of fair value of
the consideration received over the book value of the real estates transferred,
net of related tax payable to the parent, is included as a capital contribution.
Included in the investment in fixed maturities available for sale is a note
receivable from Transamerica Corporation of $200 million. The note receivable
matures in 2013 and bears interest at 7%.
NOTE I--REGULATORY MATTERS
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of TOLIC and each subsidiary's state of
incorporation. Such regulations include the risk-based capital requirement and
the restriction on the payment of dividends. Generally, dividends during any
year may not be paid, without prior regulatory approval, in excess of the
greater of 10% of the Company's statutory capital and surplus as of the
preceding year end or the Company's statutory net income from operations for the
preceding year. The insurance department of the domiciliary state recognizes
these amounts as determined in conformity with statutory accounting practices
prescribed or permitted by the insurance department, which vary in some respects
from generally accepted accounting principles. The Company's statutory net
income and statutory capital and surplus which are represented by TOLIC's net
income and capital and surplus are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 112,296 $ 131,607 $
175,850
Statutory capital and surplus, at
end of year 1,249,045 1,115,691
947,164
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guaranty, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1996, commitments to maintain liquidity for
benefit payments on notional amounts of $1.9 billion were outstanding compared
to $620 million at December 31, 1995.
<PAGE>
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1996 and 1995, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $20.6
million in 1996, $25.3 million in 1995, and $16.3 million in 1994. The following
is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1996 (in thousands):
Year ending December 31:
1997 $ 15,633
1998 14,688
1999 13,593
2000 12,029
2001 11,865
Later years 58,997
$ 126,805
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel are working toward a settlement. Any such
proposed settlement is subject to significant contingencies, including approval
by the court. The lawsuit may proceed if such contingencies are not satisfied.
In the opinion of TOLIC, any ultimate liability which might result from such
litigation would not have a materially adverse effect on the consolidated
financial position of TOLIC or the results of its operations.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
-----------------------------------------
1996 1995
----------------------------------- -----------------
Carrying Fair Carrying
Fair
Value Value Value
Value
Financial Assets:
<S> <C> <C> <C>
Fixed maturities available for sale $ 26,980,676 $ 26,980,676 $
25,997,403 $ 25,997,403
Equity securities available for sale 471,734 471,734
307,881 307,881
Mortgage loans on real estate 716,669 770,122
565,086 671,835
Policy loans 442,607 416,396
426,377 408,088
Short-term investments 135,726 135,726
211,500 211,500
Cash 35,817 35,817 49,938
49,938
Accrued investment income 404,866 404,866
394,008 394,008
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,962,501 6,400,632
8,080,139 7,518,211
Single premium immediate annuities 4,115,047 4,476,968
4,123,954 4,677,652
Guaranteed investment contracts 3,153,769 3,207,342
2,958,850 2,998,047
Other deposit contracts 3,894,802 3,913,046
2,785,709 2,848,301
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 43,916 -
20,888
Payable position - (5,485) -
(3,086)
</TABLE>
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
income. The differential to be paid or received on those interest rate swap
agreements that are designated as hedges of financial liabilities is recorded on
an accrual basis as a component of benefits paid or provided. While the Company
is not exposed to credit risk with respect to the notional amounts of the
interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate
Fair Value
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 270,035 6.73% $
1,511
Floating rate interest 250,905 6.77%
5,877
Floating rate interest based on one index and
receives floating rate interest based on
another index 326,644 -
(9,359)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays
Fixed rate interest 60,000 4.39%
333
Floating rate interest 1,710,716 6.11%
37,655
Floating rate interest based on one index and
receives floating rate interest based on
another index 58,585 -
443
Interest rate floor agreements 560,500 6.46%
19,287
Swaptions 8,327,570 4.50%
54,198
Others 108,745 -
19,607
December 31, 1995
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 235,173 7.99% $
(9,307)
Floating rate interest 140,000 5.65%
137
Floating rate interest based on one index and
receives floating rate interest based on
another index 65,000 -
242
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest 60,000 4.39%
741
Floating rate interest 934,678 6.17%
17,169
Floating rate interest based on one index and
receives floating rate interest based on
another index 152,000 -
(108)
Interest rate floor agreements 560,500 6.46%
35,820
Interest rate cap agreements 250,000 5.93%
792
Swaptions 1,267,140 5.52%
53,040
Others 100,000 -
2,500
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
<TABLE>
<CAPTION>
Activities with respect to the notional amounts are summarized as follows (in
thousands):
Beginning
End
of Year Additions Maturities Terminations
of Year
1996:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C>
securities available for sale $ 440,173 $ 566,023 $ 143,554 $
15,058 $ 847,584
Interest rate swap agreements
designated as hedges of
financial liabilities 1,146,678 1,887,348 1,103,525
101,200 1,829,301
Interest rate floor agreements 560,500 - - -
560,500
Interest rate cap agreements 250,000 - 250,000 -
-
Swaptions 1,267,140 7,170,000 109,570 -
8,327,570
Others 100,000 8,745 - -
108,745
-------------- -------------- -------------- ------------
- ----------------
$ 3,764,491 $ 9,632,116 $ 1,606,649 $
116,258 $11,673,700
============== ==============
============== ============ ===========
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 274,777 $ 246,790 $ 59,947 $
21,447 $ 440,173
Interest rate swap agreements
designated as hedges of
financial liabilities 601,545 1,035,910 460,777 30,000
1,146,678
Interest rate floor agreements 560,500 - - -
560,500
Interest rate cap agreements 100,000 250,000 100,000
- - 250,000
Swaptions 100,000 1,167,140 - -
1,267,140
Others 100,000 - - -
100,000
-------------- -------------- -------------- ------------
- ----------------
$ 1,736,822 $ 2,699,840 $ 620,724 $
51,447 $ 3,764,491
============== ==============
============== ============ ================
1994:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 153,000 $ 121,777
$ 274,777
Interest rate swap agreements
designated as hedges of
financial liabilities 210,000 391,545
601,545
Interest rate floor agreements 400,000 160,500
560,500
Interest rate cap agreements - 100,000
100,000
Swaptions - 100,000
100,000
Others 100,000 -
100,000
-------------- -------------- -------------- ------------
- ----------------
$ 863,000 $ 873,822 $ - $ - $
1,736,822
============== ==============
============== ============ ================
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1996, the Company had no significant concentration of credit risk.
NOTE L--OTHER OPERATING REVENUE
In 1994, the Company disposed of an investment in an affiliate which had been
accounted for under the equity method. Total consideration of $23.3 million was
received from the sale, resulting in income of $13.3 million.
<PAGE>
Audited Financial Statements
Separate Account VA-2LNY of
First Transamerica
Life Insurance Company
Year ended December 31, 1996
with Report of Independent Auditors
<PAGE>
Report of Independent Auditors
Unitholders of Separate Account VA-2LNY
of First Transamerica Life Insurance Company
Board of Directors, First Transamerica Life Insurance Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VA-2LNY of First Transamerica Life Insurance Company (comprised of the
Money Market, Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap, Capital
Appreciation, Stock Index Fund, Socially Responsible Fund, Growth and Income,
International Equity, International Value Portfolio, Disciplined Stock
Portfolio, and Small Company Stock Portfolio Sub-accounts) as of December 31,
1996, the related statement of operations for the year then ended, and the
statements of changes in net assets for the two years in the period then ended.
These financial statements are the responsibility of Separate Account VA-2LNY's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
the fund managers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts comprising Separate Account VA-2LNY of First Transamerica Life
Insurance Company at December 31, 1996, the results of their operations for the
year then ended, and the changes in their net assets for the two years in the
period then ended in conformity with generally accepted accounting principles.
March 3, 1997
<PAGE>
1
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
Zero
Money Managed
Coupon
Market Assets 2000
Sub-account Sub-account
Sub-account
------------------ -------------------
- -------------------
Assets:
<S> <C> <C> <C> <C> <C>
Investments, at fair value (Notes 1 and 2) $ 11,663,746 $ 5,720,885
$ 5,918,194
Receivable for net units sold 106,345 -
-
Due from Transamerica Life - -
-
----------------- ------------------
- ------------------
Total assets $ 11,770,091 $ 5,720,885 $
5,918,194
Liabilities:
Payable for net units redeemed - 22
30
Due to Transamerica Life 1,638 1
-
----------------- ------------------
- ------------------
Total liabilities 1,638 23
30
----------------- ------------------
- ------------------
Net assets $ 11,768,453 $ 5,720,862 $
5,918,164
=================
================== ==================
Accumulation units outstanding 10,392,468.634 489,733.637
396,886.829
=================
================== ==================
Net asset value and redemption price per unit $ 1.132402 $ 11.681577
$ 14.911465
=================
================== ==================
Other sub-account information:
Number of shares 11,663,745.790 539,706.137
481,545.505
Net asset value per share $ 1.00 $ 10.60 $
12.29
Investment cost $ 11,663,746 $ 6,621,424 $
5,881,973
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
International
Bond Cap Appreciation Index Fund Fund Income
Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
Sub-account Sub-account
- ---------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$9,397,038 $ 58,796,653 $ 23,431,114 $ 15,685,692 $ 2,200,073 $
44,081,314 $ 3,238,272
- 10,432 - - 1,250 6,130
- -
2 727 - - - - 5
- --------- --------------- --------------- --------------- --------------- --------------- ---------------
$9,397,040 $ 58,807,812 $ 23,431,114 $ 15,685,692 $ 2,201,323 $
44,087,444 $ 3,238,277
- 42 1,987 988 - - -
- - 21 18 4 36 -
- --------- --------------- --------------- --------------- --------------- --------------- ---------------
- 42 2,008 1,006 4 36
- -
- --------- --------------- --------------- --------------- --------------- --------------- ---------------
$9,397,040 $ 58,807,770 $ 23,429,106 $ 15,684,686 $ 2,201,319 $
44,087,408 $ 3,238,277
========== =============== =============== ===============
=============== =============== ===============
664,469.782 1,000,594.78661,074,614.7616585,454.420 103,732.717
1,906,011.1226,976.242
========================================================
=========== ============================
$ 14.1421$2 58.772812 $ 21.802330 $ 26.790617 $ 21.221060 $
23.130719 $ 14.267032
======================== ============= =============
============= ============= =============
817,133.71,128,967.988 1,066,019.767 773,456.191 109,510.834
2,254,798.683 235,339.548
$ 11.5$ 52.08 $ 21.98 $ 20.28 $ 20.09 $ 19.55 $
13.76
$ 9,394,$7148,228,603 $ 19,237,112 $ 13,002,851 $ 2,049,037 $ 44,825,963
$ 3,222,985
</TABLE>
See accompanying notes.
<PAGE>
- ---------------------------------------------------------------------------
Separate Account VA-2LNY of
- ------------------------------------------------------------------------------
First Transamerica Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1996
<TABLE>
<CAPTION>
Small
International Disciplined
Company
Value Stock Stock
Sub-account Sub-account
Sub-account
------------------ -------------------
- -------------------
Assets:
<S> <C> <C> <C> <C> <C>
Investments, at fair value (Notes 1 and 2) $ 489,842 $ 4,430,771 $
2,293,060
Receivable for net units sold - 66,278
-
Due from Transamerica Life 1 -
-
----------------- ------------------
- ------------------
Total assets $ 489,843 $ 4,497,049 $
2,293,060
Liabilities:
Payable for net units redeemed - -
-
Due to Transamerica Life - 3
1
----------------- ------------------
- ------------------
Total liabilities - 3
1
----------------- ------------------
- ------------------
Net assets $ 489,843 $ 4,497,046 $
2,293,059
=================
================== ==================
Accumulation units outstanding 47,815.855 381,884.114
212,878.654
=================
================== ==================
Net asset value and redemption price per unit $ 10.244350 $ 11.775943
$ 10.771672
=================
================== ==================
Other sub-account information:
Number of shares 38,268.876 299,578.821
169,479.652
Net asset value per share $ 12.80 $ 14.79 $
13.53
Investment cost $ 473,727 $ 4,082,076 $
2,135,971
</TABLE>
See accompanying notes.
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Statement of Operations
Year ended December 31, 1996
<TABLE>
<CAPTION>
Zero
Money Managed
Coupon
Market Assets
2000
Sub-account Sub-account
Sub-account
------------------ ------------------
- -------------------
<S> <C> <C> <C> <C>
Investment Income (Note 2) $ 531,833 $ 350,516
$ 328,984
Expenses (Note 3):
Mortality and expense risk charge 150,100 105,279
78,716
----------------- ---------------- ----------------
Net investment income 381,733 245,237
250,268
Net realized and unrealized (loss) gain on investments:
Realized (loss) gain on investment transactions - (189,898)
51,030
Unrealized (depreciation) appreciation of investments - (309,410)
(227,245)
----------------- ---------------- ----------------
Net (loss) gain on investments - (499,308)
(176,215)
----------------- ---------------- ----------------
Increase (decrease) in net assets resulting from operations $ 381,733 $ (254,071)
$ 74,053
=================
================- ================
operations
</TABLE>
Increase (decrease) in net assets resulting from operatios
operations ffrom
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
International
Bond Cap Appreciation Index Fund Fund Income
Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
Sub-account Sub-account
- ------------- ---------------- ----------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 450,620 $ 1,836,871 $ 269,443 $ 506,263 $ 93,232 $ 4,935,954
$ 122,452
107,939 707,999 234,765 163,078 21,150 421,978
30,830
- ------------ --------------- -------------- ------------- ------------- ------------- -------------
342,681 1,128,872 34,678 343,185 72,082 4,513,976
91,622
123,076 2,247,550 1,043,836 491,176 60,088 902,602
55,696
(266,024) 3,618,274 2,549,860 1,423,105 136,069 (1,361,873)
46
- ------------ --------------- -------------- ------------- ------------- ------------- -------------
(142,948) 5,865,824 3,593,696 1,914,281 196,157 (459,271)
55,742
- ------------ --------------- -------------- ------------- ------------- ------------- -------------
$ 199,733 $ 6,994,696 $ 3,628,374 $ 2,257,466 $ 268,239 $ 4,054,705
$ 147,364
============ =============== ============== =============
============= ============= =============
</TABLE>
See accompanying notes.
<PAGE>
- -----------------------------------------------------------------------------
Separate Account VA-2LNY of
- ----------------------------------------------------------------------------
First Transamerica Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1996
<TABLE>
<CAPTION>
Small
International Disciplined
Company
Value Stock
Stock
Sub-account Sub-account
Sub-account
------------------ ------------------
- -------------------
<S> <C> <C> <C> <C>
Investment income (Note 2) $ 4,577 $ 20,474 $
10,070
Expenses (Note 3)
Mortality and expense risk charge 2,723 18,757
14,842
--------------- --------------- ---------------
Net investment income (loss) 1,854 1,717
(4,772)
Net realized and unrealized gain on investments:
Realized gain (loss) on investment transactions 708 15,555
(7,185)
Unrealized appreciation of investments 16,114 348,695
157,089
--------------- --------------- ---------------
Net gain on investments 16,822 364,250
149,904
--------------- --------------- ---------------
Increase in net assets resulting from operations $ 18,676 $ 365,967
$ 145,132
===============
=============== ===============
</TABLE>
See accompanying notes.
<PAGE>
- -----------------------------------------------------------------------------
Separate Account VA-2LNY of
- ------------------------------------------------------------------------------
First Transamerica Life Insurance Company
Statement of Changes in Net Assets
Year ended December 31, 1996
<TABLE>
<CAPTION>
Zero
Money Managed
Coupon
Market Assets
2000
Sub-account Sub-account
Sub-account
------------------- ------------------
- -------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C>
Net investment income $ 381,733 $ 245,237
$ 250,268
Realized (loss) gain on investment transactions - (189,898)
51,030
Unrealized (depreciation) appreciation of investments -
(309,410) (227,245)
----------------- -----------------
- -----------------
Increase (decrease) in net assets resulting from operations 381,733
(254,071) 74,053
Increase (decrease) in net assets resulting from operations
Changes from accumulation unit transactions (Note 5) 1,460,629
(2,217,277) 658,584
----------------- -----------------
- -----------------
Total increase (decrease) in net assets 1,842,362 (2,471,348)
732,637
Net assets at beginning of year 9,926,091 8,192,210
5,185,527
----------------- -----------------
- -----------------
Net assets at end of year $ 11,768,453 $ 5,720,862
$ 5,918,164
=================
================= =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
International
Bond Cap Appreciation Index Fund Fund Income
Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
Sub-account Sub-account
- ----------------- ----------------- ---------------- ---------------- ---------------- ----------------
- -----------------
<S> <C> <C> <C> <C> <C>
$ 342,681 $ 1,128,872 $ 34,678 $ 343,185 $ 72,082 $
4,513,976 $ 91,622
123,076 2,247,550 1,043,836 491,176 60,088
902,602 55,696
(266,024) 3,618,274 2,549,860 1,423,105 136,069
(1,361,873) 46
- --------------- -------------- -------------- --------------- --------------- --------------
- --------------
199,733 6,994,696 3,628,374 2,257,466 268,239
4,054,705 147,364
2,881,292 10,024,249 9,447,429 5,323,639 1,062,861
25,766,239 2,298,151
- --------------- -------------- -------------- --------------- --------------- --------------
- --------------
3,081,025 17,018,945 13,075,803 7,581,105 1,331,100
29,820,944 2,445,515
6,316,015 41,788,825 10,353,303 8,103,581 870,219
14,266,464 792,762
- --------------- -------------- -------------- --------------- --------------- --------------
- --------------
$ 9,397,040 $ 58,807,770 $ 23,429,106 $ 15,684,686 $ 2,201,319 $
44,087,408 $ 3,238,277
=============== ============== ============== ===============
=============== ============== ==============
</TABLE>
See accompanying notes.
<PAGE>
- -----------------------------------------------------------------------------
Separate Account VA-2LNY of
- -----------------------------------------------------------------------------
First Transamerica Life Insurance Company
Statement of Changes in Net Assets (continued)
Year ended December 31, 1996
<TABLE>
<CAPTION>
Small
International Disciplined
Company
Value Stock
Stock
Sub-account Sub-account
Sub-account
------------------- ------------------
- -------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C>
Net investment income $ 1,854 $ 1,717
$ (4,772)
Realized gain (loss) on investment transactions 708 15,555
(7,185)
Unrealized appreciation of investments 16,114
348,695 157,089
----------------- -----------------
- -----------------
Increase in net assets resulting from operations 18,676
365,967 145,132
Increase (decrease) in net assets resulting from operations
Changes from accumulation unit transactions (Note 5) 471,167
4,131,079 2,147,927
----------------- -----------------
- -----------------
Total increase in net assets 489,843 4,497,046
2,293,059
Net assets at beginning of year - -
-
----------------- -----------------
- -----------------
Net assets at end of year $ 489,843 $ 4,497,046
$ 2,293,059
===================
================== ===================
</TABLE>
See accompanying notes.
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Statement of Changes in Net Assets
Year ended December 31, 1995
<TABLE>
<CAPTION>
Money Managed
Coupon
Market Assets 2000
Sub-account Sub-account
Sub-account
----------------- ----------------
- -----------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C>
Net investment income (loss) $ 372,818 $ 291,209 $
165,749
Realized (loss) gain on investment transactions - (150,832)
(14,600)
Unrealized (depreciation) appreciation of investments - (293,718)
391,296
--------------- --------------- ---------------
Increase (decrease) in net assets resulting from operations 372,818 (153,341)
542,445
Increase (decrease) in net assets resulting from operations
Changes from accumulation unit transactions (Note 5) 592,766
(1,913,560) 2,068,529
--------------- --------------- ---------------
Total increase (decrease) in net assets 965,584 (2,066,901)
2,610,974
Net assets at beginning of year 8,960,507 10,259,111
2,574,553
--------------- --------------- ---------------
Net assets at end of year $ 9,926,091 $ 8,192,210 $
5,185,527
===============
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
International
Bond Cap Appreciation Index Fund Fund Income
Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
Sub-account Sub-account
- ----------------- ----------------- ---------------- ---------------- ---------------- ----------------
- -----------------
<S> <C> <C> <C> <C> <C>
$ 173,818 $ (300,986) $ 40,129 $ 48,537 $ (3,538) $
37,593 $ 238
38,833 1,736,579 119,162 149,258 116,779
785,377 10,932
379,343 6,401,100 1,641,431 1,307,948 19,919
617,224 15,242
- --------------- --------------- --------------- --------------- --------------- ---------------
- ---------------
591,994 7,836,693 1,800,722 1,505,743 133,160
1,440,194 26,412
3,795,787 9,419,766 4,737,770 3,466,691 413,718
12,826,270 766,350
- --------------- --------------- --------------- --------------- --------------- ---------------
- ---------------
4,387,781 17,256,459 6,538,492 4,972,434 546,878
14,266,464 792,762
1,928,234 24,532,366 3,814,811 3,131,147 323,341
- - -
- --------------- --------------- --------------- --------------- --------------- ---------------
- ---------------
$ 6,316,015 $ 41,788,825 $ 10,353,303 $ 8,103,581 $ 870,219 $
14,266,464 $ 792,762
=============== =============== =============== ===============
=============== =============== ===============
</TABLE>
See accompanying notes.
<PAGE>
- --------------------------------------
Separate Account VA-2LNY of
- ----------------------------------------------------------------------------
First Transamerica Life Insurance Company
Notes to Financial Statements
December 31, 1996
1. Organization
Separate Account VA-2LNY of First Transamerica Life Insurance Company ("Separate
Account") was established by First Transamerica Life Insurance Company
("Transamerica Life"), a wholly-owned subsidiary of Transamerica Occidental Life
Insurance Company, as a separate account under the laws of the State of New York
on June 23, 1992. The Separate Account is registered with the Securities and
Exchange Commission (the Commission) under the Investment Company Act of 1940 as
a unit investment trust and is designed to provide annuity benefits pursuant to
flexible premium multi-funded individual deferred annuity policies ("Policy")
issued by Transamerica Life. The Separate Account commenced operations when
initial deposits were received on July 7, 1993.
In accordance with the terms of the Policy, all payments allocated to the
Separate Account by policy owners must be allocated to purchase units of any or
all of the Separate Account's thirteen sub-accounts, each of which invests
exclusively in a specific corresponding mutual fund portfolio. The mutual fund
portfolios are: eleven Series of Dreyfus Variable Investment Fund (Variable
Fund), Dreyfus Stock Index Fund (Stock Index Fund) and The Dreyfus Socially
Responsible Growth Fund (Socially Responsible Fund) (together "the Funds"). The
Variable Fund's eleven series are: Money Market Series, Managed Assets Series,
Zero Coupon 2000 Series, Quality Bond Series, Small Cap Series, Capital
Appreciation Series, Growth and Income, International Equity, International
Value Portfolio, Disciplined Stock Portfolio, and Small Company Stock Portfolio.
The International Value, Disciplined Stock and Small Company Stock sub accounts
were added to the Separate Account effective May 1, 1996. The Funds are open-end
management investment companies registered under the Investment Company Act of
1940.
2. Significant Accounting Policies
The accompanying financial statements of the Separate Account have been prepared
in accordance with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein. The
accounting principles followed and the methods of applying those principles are
presented below:
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
2. Significant Accounting Policies (continued)
Investment Valuation--Investments in the Funds' shares are carried at fair (net
asset) value. Realized investment gains or losses on investments are determined
on a specific identification basis which approximates average cost. Investment
transactions are accounted for on the date the order to buy or sell is executed
(trade date).
Investment Income--Investment income consists of dividend income (both ordinary
and capital gains) and is recognized on the ex-dividend date. All distributions
received are reinvested in the respective sub-accounts.
Federal Income Taxes--Operations of the Separate Account are part of, and will
be taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax law,
income from assets maintained in the Fund for the exclusive benefit of
participants generally is not subject to federal income tax.
3. Expenses and Charges
Mortality and expense risk charges are deducted from each sub-account on a daily
basis which is equal, on an annual basis, to 1.25% of the daily net asset value
of the sub-account. This amount can never increase and is paid to Transamerica
Life. An administrative expense charge is also deducted by Transamerica Life
from each sub-account on a daily basis which is equal, on an annual basis, to
.15% of the daily net asset value of the sub-account. This amount may change,
but it is guaranteed not to exceed a maximum effective annual rate of .25%.
The following charges are deducted from a policyholder's account by Transamerica
Life and not directly from the Separate Account. An annual policy fee is
deducted at the end of each policy year prior to the annuity date. Currently,
this charge is $30 (or 2% of the policy value, if less). This charge may change
but is guaranteed not to exceed $60 (or 2% of the policy, if less). After the
annuity date this charge is referred to as the Annuity Fee. In the event that a
policyholder withdraws all or a portion of the policyholder's account, a
contingent deferred sales load (CDSL) not exceeding 6% of premiums may be
applied to the amount of the policy value withdrawn to cover certain expenses
relating to the sale of policies. The amount of the CDSL is based upon elapsed
time since the premium was received and disappears after the seventh year.
During 1996, CDSL amounted to $133,845.
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
4. Remuneration
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
5. Accumulation Units
<TABLE>
<CAPTION>
The changes in accumulation units and amounts are as follows:
Zero
Money Managed Coupon Quality
Small
Market Assets 2000 Bond
Cap
Sub-account Sub-account Sub-account
Sub-account Sub-account
------------------- ---------------- ---------------- ----------------
- ----------------
Year ended December 31, 1996
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 26,617,198.730 38,335.624 51,842.861
175,846.080 126,546.210
Units redeemed (861,772.292) (61,586.450) (14,816.735)
(24,722.837) (33,470.516)
Units transferred (24,447,901.29111) (153,504.017) 8,072.697
59,206.548 90,074.069
------------------ ---------------- --------------- ---------------
- ---------------
Net increase (decrease) 1,307,525.147 (176,754.843) 45,098.823
210,329.791 183,149.763
============= ===============-
=============== =============== ===============
Capital Stock Socially Growth and
International
Appreciation Index Fund Responsible Income
Equity
Sub-account Sub-account Sub-account
Sub-account Sub-account
---------------- ---------------- ---------------- ----------------
- -----------------
Accumulation Units:
Units sold 270,146.010 137,024.714 35,870.324
666,760.274 92,814.368
Units redeemed (20,846.507) (15,121.803) (1,442.547)
(33,415.468) (2,759.436)
Units transferred 237,387.012 98,068.821 20,284.094
538,273.277 75,768.843
-------------- ------------- --------------- ---------------
- ---------------
Net increase 486,686.515 219,971.732 54,711.871
1,171,618.083 165,823.775
============== ============= ===============
=============== ===============
</TABLE>
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
Small
International Disciplined Company
Value Stock Stock
Sub-account Sub-account Sub-account
------------------- ---------------- ----------------
Accumulation Units:
<S> <C> <C> <C>
Units sold 47,818.902 188,126.210 119,085.212
Units redeemed (12,484.261) (250.516) (177.873)
Units transferred 12,481.214 194,008.420 93,971.315
----------------- -------------- ---------------
Net increase 47,815.855 381,884.114 212,878.654
================= ==============
===============
</TABLE>
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality
Small
Market Assets 2000 Bond
Cap
Sub-account Sub-account Sub-account
Sub-account Sub-account
---------------- ---------------- ---------------- ----------------
- -----------------
Year ended December 31, 1996
Amounts:
<S> <C> <C> <C> <C>
Sales $ 29,535,731 $ 491,826 $ 753,021 $
2,399,464 $ 6,971,390
Redemptions (940,962) (772,263) (216,107)
(338,685) (1,852,863)
Transfers (27,134,140) (1,936,840) 121,670
820,513 4,905,722
---------------- ---------------- --------------- ---------------
- ---------------
Net increase (decrease) $ 1,460,629 $ (2,217,277) $ 658,584 $
2,881,292 $ 10,024,249
=============== ================
=============== =============== ===============
Capital Stock Socially Growth and
International
Appreciation Index Fund Responsible Income
Equity
Sub-account Sub-account Sub-account
Sub-account Sub-account
Amounts:
Sales $ 5,339,870 $ 3,329,379 $ 692,678 $
14,772,345 $ 1,293,057
Redemptions (409,817) (366,457) (29,419)
(751,599) (38,366)
Transfers 4,517,376 2,360,717 399,602
11,745,493 1,043,460
--------------- --------------- --------------- ---------------
- ---------------
Net increase $ 9,447,429 $ 5,323,639 $ 1,062,861 $
25,766,239 $ 2,298,151
=============== ===============
=============== =============== ===============
</TABLE>
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
Small
International Disciplined Company
Value Stock Stock
Sub-account Sub-account Sub-account
------------------ ----------------- ----------------
Amounts:
<S> <C> <C> <C>
Sales $ 348,424 $ 2,039,665 $ 1,210,502
Redemptions (30) (2,921) (1,894)
Transfers 122,773 2,094,335 939,319
----------------- --------------- ---------------
Net increase $ 471,167 $ 4,131,079 $ 2,147,927
================= ===============
===============
</TABLE>
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality
Small
Market Assets 2000 Bond
Cap
Sub-account Sub-account Sub-account
Sub-account Sub-account
------------------- ----------------- --------------- ---------------
- ---------------
Year ended December 31, 1995
Accumulation Units:
<S> <C> <C> <C> <C>
Units sold 29,544,251.052 26,430.886 26,892.823
18,981.373 66,834.194
Units redeemed (961,510.362) (34,020.748) (9,576.976)
(14,077.846) (19,447.456)
Units transferred (28,044,962.862) (146,906.895) 131,307.626
284,578.694 157,731.048
----------------- ------------ ----------- -----------
- -----------
Net increase (decrease) 537,777.828 (154,496.757) 148,623.473
289,482.221 205,117.786
================= ==============
============= ============= ==============
Capital Stock Socially Growth and
International
Appreciation Index Fund Responsible Income
Equity
Sub-account Sub-account Sub-account
Sub-account Sub-account
------------------- ----------------- --------------- ---------------
- -----------------
Accumulation Units:
Units sold 52,743.913 26,348.437 7,783.369
108,076.106 11,372.243
Units redeemed (17,918.025) (9,709.656) (848.278)
(4,644.204) (1,447.345)
Units transferred 267,836.448 158,347.265 17,914.164
630,961.194 51,227.569
----------------- -------------- ------------- -----------
- -------------
Net increase 302,662.336 174,986.046 24,849.255
734,393.096 61,152.467
================= ==============
============= ============= =============
</TABLE>
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
<TABLE>
<CAPTION>
5. Accumulation Units (continued)
Zero
Money Managed Coupon Quality
Small
Market Assets 2000 Bond
Cap
Sub-account Sub-account Sub-account
Sub-account Sub-account
------------------- ----------------- --------------- ---------------
- -----------------
Amounts:
<S> <C> <C> <C> <C>
Sales $ 31,752,030 $ 331,503 $ 385,356 $
248,748 $ 3,139,452
Redemptions (1,027,098) (418,989) (136,865)
(174,885) (891,363)
Transfers (30,132,166) (1,826,074) 1,820,038
3,721,924 7,171,677
------------------ --------------- -------------- -------------
- -------------
Net increase (decrease) $ 592,766 $ (1,913,560) $ 2,068,529 $
3,795,787 $ 9,419,766
================== ===============
============== ============= =============
Capital Stock Socially Growth and
International
Appreciation Index Fund Responsible Income
Equity
Sub-account Sub-account Sub-account
Sub-account Sub-account
------------------- ----------------- --------------- ---------------
- -----------------
Amounts:
Sales $ 827,607 $ 524,503 $ 128,894 $
1,922,589 $ 142,470
Redemptions (277,839) (192,252) (14,360)
(77,573) (17,841)
Transfers 4,188,002 3,134,440 299,184
10,981,254 641,721
------------------ --------------- -------------- -------------
- -------------
Net increase $ 4,737,770 $ 3,466,691 $ 413,718 $
12,826,270 $ 766,350
================== ===============
============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
6. Investment Transactions
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1996 were:
Zero
Money Managed Coupon Quality
Small
Market Assets 2000 Bond
Cap
Sub-account Sub-account Sub-account
Sub-account Sub-account
---------------- ----------------- --------------- ---------------
- ---------------
<S> <C> <C> <C> <C>
Aggregate purchases $ 38,977,531 $ 1,708,024 $ 2,111,465 $
5,548,697 $ 19,238,021
=============== ===============
============= ============= =============
Aggregate proceeds from sales $ 37,350,845 $ 3,679,019 $ 1,166,104 $
2,286,011 $ 8,029,394
=============== ===============
============= ============= =============
</TABLE>
<PAGE>
Separate Account VA-2LNY of
First Transamerica Life Insurance Company
Notes to Financial Statements
<TABLE>
<CAPTION>
6. Investment Transactions (continued)
Capital Stock Socially Growth and
International
Appreciation Index Fund Responsible Income
Equity
Sub-account Sub-account Sub-account
Sub-account Sub-account
---------------- ----------------- --------------- ---------------
- -------------------
<S> <C> <C> <C> <C>
Aggregate purchases $ 12,569,868 $ 7,223,701 $ 1,623,410 $
35,514,418 $ 3,265,100
=============== ===============
============= ============= =============
Aggregate proceeds from sales $ 3,050,069 $ 1,488,106 $ 484,010 $
5,163,989 $ 867,816
=============== ===============
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Small
International Disciplined Company
Value Stock Stock
Sub-account Sub-account Sub-account
---------------- ----------------- ---------------
<S> <C> <C> <C>
Aggregate purchases $ 520,351 $ 4,345,720 $ 2,629,899
=============== ===============
=============
Aggregate proceeds from sales $ 47,332 $ 279,199 $ 486,743
=============== ===============
=============
</TABLE>
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Parts A or B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Transamerica
Occidental Life Insurance Company
("Transamerica") authorizing establishment of the Variable
Account.(1)
(2) Not Applicable.
(3) (a) Master Agreement among Transamerica Occidental Life
Insurance Company, First
Transamerica Life Insurance, Transamerica Financial
Resources, Inc., Dreyfus Service
Corporation, and Dreyfus Service Organization, Inc. (4)
(b) Principal Agency Agreement between Transamerica
Occidental Life
Insurance Company and Dreyfus Service Organization, Inc
. (4)
(c) Distribution Agreement between Transamerica Occidental
Life Insurance
Company and Dreyfus Service Corporation.(4)
(d) Form of Sales Agreement among Dreyfus Service
Corporation, Dreyfus Service
Organization, Inc., and Broker-Dealers. (4)
(e) Amendment Dated as of August 31, 1993, to Master
Agreement among Transamerica
Occidental Life Insurance Company, First Transamerica Life Insurance Company,
Transamerica Financial Resources, Inc., Dreyfus Service Corporation and Dreyfus
Service Organization, Inc. (6)
(f) Amendment Dated as of August 31, 1993 to Principal
Agency Agreement between Transamerica Occidental Life
Insurance Company and Dreyfus Service Organization, Inc.
(6)
(g) Amendment Dated as of August 31, 1993 to Distribution Agreement between
Transamerica Occidental Life Insurance Company and Dreyfus Service Corporation.
(6)
(h) Distribution Agreement between Transamerica Occidental Life Insurance
Company and
Transamerica Insurance Securities Sales Corporation, dated as of August
24, 1994. (8)
(i) Sales Agreement among Transamerica Insurance Securities Sales
Corporation,
Transamerica Occidental Life Insurance Company, First Transamerica Life
Insurance
Company, Dreyfus Service Corporation, and Dreyfus Service Organization,
Inc., dated as
of August 24, 1994. (8)
(j) Services Agreement among Transamerica Occidental Life Insurance Company,
First
Transamerica Life Insurance Company, Transamerica Insurance Securities
Sales
Corporation, Dreyfus Service Corporation, and Dreyfus Service
Organization, Inc., dated
as of August 24, 1994. (8)
(k) Form of Sales Agreement among Transamerica Insurance Securities Sales
Corporation, Transamerica Occidental Life Insurance Company,First Transamerica
Life Insurance Company and Broker/Dealers, dated August 24, 1994.(10)
(l) Form of Sales Agreement between Transamerica Occidental Life Insurance
Company,
<PAGE>
Transamerica Life Insurance and Annuity Company, First Transamerica Life
Insurance Company and Transamerica Securities Sales Corporation.(10)
(4)Group Contract Form, Certificate Form, Individual Contract Form and
Endorsements.
(a) Contract Form and Endorsements. (5)
(i) Form of Flexible Purchase Payment Multi-Funded Deferred Master Group
Annuity Contract.
(ii) Form of Automatic Payout Option Endorsement to Group Contract.
(iii) Form of Dollar Cost Averaging Option Endorsement to Group Contract.
(iv) Form of Systematic Withdrawal Option Endorsement to Group Contract.
(v) Form of Guaranteed Minimum Death Benefit Endorsement to Group Contract.
(vi) Form of Fixed Account Rider to Group Contract. (7)
(b) Certificate of Participation Form and Endorsements. (5)
(i) Form of Certificate of Participation.
(ii) Form of IRA Endorsement to Certificate.
(iii) Form of Dollar Cost Averaging Option Endorsement to Certificate.
(iv) Form of Systematic Withdrawal Option Endorsement to Certificate.
(v) Form of Automatic Payout Option Endorsement to Certificate.
(vi) Form of Benefit Distribution Endorsement to Certificate.
(c) Individual Contract Form and Endorsements (6)
(i) Form of Flexible Purchase Payment Multi-Funded Deferred Individual
Annuity
Contract.
(ii) Form of IRA Endorsement to Individual Contract.
(iii) Form of Benefit Distribution Endorsement.
(iv) Form of Dollar Cost Averaging Option Endorsement to Individual
Contract.
(v) Form of Systematic Withdrawal Option Endorsement to Individual
Contract.
(vi) Form of Automatic Payout Option Endorsement to Individual Contract.
(vii) Form of Guaranteed Minimum Death Benefit Endorsement to Individual
Contract.
(viii) Form of Fixed Account Rider to Individual Contract. (7)
(5) (a) Form of Application for and Acceptance of Group Annuity Contract.
(5)
(b) Form of Application for Enrollment under Group Annuity
Contract.(5)
(c) Form of Application for Individual Annuity Contract. (6)
(6) (a) Restated Articles of Incorporation of Transamerica. (1)
(b) Restated By-Laws of Transamerica. (1)
(7) Not applicable.
(8) (a) Participation Agreement between Transamerica Occidental
Life Insurance Company and
Dreyfus Variable Investment Fund. (4)
(b) Participation Agreement between Transamerica Occidental
Life Insurance Company and
Dreyfus Life and Annuity Index Fund, Inc. (4)
(c) Participation Agreement between Transamerica Occidental
Life Insurance Company and
The Dreyfus Socially Responsible Growth Fund, Inc. (6)
<PAGE>
(d) Administrative Services Agreement between Transamerica Occidental Life
Insurance Company and Vantage Computer Systems, Inc. (4)
(e) Amendment Dated as of August 31, 1993 to Participation Agreement between
Transamerica Occidental Life Insurance Company and Dreyfus Variable Investment
Fund. (6)
<PAGE>
(f) Amendment Dated as of August 31, 1993 to Participation Agreement between
Transamerica Occidental Life Insurance Company and Dreyfus Life and
Annuity Index Fund, Inc. (6)
(g) Amendment Dated as of August 24, 1994 to Participation Agreement Dated
as of March 3, 1993, As Amended, between Transamerica Occidental Life
Insurance Company and Dreyfus Variable Investment Fund. (8)
(h) Amendment Dated as of August 24, 1994 to Participation Agreement Dated
as of August
31, 1993 between Transamerica Occidental Life Insurance Company and
Dreyfus Socially Responsible Growth Fund, Inc. (8)
(i) Amendment Dated as of August 24, 1994 to Participation Agreement Dated
as of March 3, 1993, As Amended, between Transamerica Occidental Life
Insurance Company and Dreyfus Stock Index Fund. (8)
(9) (a) Opinion and Consent of Counsel. (9)
(10) (a) Consent of Counsel. (10)
(b) Consent of Independent Auditors. (10)
(11) No financial statements are omitted from item 23.
(12) Not applicable.
(13) Performance Data Calculations. (6)
(14) Not applicable.
(15) Powers of Attorney.
Robert Abeles (10) Richard N. Latzer (2)
Thomas J. Cusack (6) Karen MacDonald (9)
James W. Dederer (2) Gary U. Rolle' (2)
John A. Fibiger (6) James B. Roszak (2)
Richard H. Finn (1) William E. Simms (3)
T. Desmond Sugrue (10)
David E. Gooding (2) Nooruddin S. Veerjee (4)
Edgar H. Grubb (2) Robert A. Watson(9)
Frank C. Herringer (2)
(1) Filed with initial filing of this Form N-4 Registration Statement,
File No. 33-49998 (July 24, 1992).
(2) Incorporated by reference to Exhibit 7(c) of Post-Effective Amendment
No.1 to the Registration
Statement of Transamerica Occidental Life Insurance Company's Separate
Account VL on Form S-6,
File No. 33-28107 (April 30, 1990).
(3) Incorporated by reference to Exhibit 7(d) of Post-Effective Amendment
No. 2 to the Registration
Statement of Transamerica Occidental Life Insurance Company's Separate
Account VL on Form S-6,
File No. 33-28107 (April 30, 1991).
(4) Filed with Post-Effective Amendment No. 1 to this Form N-4 Registration
Statement, File No. 33-49998
(April 30, 1993).
<PAGE>
(5) Filed with Post-Effective Amendment No. 3 to this Form N-4 Registration
Statement, File No. 33-49998
(March 8, 1994).
(6) Filed with Post-Effective Amendment No. 4 to this Form N-4 Registration
Statement, File No. 33-49998
(April 29, 1994).
(7) Filed with Post-Effective Amendment No. 5 to this Form N-4 Registration
Statement, File No. 33-49998
(March 1, 1995).
(8) Filed with Post-Effective Amendment No. 6 to this Form N-4 Registration
Statement File No. 33-499988 (April 28, 1995).
(9) Filed with Post-Effective Amendment No. 7 to this Form
N-4 Registration Statement
File No. 33-49998 (April 26, 1996).
(10) File herewith.
Item 25. List of Directors of Transamerica Occidental Life Insurance Company
Robert Abeles Frank C. Herringer
Richard N. Latzer
Thomas J. Cusack
James W. Dederer Karen MacDonald
John A. Fibiger Gary U. Rolle'
Richard H. Finn James B. Roszak
David E. Gooding William E. Simms
Edgar H. Grubb T. Desmond Sugrue
Nooruddin S. Veerjee
Robert A. Watson
List of Officers for Transamerica Occidental Life Insurance Company
Thomas J. Cusack President and Chief Executive Officer
John A. Fibiger, FSA Chairman
James B. Roszak President, Life Insurance Division and Chief
Marketing Officer
William E. Simms President - Reinsurance Division
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer, CLU Executive Vice President, General
Counsel and Corporate Secretary
David E. Gooding Executive Vice President and Chief Information Officer
<PAGE>
Bruce Clark Senior Vice President and Chief Actuary
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
<PAGE>
Louise K. Neal Senior Vice President
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Executive Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
Nooruddin S. Veerjee, FSA President - Group Pension Division
Darrel K.S. Yuen President-Asian Operations
Richard N. Latzer Chief Investment Officer
Gary U. Rolle', CFA Chief Investment Officer
Glen E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Lyman Lokken Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Dale S. Rathe-Aazam Investment Officer
Susan A. Silbert Investment Officer
Jeffrey S. Van Harte Investment Officer
Lennart H. Walin Investment Officer
Paul Wintermute Investment Officer
William D. Adams Vice President
Sandra Bailey-Whichard Vice President
Nicki Bair Senior Vice President
Dennis Barry Vice President
Laurie Bayless Vice President
Marsha Blackman Vice President
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Senior Vice President and Actuary
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
Peter DeWolf Vice President
Mary J. Dinkel, CLU Vice President
Randy Dobo Vice President and Actuary
Thomas P. Dolan, FLMI Vice President
John V. Dohmen Vice President
Gail DuBois Vice President and Associate Actuary
Ken Ellis Vice President
George Garcia Vice President and Chief Medicare Officer
David M. Goldstein Vice President and Associate General Counsel
John D. Haack Vice President
Paul Hankwitz, MD Vice President and Chief Medical Director
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko Vice President
C-10
<PAGE>
William M. Hurst Vice President and Associate General Counsel
James M. Jackson Vice President and Deputy General Counsel
Allan H. Johnson, FSA Vice President and Actuary
Ken Kilbane Vice President
James D. Lamb, FSA Vice President and Chief Actuary
Ronald G. Larson, FLMI Regional Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Thomas Liu Vice President
Katherine Lomeli Vice President and Assistant Secretary
Philip E. McHale, FLMI Vice President
Mark Madden Vice President
Vic Modugno Vice President and Associate Actuary
Mischelle Mullin Vice President
Wayne Nakano, CPA Vice President and Controller
Paul Norris Vice President and Actuary
John W. Paige, FSA Vice President and Associate Actuary
Stephen W. Pinkham Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Joel D. Seigle Vice President
Sandra Smith Vice President
James O. Strand Vice President
Deborah Tatro Vice President
Lawrence Taylor Vice President
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
William R. Wellnitz, FSA Senior Vice President and Actuary
Anthony Wilkey Vice President
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Olisa Abaelu Second Vice President
Flora Bahaudin Second Vice President
David Barcellos Vice President
Michael C. Barnhart Regional Vice President
Dan Bass, ASA Second Vice President
Frank Beardsley Vice President
Esther Blount Second Vice President
Benjamin Bock Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Art Cohen Second Vice President
Rose Corlew Second Vice President
Dave Costanza Second Vice President
Gloria Durosko Second Vice President
Reid A. Evers Vice President and Associate General Counsel
David Fairhall Second Vice President and Associate Actuary
Selma Fox Second Vice President
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
<PAGE>
Sharon Haley Second Vice President
Brian Hoyt Second Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Ronald G. Keller Second Vice President
Ken Kiefer Second Vice President
Joan Klubnik Second Vice President
Lynette Lawson Second Vice President
Dean LeCesne Second Vice President
Marilyn McCullough Vice President and Chief Reinsurance Underwriter
Richard MacKenzie Second Vice President
Carl Marcero Second Vice President
Lisa Moriyama Second Vice President
Joseph K. Nelson Second Vice President
John Oliver Second Vice President
Susan O'Brien Second Vice President
Daragh O'Sullivan Second Vice President
Stephanie Quincey Second Vice President
James R. Robinson Second Vice President
John J. Romer Vice President
Thomas M. Ronce Second Vice President and Assistant General Counsel
Hugh Shellenberger Second Vice President
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Vice President
David Stone Second Vice President
Suzette Stover-Hoyt Second Vice President
John Tillotson Second Vice President
Janet Unruh Second Vice President and Assistant General Counsel
Colleen Vandermark Vice President
Susan Viator Second Vice President
Richard T. Wang Second Vice President
James B. Watson Second Vice President and Assistant General Counsel
Joanne E. Whitaker Second Vice President
Sheila Wickens, MD Second Vice President and Medical Director
William Wojciechowski Second Vice President
Michael B. Wolfe Vice President
Wilbur L. Fulmer Tax Officer
James Wolfenden Statement Officer
Item 26. Person Controlled by or Under Common Control With the Depositor or
Registrant.
The Depositor, Transamerica Occidental Life Insurance Company
(Transamerica), is wholly owned by Transamerica Insurance Corporation of
California. The Registrant is a segregated asset account of Transamerica.
The following chart indicates the persons controlled by or under common
control with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
C-12
<PAGE>
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
Inter-America Corporation - California
Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. - Delaware
River Thames Insurance Company Limited - England
RTI Holdings, Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
Transamerica CBO I, Inc. - Delaware
Transamerica Corporation (Oregon) - Oregon
Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Company (Europe) - Maryland
Transamerica Insurance Finance Corporation, California - California
Transamerica Insurance Finance Corporation, Canada - Ontario
Transamerica Finance Corporation - Delaware
TA Leasing Holding Co., Inc. - Delaware
Trans Ocean Ltd. - Delaware
Trans Ocean Container Corp. - Delaware
Cool Solutions, Inc. - Delaware
TOD Liquidating Corp. - California
TOL S.R.L. - Italy
Trans Ocean Leasing Deutschland GMBH - Germany
Trans Ocean Leasing PTY Limited - Australia
Trans Ocean Management Corporation -
Trans Ocean Regional Corporate Holdings - California
Trans Ocean SARL - France
Trans Ocean Tank Services Corporation - Delaware
Trans Ocean Container Finance Corp. - Delaware
Transamerica Leasing Inc. - Delaware
Better Asset Management Company LLC - Delaware
Greybox L.L.C. - Delaware
Transamerica Leasing Holdings Inc. - Delaware
Greybox Services Limited - United Kingdom
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing SRL - Italy
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil Ltda. - Brazil
Transamerica Leasing GmbH - West Germany
Transamerica Leasing Limited - United Kingdom
ICS Terminals (UK) Limited - United Kingdom
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Leasing (HK) Ltd. - Hong Kong
<PAGE>
Transamerica Leasing (Proprietary) Limited - South Africa
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III Inc. - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing A/S - Denmark.
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - Fra.
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
TELColorado Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
The Plain Company - Delaware
Transamerica Global Distribution Finance Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
BWAC Seventeen, Inc. - Delaware
Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada - Canada
TCF Commercial Leasing Corporation, Canada - Ontario
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited - United Kingdom
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
Transamerica Commercial Finance France S.A. - France
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmaatschappij B.V. - Netherlands
Transamerica GmbH - Germany - Germany
Transamerica Finance Loan Company - Delaware
Transamerica Financial Services Holding Company - Delaware
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
Pacific Agency, Inc. - Indiana
Pacific Agency, Inc. - Nevada
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Financial Services Limited, United Kingdom -
United Kingdom
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation (Washington) - Washington
Transamerica Financial Consumer Discount Company (Pennsylvania)
- - Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Services Mortgage Company - Delaware
Transamerica Financial Professional Services, Inc. - California
<PAGE>
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services Company - Ohio
Transamerica Financial Services Inc. - Hawaii
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services, Inc. - West Virginia
Transamerica Insurance Administrators, Inc. - Delaware
Transamerica Mortgage Company - Delaware
Transamerica Financial Services Finance Co. - Delaware
Transamerica HomeFirst, Inc. - California
Transamerica Foundation - California
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas - Texas
TBK Insurance Agency of Ohio, Inc. - Ohio
Transamerica Financial Resources Insurance Agency of Alabama Inc. -
Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - Massachusetts
Transamerica International Insurance Services, Inc. - Delaware
Home Loans and Finance Ltd. - United Kingdom
Transamerica Occidental Life Insurance Company - California
Bulkrich Trading Limited - Hong Kong
First Transamerica Life Insurance Company - New York
NEF Investment Company - California
Transamerica Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Colorado
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Securities Sales Corporation - Maryland
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
Transamerica Investment Services, Inc. - Delaware
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- Maryland
Transamerica LP Holdings Corp. - Delaware
Transamerica Properties, Inc. - Delaware
Transamerica Retirement Management Corporation - Delaware
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - Delaware
<PAGE>
Bankers Mortgage Company of California - California
Pyramid Investment Corporation - Delaware
The Gilwell Company - California
Transamerica Affordable Housing, Inc. - California
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Ventana Inn, Inc. - California
Transamerica Telecommunications Corporation - Delaware
<PAGE>
<PAGE>
<PAGE>
*Designates INACTIVE COMPANIES
oA Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Certificate Owners
As of April 1, 1997 there were 8,436 Owners of Non-Qualified Individual
Contracts and 4,735 Owners of Qualified Individual Contracts.
<PAGE>
Item 28. Indemnification
Transamerica's Bylaws provide in Article V as follows:
Section 1. Right to Indemnification.
Each person who was or is a party or is threatened to be made a party to or is
involved, even as a witness, in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation that
was predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expense, liability, and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. [It is the Corporation's
intent that the bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the Corporation's Articles of Incorporation.]
Section 2. Authority to Advance Expenses.
Expenses incurred by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by the
California General Corporation Law, as amended, such Expenses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article or otherwise. Expenses incurred by other Agents of the corporation
(or by the directors or officers not acting in their capacity as such, including
service with respect to employee benefit plans) may be advanced upon the receipt
of a similar undertaking, if required by law, and upon such other terms and
conditions as the Board of Directors deems appropriate. Any obligation to
reimburse the corporation for Expense advances shall be unsecured and no
interest shall be charged thereon.
Section 3. Right of Claimant to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full by the
corporation within 30 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation
<PAGE>
Law for the corporation to indemnify the claimant for the amount claimed. The
burden of proving such a defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper under
the circumstances because he has met the applicable standard of conduct set
forth in the California General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant had not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
Section 4. Provisions Nonexclusive.
The rights conferred on any person by this Article shall not be exclusive of any
other rights that such person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
The corporation may purchase and maintain insurance to protect itself and any
Agent against any Expense asserted against or incurred by such person, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article [provided that,
in cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the California
General Corporation Law, as amended].
Section 6. Survival of Rights.
The rights provided by this Article shall continue as to a person who has ceased
to be an Agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Section 7. Settlement of Claims.
The corporation shall not be liable to indemnify any Agent under this Article
(a) for any amounts paid in settlement of any action or claim effected without
the corporation's written consent, which consent shall not be unreasonably
withheld; or (b) for any judicial award, if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
Section 8. Effect of Amendment
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
Section 9. Subrogation.
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the Agent, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring suit to enforce such rights.
Section 10. No Duplication of Payments.
The corporation shall not be liable under this Article to make any payment in
connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to
<PAGE>
directors, officers and controlling person of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by the director, officer or
controlling person of the registrant in the successful defense of any 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 Occidental Life Insurance
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 $65,000,000 for Coverage A and
$55,000,000 for Coverage B for the period 11/25/93 to 11/25/94. Coverage B is
subject to a self insured retention of $5,000,000. The primary policy under the
program is with Corporate Officers and Directors Assurance Holding Limited
(CODA).
Item 29. Principal Underwriter
Transamerica Securities Sales Corporation (TSSC) and Transamerica
Financial Resources (TFR) are the co-underwriters of the Certificates and the
Individual Contracts as defined in the Investment Company Act of 1940. TSSC
became Principal Underwriter effective 8-24-94.
NAME AND PRINCIPAL POSITION AND OFFICES WITH
BUSINESS ADDRESS* TRANSAMERICA SECURITIES SALES
CORPORATION
Barbara A. Kelley President and Director
Regina M. Fink Secretary and Director
Benjamin Tang Treasurer
James B. Roszak Director
Nooruddin Veerjee Director
Dan S. Trivers Senior Vice President
Nicki A. Bair Vice President
Chris Shaw Second Vice President
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
NAME AND PRINCIPAL POSITION AND OFFICES WITH
BUSINESS ADDRESS* TRANSAMERICA FINANCIAL
RESOURCES
Barbara A. Kelley President and Director
Regina M. Fink Secretary and Counsel
<PAGE>
Monica Suryapranata Treasurer
Gilbert F. Cronin Director
James W. Dederer Director
John Leon Second Vice President and
Director of Due Diligence
James B. Roszak Director
Jeffrey C. Goodrich Vice President
Dan Trivers Vice President, Director of
Administration and
Chief Compliance Officer
Ronald F. Wagley Director
Kerry Rider Second Vice President and
Director of Compliance
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
The following table lists the amounts of commissions paid to the
co-underwriters 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- 15,506,834.71 -0-
TFR -0- -0- 2,283,845.07 -0-
</TABLE>
Item 30. Location and Accounts and Records
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by Transamerica or the
Service Office at their administrative offices.
Item 31. Management Services
All management contracts are discussed in Parts A or B.
Items 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual Contract offered
by the Prospectus, a space that an applicant can check to request a
Statement of
C-23
<PAGE>
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 undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request to Transamerica
at the address or phone number listed in the Prospectus.
(d) Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88) regarding Sections 22(e), 27(c)(i) and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) policies, and that paragraphs numbered (1) through (4)
of that letter will be complied with.
(e) Transamerica represents that the fees and charges deducted under the
Contracts are reasonable in the aggregate in relation to services
rendered, expenses expected to be incurred and risks assumed by
Transamerica.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Transamerica Occidental Life Insurance Company certifies that this
Post-Effective Amendment No.8 to the Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment No. 8 to the
Registration Statement to be signed on its behalf by the undersigned in the City
of Los Angeles, State of California on this 28th day of April, 1997.
SEPARATE ACCOUNT VA-2L TRANSAMERICA OCCIDENTAL
OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
LIFE INSURANCE COMPANY (DEPOSITOR)
(REGISTRANT)
--------------------------
Aldo Davanzo
Vice President and Assistant Secretary
As Required by the Securities Act of 1933, this Post-Effective
Amendment No. 8 to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
_____________________* Director, Executive Vice President April 28,
1997
Robert Abeles and Chief Financial Officer
______________________* President, Chief Executive Officer April 28,
1997
Thomas J. Cusack and Director
______________________* Chairman and Director April 28,
1997
John A. Fibiger
______________________* Director April 28, 1997
Richard I. Finn
______________________* Director April 28, 1997
<PAGE>
David E. Gooding
______________________* Director April 28, 1997
Edgar H. Grubb
______________________* Director April 28, 1997
Frank C. Herringer
______________________* Director April 28, 1997
Richard N. Latzer
______________________* Director April 28, 1997
Karen MacDonald
______________________* Director April 28, 1997
Gary U. Rolle'
______________________* Director April 28, 1997
James B. Roszak
______________________* Director April 28, 1997
William E. Simms
______________________* Director April 28, 1997
T. Desmond Sugrue
______________________* Director April 28, 1997
Nooruddin S. Veerjee
______________________* Director April 28, 1997
Robert A. Watson
</TABLE>
______________________ On April 28, 1997 as Attorney-in-
Fact pursuant to
*By: Aldo Davanzo powers of attorney previously filed
and filed herewith, and in his own
capacity as Executive Vice President,
General Counsel, Corporate Secretary
and Director
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit
(3) (k) Form of Sales Agreement among Transamerica Insurance
Securities Sales Corporation, Transamerica Occidental
Life Insurance Company,First Transamerica Life Insurance
Company and Broker/Dealers, dated August 24, 1994.(10)
(l)Form Sales Agreement between Transamerica Occidental Life
Insurance Company, Transamerica Life Insurance and Annuity
Company, First Transamerica Life Insurance Company and
Transamerica Securirites Sales Corporation.(10)
(10) (a) Consent of Counsel
(b) Consent of Independent Auditors
(15) Power of Attorney
<PAGE>
Exhibit (3)(k)
Form of Sales Agreement among Transamerica Insurance
Securities Sales Corporation, Transamerica Occidental
Life Insurance Company,First Transamerica Life Insurance
Company and Broker/Dealers, dated August 24, 1994.(10)
<PAGE>
SALES AGREEMENT
Agreement dated as of ______________________________, 1994, by
and among TRANSAMERICA INSURANCE SECURITIES SALES CORPORATION, a
California
corporation ("TISSC"), TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY, a
California insurance company ("TOLIC"), FIRST TRANSAMERICA LIFE
INSURANCE
COMPANY ("FTLIC," together with TOLIC, the "Transamerica Companies" and each
individually, a "Transamerica Company," and the Transamerica Companies together
with TISSC, "Transamerica"), and ___________________________________________, a
__________________ corporation ("Broker-Dealer"); and
_____________________________, a____________________ corporation ("Insurance
Agent").
RECITALS:
A. Each Transamerica Company pursuant to a Distribution
Agreement with TISSC (the "Distribution Agreements") has appointed TISSC as the
principal underwriter of the class or classes of variable annuity contracts
identified in Schedule 1 to this Agreement at the time that this Agreement is
executed, and such other class or classes of variable insurance products that
may be added to Schedule 1 from time to time in accordance with Section 2(g) of
this Agreement (each, a "class of Contracts"; all such classes, the
"Contracts"). Each class of Contracts will be issued by a Transamerica Company
through one or more separate accounts of such Transamerica Company ("Separate
Accounts") and each class of Contracts will be funded by shares of certain
registered investment companies (each, a "Fund"; together, the "Funds") and/or
by a fixed account option(s). The Transamerica Companies have authorized TISSC
to enter into separate written agreements with broker-dealers pursuant to which
such broker-dealers would be authorized to participate in the sale of the
Contracts and would agree to use their best efforts to solicit applications for
the Contracts.
B. Broker-Dealer is a broker-dealer and Insurance Agent is a
life insurance agent. Insurance Agent is:
() the same person as Broker-Dealer.
() an Affiliate of Broker-Dealer
C. The parties to this Agreement desire that Broker-Dealer and
Insurance Agent be authorized to solicit applications for the sale of the
Contracts subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises and covenants hereinafter set forth, the parties agree as
follows:
1. Additional Definitions
(a) Registration Statement - With respect to each class of
Contracts, the most recent effective registration statement(s) filed with the
SEC or the most recent effective post-effective amendment(s) thereto, including
financial statements included therein and all exhibits thereto. There may be
more than one Registration Statement in effect at a time for a
<PAGE>
class of Contracts; in such case, any reference to "the Registration Statement"
for a class of Contracts shall refer to any or all, depending on the context, of
the Registration Statements for such class of Contracts.
(b) Prospectus - With respect to each class of Contracts, the
prospectus for such class of Contracts included within the Registration
Statement for such class of Contracts; provided, however, that, if the most
recently filed prospectus filed pursuant to Rule 497 under the 1933 Act
subsequent to the date on which Registration Statement became effective differs
from the prospectus on file at the time such Registration Statement became
effective, the term "Prospectus" shall refer to the most recently filed
prospectus filed under Rule 497 from and after the date on which it shall have
been filed.
(c) 1933 Act - The Securities Act of 1933, as amended.
--------
(d) 1934 Act - The Securities Exchange Act of 1934, as amended.
--------
(e) 1940 Act - The Investment Company Act of 1940, as amended.
--------
(f) Agent - An individual associated with Insurance Agent and
Broker-Dealer who is appointed by one or both of the Transamerica Companies as
an agent for the purpose of soliciting applications.
(g) Premium - A payment made under a Contract to purchase
benefits under such Contract.
(h) Service Center - Transamerica Annuity Service Center, P.O.
Box 419706, Kansas City, Missouri, 64141-6706, (800) 258-4260, or such other
address as may be designated from time to time by the Transamerica Companies and
provided to Insurance Agent and Broker-Dealer.
(i) Agents Manual - The manual prepared by the Transamerica
Companies and attached hereto as Exhibit A.
(j) SEC - The Securities and Exchange Commission.
(k) NASD - The National Association of Securities Dealers, Inc.
(l) Affiliate - With respect to a person, any other person
controlling, controlled by, or under common control with, such person.
(m) Broker-of-Record - Generally, the person designated in the
Transamerica Companies' records as the person, with respect to a Contract, who
is entitled to receive compensation payable with respect to such Contract and
who is able to contact directly the owner of such Contract. In the case of
compensation payable with respect to a Premium, the
2
<PAGE>
Broker-of-Record shall be the party designated as such in the Transamerica
Companies records, at the time such Premium is accepted by a Transamerica
Company. In the case of any payment of compensation payable with respect to
Contract value, the Broker-of-Record shall be the party designated as such in
the Transamerica Companies records, in accordance with the Agents Manual at the
time any such payment is payable. In the case of compensation payable on
annuitization of a Contract, the Broker-of-Record is the party designated as
such in the Transamerica Companies records on the Annuity Date for such
Contract.
2. Authorization of Broker-Dealer and Insurance Agent
(a) Pursuant to the authority granted to it in the
Distribution Agreements, TISSC hereby authorizes Broker-Dealer under the
securities laws, and the Transamerica Companies hereby authorize Insurance Agent
under the insurance laws, each in a non-exclusive capacity, to sell the
Contracts. Broker-Dealer and Insurance Agent accept such authorization and shall
use their best efforts to find purchasers for the Contracts in each case
acceptable to the Transamerica Company issuing such Contracts. Broker-Dealer and
Insurance Agent understand that the public offering of and solicitation for a
class of Contracts will commence as soon as practicable after the effective date
of the Registration Statement for such class of Contracts.
(b) TISSC and the Transamerica Companies shall notify
Broker-Dealer and Insurance Agent in writing of all states and jurisdictions in
which each Transamerica Company is licensed to sell the Contracts.
(c) Broker-Dealer and Insurance Agent acknowledge that no
territory is exclusively assigned hereunder, and each Transamerica Company and
TISSC reserves the right in its sole discretion to establish or appoint one or
more agencies in any jurisdiction in which Insurance Agent transacts business
hereunder.
(d) Insurance Agent is vested under this Agreement with power
and authority to select and recommend individuals associated with Insurance
Agent for appointment as Agents of one or both of the Transamerica Companies,
and only individuals so recommended by Insurance Agent shall become Agents,
provided that each Transamerica Company reserves the right in its sole
discretion to refuse to appoint any proposed agent or, once appointed, to
terminate the same at any time with or without cause.
(e) Neither Broker-Dealer nor Insurance Agent shall expend or
contract for the expenditure of the funds of TISSC or the Transamerica
Companies. Broker-Dealer and Insurance Agent each shall pay all expenses
incurred by each of them in the performance of this Agreement, unless otherwise
specifically provided for in this Agreement or unless TISSC and the Transamerica
Companies shall have agreed in advance in writing to share the cost of any such
expenses. Initial state appointment fees for Insurance Agent and appointees of
Insurance Agent as Agents of a Transamerica Company will be paid by such
Transamerica
3
<PAGE>
Company unless otherwise paid for by the Insurance Agent or Broker-Dealer.
Renewal state appointment fees for any Insurance Agent or any appointee of any
Insurance Agent shall be paid by such Transamerica Company if, in the
Transamerica Company's sole discretion, its minimum production and activity
requirements for the payment of renewal appointment fees have been met by such
Insurance Agent or appointee. Each Transamerica Company shall establish
reasonable minimum production and activity requirements for the payment of
renewal state appointment fees, which may be changed by such Transamerica
Company in its sole discretion at any time without notice. Except as otherwise
provided herein, Insurance Agent will be obligated to pay all state appointment
fees, including, but not limited to, renewal appointment fees not paid for by a
Transamerica Company, transfer fees and termination fees, and any other fees
required to be paid to obtain state insurance licenses for Insurance Agent or
appointees of Insurance Agent. Neither Broker-Dealer nor Insurance Agent shall
possess or exercise any authority on behalf of either Transamerica Company other
than that expressly conferred on Broker-Dealer or Insurance Agent by this
Agreement. In particular, and without limiting the foregoing, neither
Broker-Dealer nor Insurance Agent shall have any authority, nor shall either
grant such authority to any Agent, on behalf of one or both of the Transamerica
Companies: to make, alter or discharge any Contract or other contract entered
into pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Premiums; or to receive any monies or Premiums
from applicants for or purchasers of the Contracts (except for the sole purpose
of forwarding monies or Premiums to a Transamerica Company).
(f) Broker-Dealer and Insurance Agent acknowledge that each
Transamerica Company has the right in its sole discretion to reject any
applications or Premiums received by it and to return or refund to an applicant
such applicant's Premium. In the event that a Transamerica Company rejects an
application solicited by an Agent or Insurance Agent, such Transamerica Company
will return any Premium paid by the applicant to such applicant and will
promptly notify Insurance Agent of such action. In the event that a purchaser
exercises his free look right under his Contract, any amount to be refunded as
provided in such Contract shall be so refunded to the purchaser by or on behalf
of the Transamerica Company that issued such Contract and such Transamerica
Company shall promptly notify Insurance Agent of such action.
(g) Schedule 1 to this Agreement may be amended by
Transamerica at its sole discretion from time to time to include other classes
of variable annuity contracts or variable life insurance contracts, which
classes of contracts are distributed by TISSC pursuant to the Distribution
Agreements or other distribution agreements with the Transamerica Companies. The
provisions of this Agreement shall be equally applicable to each such class of
Contracts unless the context otherwise requires. Schedule 1 to this Agreement
may be amended by Transamerica at its sole discretion from time to time with 30
days notice to Insurance Agent to delete classes of variable annuity contracts
or variable life insurance contracts.
(h) TISSC and the Transamerica Companies acknowledge that Broker-Dealer and
Insurance Agent are each an independent contractor. Accordingly, Broker-Dealer
and
4
<PAGE>
Insurance Agent are not obliged or expected to give full time and energies to
the performance of their obligations hereunder, nor are Broker-Dealer and
Insurance Agent obliged or expected to represent TISSC or one or both of the
Transamerica Companies exclusively. Nothing herein contained shall constitute
Broker-Dealer, Insurance Agent, the Agents or any agents or representatives of
Broker-Dealer or Insurance Agent as employees of TISSC or a Transamerica Company
in connection with the solicitation of applications for the Contracts.
3. Licensing and Registration of Broker-Dealer, Insurance Agent and Agents
(a) Broker-Dealer represents that it is a broker-dealer
registered with the SEC under the 1934 Act, and is a member of the NASD.
Broker-Dealer must, at all times when performing its functions and fulfilling
its obligations under this Agreement, be duly registered as a broker-dealer
under the 1934 Act and in each state or other jurisdiction in which Broker-
Dealer intends to perform its functions and fulfill its obligations hereunder,
and be a member in good standing of the NASD.
(b) Insurance Agent represents that it is a licensed life
insurance agent where required to solicit applications, except that if Insurance
Agent cannot be qualified to be a licensed life insurance agent until appointed
by an insurer, Insurance Agent represents that it is qualified to be a licensed
insurance agent but for the appointment by an insurer. Insurance Agent must, at
all times when performing its functions and fulfilling its obligations under
this Agreement, be duly licensed to sell the Contracts in each state or other
jurisdiction in which Insurance Agent intends to perform its functions and
fulfill its obligations hereunder.
(c) Broker-Dealer shall ensure that no individual shall offer
or sell the Contracts on behalf of Broker-Dealer in any state or other
jurisdiction in which the Contracts may lawfully be sold unless such individual
is an associated person of Broker-Dealer (as that term is defined in Section
3(a)(18) of the 1934 Act) and duly registered with the NASD and any applicable
state securities regulatory authority as a registered person of Broker-Dealer
qualified to sell the Contracts in such state or jurisdiction.
(d) Insurance Agent shall ensure that no individual shall
offer or sell the Contracts on behalf of Insurance Agent in any state or other
jurisdiction unless such individual is duly licensed and appointed as an Agent
of one or both of the Transamerica Companies (as appropriate), and appropriately
licensed, registered or otherwise qualified to offer and sell the Contracts to
be offered and sold by such individual under the insurance laws of such state or
jurisdiction. Insurance Agent understands that certain states may require that a
special variable contracts examination be passed by an Agent before he or she
can solicit applications for the Contracts. Nothing in this Agreement is to be
construed as requiring a Transamerica Company to obtain a license or issue a
consent or appointment to enable any particular agent of Insurance Agent to sell
Contracts; however, each Transamerica Company shall provide its full cooperation
to Insurance Agent in its efforts to assist individuals recommended by Insurance
Agent who are reasonably qualified, in meeting the requirements for appointment.
All matters concerning the licensing of any individuals recom-
5
<PAGE>
mended for appointment by Insurance Agent under any applicable state insurance
law shall be a matter directly between Insurance Agent and such individual, and
the Insurance Agent shall furnish a Transamerica Company with proof of proper
licensing of such individual or other proof, reasonably acceptable to
Transamerica, of satisfaction by such individual of licensing requirements prior
to such Transamerica Company appointing any such individual as an Agent of such
Transamerica Company.
(e) If Insurance Agent is an Affiliate of Broker-Dealer as reflected in
Recital D, to this Agreement, then by engaging in the distribution activities
contemplated by the Agreement, Broker-Dealer and Insurance Agent represent and
warrant either that:
(i) Broker-Dealer and Insurance Agent:
(A) have obtained a letter from the Staff of the Securities and Exchange
Commission advising Broker-Dealer and Insurance Agent that the Staff will not
recommend enforcement action if Insurance Agent is not registered as a
broker-dealer with the Commission;
(B) are complying and will continue to comply with
the conditions set forth in such letter at all times while the Agreement is in
effect; or
(ii) at the time that the Agreement becomes effective and during the term of
the Agreement:
(A) Insurance Agent is either wholly-owned by Broker-Dealer or an
affiliated person of Broker-Dealer or is wholly-owned by one or more associated
persons of Broker-Dealer;
(B) Insurance Agent and its personnel will be "associated persons" of
Broker-Dealer within the meaning of Section 3(a)(18) of the 1934 Act;
(C) Insurance Agent will engage in the offer or sale of the contracts
only through persons who are registered person of Broker-Dealer;
(D) Insurance Agent will not receive or handle customer funds or
securities;
(E) Broker-Dealer will be responsible for the training, supervision and
control of registered persons engaging in the offer or sale of the Contracts on
behalf of Insurance Agent, as required under the 1934 Act, NASD rules and other
applicable statutes or regulations, and will also be responsible for the
supervision and control of any of its associated persons who are owners,
directors or executive officers of Insurance Agent;
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(F) Broker-Dealer will comply with all applicable requirements of the
1934 Act and the NASD, including the requirement to maintain and preserve books
and records under Section 17(a) of the 1934 Act and the rules thereunder; and
(G) Commissions and fees relating to the Contracts will be reflected in
the quarterly FOCUS reports and the fee assessment reports filed by Broker-
Dealer with the NASD.
Broker-Dealer and Insurance Agent shall notify Transamerica immediately
in writing if Broker-Dealer and/or Insurance Agent fail to comply with any of
the applicable provisions set forth above.
4. Broker-Dealer and Insurance Agent Compliance
(a) Insurance Agent shall train, supervise, and be solely
responsible for the conduct of the Agents in their solicitation activities in
connection with the Contracts, and shall supervise Agents' compliance with
applicable rules and regulations of any insurance regulatory agencies that have
jurisdiction over variable contracts activities, as well as the rules and
procedures of the Transamerica Companies pertaining to the solicitation, sale
and submission of applications for the Contracts, which are set forth in the
Agents Manual as provided to it in writing, as it may be amended from time to
time in the Transamerica Companies' sole discretion. Broker-Dealer shall be
solely responsible for background investigations of the Agents to determine
their qualifications, good character, and moral fitness to sell the Contracts.
(b) Broker-Dealer shall be responsible for securities
training, supervision and control of the Agents in connection with their
solicitation activities with respect to the Contracts and shall supervise
Agents' strict compliance with applicable federal and state securities law and
NASD requirements in connection with such solicitation activities.
(c) Broker-Dealer and Insurance Agent shall comply with the
rules and procedures set forth in the Agents Manual as provided to them in
writing, as it may be amended from time to time, and shall be solely responsible
for such compliance.
(d) Broker-Dealer and Insurance Agent hereby represent and
warrant that they are duly in compliance with all applicable federal and state
securities laws and regulations, including without limitation state insurance
laws and regulations imposing insurance licensing requirements.
(e) Broker-Dealer and Insurance Agent each shall carry out
their respective sales and administrative obligations under this Agreement in
continued compliance with federal and state laws and regulations, including
those governing securities and/or insurance related activities or transactions,
as applicable.
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(f) Broker-Dealer, Insurance Agent and Agents shall not offer
or attempt to offer the Contracts, nor solicit applications for the Contracts,
nor deliver Contracts, in any state or jurisdiction in which the Contracts may
not be lawfully sold or offered for sale. For purposes of determining where the
Contracts may be offered and applications solicited, Broker-Dealer and Insurance
Agent may rely on written notification, as revised from time to time, that they
receive from the Transamerica Companies.
(g) Broker-Dealer and Insurance Agent shall ensure that each
Agent shall comply with a standard of conduct applicable to licensed insurance
agents including, but not limited to, the following:
(i) An Agent shall be duly qualified, licensed and
registered to solicit and participate in the sale of Contracts as set
forth in Section 3 of this Agreement.
(ii) An Agent shall not solicit applications for the
Contracts without delivering the Prospectus for the Contracts and any
then-applicable supplements thereto, and, where required by state
insurance law (as set forth in a notice to be supplied by the
Transamerica Companies), the then-currently effective statement of
additional information for the Contracts, and the then-currently
effective prospectus(es) for the Fund(s) and any then-applicable
supplements thereto. In soliciting applications for the Contracts, an
Agent shall only make statements, oral or written, which are in
accordance with the Prospectuses, statements of information and
Registration Statements for the Contract(s), or a Fund, or in reports
or proxy statements therefor, or in promotional, sales or advertising
material or other information supplied and approved in writing by
Transamerica. An Agent shall utilize only those applications for the
Contracts provided to Insurance Agent by Transamerica Company.
(iii) An Agent shall recommend the purchase of a
Contract to an applicant only if he has reasonable grounds to believe
that such purchase is suitable for the applicant in accordance with,
among other things, applicable regulations of any state insurance
regulatory authority, the SEC and the NASD. While not limited to the
following, a determination of suitability shall be based on information
supplied to an Agent after a reasonable inquiry concerning the
applicant's insurance and investment objectives and financial situation
and needs.
(iv) An Agent shall accept initial Premiums in the
form of a check or money order only if made payable to "Transamerica
Occidental Life Insurance Company" or "First Transamerica Life
Insurance Company," as applicable, and signed by the applicant for the
Contract. An Agent shall not accept third-party checks or cash for
Premiums.
(v) All checks and money orders and applications for
the Contracts received by an Agent shall be remitted promptly, and in
any event not later than 2 business days after receipt, to the Service
Center.
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(vi) An Agent shall have no authority to endorse
checks or money orders payable to a Transamerica Company.
(vii) An Agent shall have no authority to alter,
modify, waive or change any of the terms, rates, charges or conditions
of the Contracts.
(viii) An Agent shall have no authority to advertise
for or on behalf of TISSC or a Transamerica Company without prior
written approval and authorization from TISSC or such Transamerica
Company.
(ix) An Agent shall have no authority to offer, sell,
or solicit applications for Contracts or Premiums thereunder which will
be subject to or in connection with any so-called "market timing"
program, plan, arrangement or service.
(x) An Agent shall not encourage a prospective
purchaser to surrender or exchange an insurance policy or contract in
order to purchase a Contract or, conversely, to surrender or exchange a
Contract in order to purchase another insurance policy or contract,
subject to applicable NASD Rules of Fair Practice and any other
applicable laws, regulations and regulatory guidelines.
(xi) An Agent shall act in accordance with the Agents
Manual in connection with any solicitation activities in connection
with the Contracts.
(h) Insurance Agent shall return promptly to the appropriate
Transamerica Company all receipts for delivered Contracts, all undelivered
Contracts and all receipts for cancellation, in accordance with the instructions
set forth in the Agents Manual. Upon issuance of a Contract by a Transamerica
Company and delivery of such Contract to Insurance Agent, Insurance Agent shall
promptly deliver such Contract to its purchaser. For purposes of this provision,
"promptly" shall be deemed to mean not later than five calendar days. Each
Transamerica Company will assume that a Contract issued by such Transamerica
Company will be delivered by Insurance Agent to the purchaser of such Contract
within five calendar days for purposes of determining when to transfer Premiums
initially allocated to the Money Market Account available under such Contract to
the particular investment options specified by such purchaser. As a result, if a
purchaser exercises the free look provisions under a Contract, Broker-Dealer
shall indemnify the Transamerica Company issuing a Contract for any loss
incurred by such Transamerica Company that results from Insurance Agent's
failure to deliver such Contract to its purchaser within the contemplated five
calendar day period.
(i) In the event that Premiums are sent to Insurance Agent or
Broker-Dealer, rather than to the Service Center, Insurance Agent and
Broker-Dealer shall promptly (and in any event, not later than 2 business days)
remit such Premiums to the appropriate Transamerica Company at the Service
Center. Insurance Agent and Broker-Dealer acknowledge that if any Premium is
held at any time by either of them, such Premium shall
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be held on behalf of the customer, and Insurance Agent or Broker-Dealer shall
segregate such Premium from their own funds and promptly (and in any event,
within 2 business days) remit such Premium to the appropriate Transamerica
Company. All such Premiums, whether by check, money order or wire, shall at all
times be the property of the Transamerica Company issuing the Contract pursuant
to which such Premiums are paid.
(j) Neither Broker-Dealer nor Insurance Agent, nor any of
their directors, partners, officers, employees, registered persons, associated
persons, agents or affiliated persons, in connection with the offer or sale of
the Contracts, shall give any information or make any representations or
statements, written or oral, concerning the Contracts, a Fund or Fund Shares,
other than information or representations which are in accordance withthe
Prospectuses, statements of additional information and Registration Statements
for the Contracts, or a Fund, or in reports or proxy statements therefore, or in
promotional, sales or advertising material or other information supplied and
approved in writing by TISSC and Transamerica Company.
(k) Broker-Dealer and Insurance Agent shall not use or
implement any promotional, sales or advertising material relating to the
Contracts without the prior written approval of TISSC and Transamerica
Companies.
(l) Broker-Dealer and Insurance Agent understand, acknowledge,
and represent that Contracts and Premiums thereunder shall not be solicited,
offered, or sold in connection with any so-called "market timing" program, plan,
arrangement or service. Should TISSC or a Transamerica Company determine at its
reasonable discretion that Broker-Dealer or Insurance Agent is soliciting,
offering, or selling, or has solicited, offered, or sold, Contracts or Premiums
subject to any so-called "market timing" program, plan, arrangement or service,
TISSC or such Transamerica Company may take such action which is necessary, at
its sole discretion, to halt such solicitations, offers or sales. Furthermore,
in addition to any indemnification provided in Section 13 to this Agreement and
any other liability that Broker- Dealer and Insurance Agent might have,
Broker-Dealer and Insurance Agent shall each be liable to TISSC and each
Transamerica Company whose Contracts are solicited, offered or sold in
connection with any so-called "market timing" program, plan, arrangement or
service and each Fund affected by any such program, plan, arrangement or
service, for any damages or losses, actual or consequential, sustained by TISSC
or either Transamerica Company or any Fund, as a result of any so-called "market
timing" program, plan, arrangement or service which causes such losses or
damages following solicitation, offer, or sale of a Contract or Premium subject
to "market timing" or similar service by Broker-Dealer or Insurance Agent.
(m) Broker-Dealer and Insurance Agent shall be solely
responsible under applicable tax laws for the reporting of compensation paid to
Agents.
(n) Insurance Agent represents that it maintains and shall
maintain such books and records concerning the activities of the Agents as may
be required by the appropriate insurance regulatory agencies that have
jurisdiction and that may be reasonably required by
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the Transamerica Companies to adequately reflect the Contracts business
processed through Insurance Agent. Insurance Agent shall make such books and
records available to a Transamerica Company at any reasonable time upon written
request by a Transamerica Company.
(o) Broker-Dealer represents that it maintains and shall
maintain appropriate books and records concerning the activities of the Agents
as are required by the SEC, the NASD and other agencies having jurisdiction and
that may be reasonably required by TISSC to reflect adequately the Contracts
business processed through Insurance Agent. Broker-Dealer shall make such books
and records available to a Transamerica Company at any reasonable time upon
written request by a Transamerica Company.
(p) Broker-Dealer and Insurance Agent shall promptly furnish
to Transamerica or its authorized agent, and Transamerica shall promptly furnish
to Broker-Dealer or Insurance Agent, any reports and information that
Transamerica may reasonably request for the purpose of meeting such Transamerica
Company's reporting and recordkeeping requirements under the insurance laws of
any state, under any applicable federal and state securities laws, rules and
regulations, and the rules of the NASD.
5. Sales Materials
(a) During the term of this Agreement, TISSC and each
Transamerica Company will provide Broker-Dealer and Insurance Agent, without
charge, with as many copies of Prospectuses (and any supplements thereto),
current Fund prospectus(es) (and any supplements thereto), and applications for
the Contracts, as Broker-Dealer or Insurance Agent may reasonably request. Upon
termination of this Agreement, Broker-Dealer and Insurance Agent will promptly
return to TISSC any Prospectuses, applications, Fund prospectuses, and other
materials and supplies furnished by TISSC or Transamerica Company to
Broker-Dealer or Insurance Agent or to the Agents.
(b) During the term of this Agreement, TISSC will be
responsible for providing and approving all promotional, sales and advertising
material to be used by Broker- Dealer and Insurance Agent. TISSC will file such
materials or will cause such materials to be filed with the SEC, the NASD,
and/or with any state securities regulatory authorities, as appropriate.
6. Commissions and Expenses
(a) During the term of this Agreement, TISSC shall pay to
Insurance Agent as compensation for Contracts for which it is the
Broker-of-Record, the commissions and fees set forth in Schedule 2 to this
Agreement, as such Schedule 2 may be amended or modified at any time, in any
manner, and without prior notice, by Transamerica, and subject to other
provisions of this Agreement. Any amendment to Schedule 2 will be applicable to
any Contract for which an application or premium is received by the Service
Center on or after the
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effective date of such amendment or which is in effect after the effective date
of such amendment. Compensation with respect to any Contract shall be paid to
Insurance Agent only for so long as Insurance Agent is the Broker-of-Record for
such Contract.
(b) Broker-Dealer and Insurance Agent recognize that all
compensation payable to Insurance Agent hereunder will be disbursed by or on
behalf of the Transamerica Companies after Premiums are received and accepted by
the appropriate Transamerica Company and that no compensation of any kind other
than that described in this Agreement is payable to Insurance Agent.
Compensation generally will be paid twice per month.
(c) Chargebacks
(i) In the event that:
(A) a Premium is returned because a
Transamerica Company rejects the application for such Premium
or because the Premium, or the application for such Premium,
is not timely received by a Transamerica Company as required
herein, or a refund is made because a purchaser exercises his
free look right under his Contract; or
(B) within the first six months after the
date that a Contract was issued, the purchaser surrenders the
Contract, or otherwise rescinds the Contract, or the Contract
annuitizes;
then, in any such event, upon written request from TISSC, Insurance
Agent shall promptly repay any and all compensation received by
Insurance Agent, based on all Premiums paid into the Contract, and
shall pay any loss incurred as a result of a Premium being returned
which was not timely received or for which an application was not
timely received by a Transamerica Company.
(ii) If during the period from six months after the
date of issuance of a Contract to the end of the first policy year of
the Contract, the purchaser exercises a right to surrender the
Contract, or otherwise rescinds the Contract, or the Contract
annuitizes, then, in any such event, upon written request from TISSC,
Insurance Agent shall promptly repay one-half (1/2) of any and all
compensation received by Insurance Agent, based on all Premiums paid
into the Contract.
(iii) If at any time after the first policy year of a
Contract, the purchaser exercises a right to surrender the Contract, or
otherwise rescinds the Contract, then, in any such event, upon written
request from TISSC, Insurance Agent shall promptly repay one-half (1/2)
of any and all compensation received by Insurance Agent, based on all
Premiums paid into the Contract in the policy year in which the
Contract is surrendered or rescinded.
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(iv) If at any time during the second or third policy
year of a Contract the Contract annuities, then, in any such event,
upon written request from TISSC, Insurance Agent shall promptly repay
one-half (1/2) of any and all compensation received by Insurance Agent,
based on all Premiums paid into the Contract in the policy year in
which the Contract annuitizes.
(v) If at any time after the third policy year of a
Contract, the Contract annuities and the issuing Transamerica Company
does not waive the contingent deferred sales charge, then, in any such
event, upon written request from TISSC, Insurance Agent, shall promptly
repay one-half (1/2) of any and all compensation received by Insurance
Agent, based on all Premiums paid into the Contract in the policy year
in which the Contract annuitizes.
(vi) If at any time after the third policy year of a
Contract, the Contract annuitizes and the issuing Transamerica Company
waives the contingent deferred sales charge, then, in any such event,
upon written request from TISSC, Insurance Agent shall promptly repay
any and all compensation received by Insurance Agent, based on all
Premiums paid into the Contract during the immediately preceding six
calendar months.
If repayment and/or payment under any of the provisions of this Section 6(c) is
not promptly made following receipt of a notice of request for repayment,
Insurance Agent authorizes TISSC, at its sole option, to deduct any such
unrepaid compensation or unpaid payment from any future compensation as it
becomes due to Insurance Agent, to the extent permitted by applicable law;
provided, however, that this option on the part of TISSC shall not prevent it
from pursuing any other means or remedies available to it to recover such
compensation and/or payment. For purposes of this Section 6(c), the payment of a
death benefit pursuant to the terms of a Contract shall not be deemed a
surrender or rescission by a purchaser. The provisions of this Section 6(c) are
not intended to impose any repayment and/or payment obligation with respect to
asset-based sales compensation, including "trail" commissions, paid to Insurance
Agent.
(d) With respect to commissions, compensation or any other
amounts owed by Transamerica to Broker-Dealer or Insurance Agent under any other
agreement, Insurance Agent shall have a right to set off against such amounts
any monies payable by Insurance Agent under this Agreement, including Section
6(c) hereof, to Insurance Agent, to the extent permitted by applicable laws.
This right on the part of Insurance Agent shall not prevent both of them or
either of them from pursuing any other means or remedies available to them to
recover such monies payable by Insurance Agent.
(e) Broker-Dealer or Insurance Agent shall immediately remit
to the appropriate Transamerica Company any premium retained (in error) by
Broker-Dealer or Insurance Agent.
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7. Interests in Agreement. Agents shall have no interest in this
Agreement or right to any commissions to be paid by TISSC to Insurance Agent.
Insurance Agent shall be solely responsible for the payment of any commission or
consideration of any kind to Agents. Insurance Agent shall have no right to
withhold or deduct any commission from any Premiums in respect of the Contracts
which it may collect. Insurance Agent shall have no interest in any compensation
paid by a Transamerica Company to TISSC, now or hereafter, in connection with
the sale of any Contracts hereunder.
8. Term of Agreement
(a) This Agreement relates solely to the classes of Contracts
identified in Schedule 1 to this Agreement.
(b) This Agreement shall remain in effect for a period of one
year, and, unless terminated earlier pursuant to subsections (c) or (d) of this
Section, shall automatically continue in effect for one-year periods thereafter;
provided, however, that it shall automatically terminate upon termination of one
or both of the Distribution Agreements referenced in Recital A of this
Agreement.
(c) This Agreement may be terminated by any party hereto by
giving notice to the other parties at least sixty (60) days prior to an annual
anniversary of this Agreement as identified on the face page.
(d) If Broker-Dealer or Insurance Agent, on the one side, or
TISSC or either or both of the Transamerica Companies, on the other side, should
default in a material respect, in their respective obligations under this
Agreement, or breach in a material respect, any of their respective
representations or warranties made in this Agreement, may, at their option,
cancel and terminate this Agreement without notice.
(e) Upon termination of this Agreement, all authorizations,
rights, and obligations hereunder shall cease except:
(i) the obligation to settle accounts hereunder,
including the payment of compensation with respect to Contracts in
effect at the time of termination or issued pursuant to applications
received by a Transamerica Company prior to termination or Premiums
received on such Contracts subsequent to termination of this Agreement;
(ii) the provisions with respect to indemnification set forth in Section
13 hereof;
(iii) the provisions of Sections 4(g) and 4(h) hereof
that require Insurance Agent and Broker-Dealer to maintain certain
books and records; and
(iv) the confidentiality provisions contained in Section 11 hereof.
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9. Complaints and Investigations
(a) TISSC, the Transamerica Companies, Broker-Dealer and
Insurance Agent each shall cooperate fully in any insurance regulatory
investigation or proceeding or judicial proceeding arising in connection with
the Contracts marketed under this Agreement. In addition, TISSC, the
Transamerica Companies, Broker-Dealer and Insurance Agent shall cooperate fully
in any securities regulatory investigation or proceeding or judicial proceeding
with respect to TISSC, Broker-Dealer, their Affiliates and their agents, to the
extent that such investigation or proceeding is in connection with the Contracts
marketed under this Agreement. Without limiting the foregoing:
(i) Broker-Dealer and Insurance Agent will be
notified promptly of any customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by TISSC or
a Transamerica Company with respect to Insurance Agent or any Agent or
which may affect the issuance of any Contract marketed under this
Agreement; and
(ii) Broker-Dealer and Insurance Agent will promptly
notify TISSC and the appropriate Transamerica Company of any written
customer complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Broker- Dealer, Insurance
Agent or their Affiliates with respect to themselves, their Affiliates,
or any Agent in connection with any Contract marketed under this
Agreement or any activity in connection with any such Contract.
(b) In the case of a customer complaint, TISSC, the
Transamerica Companies, Broker-Dealer and Insurance Agent will cooperate in
investigating such complaint and any response by Broker-Dealer or Insurance
Agent to such complaint will be sent to TISSC for approval not less than five
business days prior to its being sent to the customer or regulatory authority,
except that if a more prompt response is required, the proposed response shall
be communicated by telephone or facsimile.
10. Assignment. This Agreement shall be nonassignable by the parties hereto,
except that a party may assign its rights and obligations to any subsidiary of,
or any company under common control with, such party, provided that:
(a) the assignee is duly licensed to perform all functions
required of that party under this Agreement;
(b) the assignee undertakes to perform such party's functions hereunder; and
(c) in the event Broker-Dealer or Insurance Agent determines
to assign its rights and obligations under this Agreement:
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(i) such proposed assignment is approved in advance
by TISSC, in the event of an assignment by Broker-Dealer or by
the Transamerica Companies, as appropriate, in the event of an
assignment by Insurance Agent; and
(ii) Broker-Dealer or Insurance Agent or assignee
pays any state insurance agent appointment fees that become
due and payable as a result of the assignment.
11. Confidentiality. Transamerica and Broker-Dealer and Insurance Agent
shall maintain the confidentiality of any customer list or any other proprietary
information that either may acquire in the performance of this Agreement and
shall not use such customer list or information without the prior written
consent of the other party.
12. Modification of Agreement. This Agreement supersedes all prior
agreements, either oral or written, between the parties relating to the
Contracts and, except for any amendment of Schedule 1 pursuant to the terms of
Section 2 hereof or Schedule 2 pursuant to the terms of Section 6 hereof, may
not be modified in any way unless by written agreement signed by all of the
parties.
13. Indemnification
(a) Broker-Dealer and Insurance Agent, jointly and severally,
shall indemnify and hold harmless TISSC and each Transamerica Company and each
person who controls or is associated with a Transamerica Company within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon:
(i) violation(s) by Broker-Dealer, Insurance Agent,
or an Agent of federal or state securities law or regulation(s),
insurance law or regulation(s), or any rule or requirement of the NASD;
(ii) any unauthorized use of sales or advertising
material, any oral or written misrepresentations, or any unlawful sales
practices concerning the Contracts, by Broker-Dealer, Insurance Agent
or an Agent;
(iii) claims by the Agents or other agents or
representatives of Insurance Agent or Broker-Dealer for commissions or
other compensation or remuneration of any type;
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(iv) any action or inaction by a clearing broker
through whom Broker- Dealer or Insurance Agent processes any
transaction pursuant to this Agreement;
(v) any failure on the part of Broker-Dealer,
Insurance Agent, or an Agent to submit Premiums or applications to the
Transamerica Companies, or to submit the correct amount of a Premium,
on a timely basis and in accordance with Section 4 of this Agreement
and the Agents Manual;
(vi) any failure on the part of Broker-Dealer,
Insurance Agent, or an Agent to deliver Contracts to purchasers thereof
on a timely basis and in accordance with the Agents Manual; or
(vi) a breach by Broker-Dealer or Insurance Agent of
any provision of this Agreement, including without limitation Section
4(l).
This indemnification will be in addition to any liability which Broker-Dealer
and Insurance Agent may otherwise have.
(b) TISSC and the Transamerica Companies, jointly and
severally, shall indemnify and hold harmless Broker-Dealer and Insurance Agent
and each person who controls or is associated with Broker-Dealer or Insurance
Agent within the meaning of such terms under the federal securities laws, and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under any
statue or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any breach by
TISSC or a Transamerica Company of any provision of this Agreement. This
indemnification will be in addition to any liability which TISSC and the
Transamerica Companies, jointly and severally, may otherwise have.
(c) After receipt by a party entitled to indemnification
("indemnified party") under this Section 13 of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person obligated
to provide indemnification under this Section 13 ("indemnifying party"), such
indemnified party will notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, provided that the
omission so to notify the indemnifying party will not relieve it from any
liability under this Section 13, except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged solely as a result of the failure to give such notice. The
indemnifying party, upon the request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees
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and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if such proceeding is
settled with such consent or if final judgment is entered in such proceeding for
the plaintiff, the indemnifying party shall indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
14. Rights, Remedies, etc. are Cumulative. The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws. Failure of a party
to insist upon strict compliance with any of the conditions of this Agreement
shall not be construed as a waiver of any of the conditions, but the same shall
remain in full force and effect. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
15. Notices. All notices hereunder are to be made in writing and shall be given:
if to TISSC, to:
Transamerica Insurance Securities Sales Corporation
Attention: General Counsel
Transamerica Center
1150 South Olive Street
Los Angeles, California 90015
if to Transamerica Occidental Life Insurance Company, to:
Transamerica Occidental Life Insurance Company
Attention: General Counsel
Transamerica Center
1150 South Olive Street
Los Angeles, California 90015
if to First Transamerica Life Insurance Company, to:
First Transamerica Life Insurance Company
Attention: General Counsel
575 Fifth Avenue
New York, New York 10017
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if to Broker-Dealer, to:
======================
======================
if to Insurance Agent, to:
=======================
-----------------------
or such other address as such party may hereafter specify in writing. Each such
notice to a party shall be either hand delivered or transmitted by registered or
certified United States mail with return receipt requested, and shall be
effective upon delivery.
16. Interpretation, Jurisdiction, Etc. This Agreement constitutes the
whole agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to the subject matter hereof. No
prior writings by or between the parties hereto with respect to the subject
matter hereof shall be used by a party in connection with the interpretation of
any provision of this Agreement. This Agreement shall be construed and its
provisions interpreted under and in accordance with the internal laws of the
state of California without giving effect to principles of conflict of laws.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration in a forum
selected by Transamerica in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
18. Headings. The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
19. Counterparts. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
20. Severability. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action required
by applicable federal or state law, then it is the intention of the parties
hereto that such provision shall be enforced to the extent permitted under the
law, and, in any event, that all other provisions of this Agreement shall remain
valid and duly enforceable as if the provision at issue had never been a part
hereof.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
Transamerica Insurance Securities __________________________
Sales Corporation Broker/Dealer
By:________________________ By:________________________
Name:______________________ Name:______________________
Title:_______________________ Title:_______________________
Transamerica Occidental Life ___________________________
Insurance Company Insurance Agent
By:________________________ By:________________________
Name:______________________ Name:______________________
Title:_______________________ Title:_______________________
First Transamerica Life
Insurance Company
By:________________________
Name:______________________
Title:_______________________
20
<PAGE>
Schedule 1
Contracts Subject to this Agreement
Effective September 1, 1994
Dreyfus-Transamerica Triple Advantage Variable Annuity Contract
21
<PAGE>
Option 1
Schedule 2
Effective September 1, 1994
Premiums. A commission will be paid to Insurance Agent for each Premium
accepted on a Contract for which Insurance Agent is the Broker-of-Record as
follows:
=====================================================================
=====
Class of Contracts Commission Rate
- --------------------------------------------------------------------------
Dreyfus-Transamerica 5.25%
Triple Advantage
=====================================================================
=====
Commissions will be paid twice monthly, based on Premiums accepted during the
prior half- monthly period.
Annuitization. A commission will be paid to Insurance Agent upon annuitization
of a Contract for which Insurance Agent is the Broker-of-Record on the Annuity
Date, based on the amount of Contract Value annuitized, as follows:
=====================================================================
======
Class of Contracts Commission Rate
- ---------------------------------------------------------------------------
Dreyfus-Transamerica 2.5%
Triple Advantage
=====================================================================
======
This commission will apply to annuitization only if the Contract has been in
force for three full years prior to the Annuity Date and if the annuity elected
involves life contingencies.
NO COMMISSION ON ANNUITIZATION WILL BE PAID ON CONTRACTS ISSUED IN
NEW YORK.
22
<PAGE>
Schedule 2 Option 2
Effective September 1, 1994 (not available for
First Transamerica
Life Insurance
Company)
Premium. A commission will be paid to Insurance Agent for each Premium accepted
on each Contract for which Insurance Agent is Broker-of-Record as follows:
=====================================================================
======
Class of Contracts Commission Rate
- ---------------------------------------------------------------------------
Dreyfus/Transamerica 4.50%
Triple Advantage
=====================================================================
======
Commissions will be paid twice monthly, based on Premiums accepted during the
prior half- monthly period.
Asset-Based Trailer. In addition, after a Contract has been in effect for 15
months an asset-based fee will be paid to Insurance Agent, based on the Contract
Value of each Contract for which Insurance Agent is the Broker-of-Record at the
time the fee is paid, until the Contract is annuitized. The asset-based fee will
be determined on the basis of a 0.25% annualized rate applied monthly to the
Contract Value.
=====================================================================
=========
Class of Contracts Asset-Based Fee
- ------------------------------------------------------------------------------
Dreyfus/Transamerica Monthly Factor 0.020810%
Triple Advantage
=====================================================================
=========
The asset-based fee will be paid once monthly, based on average aggregate
Contract Value during the prior monthly period. The average aggregate Contract
Value shall be the sum of the Contract Values on the first day of the prior
monthly period and on the last day thereof, divided by 2. If a Contract is
terminated or annuities at any time during a monthly period, no asset-based gee
will be paid for that monthly period.
Annuitization. A commission will be paid to Insurance Agent upon annuitization
of a Contract for which Insurance Agent is the Broker-of-Record on the Annuity
Date, based on the amount of Contract Value annuitized, as follows:
=====================================================================
======
Class of Contracts Commission Rate
- ---------------------------------------------------------------------------
Dreyfus-Transamerica 2.50%
Triple Advantage
=====================================================================
======
This commission will apply to annuitization only if the Contract has been in
force for three full years prior to the Annuity Date and if the annuity elected
involves life contingencies.
<PAGE>
Exhibit (3)(l)
Form Sales Agreement between Transamerica Occidental Life
Insurance Company, Transamerica Life Insurance and Annuity
Company, First Transamerica Life Insurance Company and
Transamerica Securirites Sales Corporation.(10)
<PAGE>
Transamerica Life Companies
Institutional Marketing Services
Variable Insurance Products Sales Agreement
This Agreement is effective as of the date identified on the signature page of
this Agreement and is made by and between Transamerica Occidental Life Insurance
Company, Transamerica Life Insurance and Annuity Company and First Transamerica
Life Insurance Company, as applicable and as indicated on the signature page,
("Insurance Company(ies)") and Transamerica Securities Sales Corporation
("Underwriter") (collectively "Transamerica") and
_____________________________________________, a registered broker-dealer,
("Broker").
WHEREAS, the Insurance Companies are in the business of issuing variable
insurance products to the public;
WHEREAS, Underwriter, an affiliate of the Insurance Companies, is
registered as a broker-dealer under the Securities Exchange Act of 1934, is a
member of the NASD and acts as principal underwriter for certain variable
insurance products issued by the Insurance Company;
WHEREAS, Transamerica wishes to appoint Broker to solicit applications
for certain variable insurance products issued by the Insurance Companies;
WHEREAS, Broker wishes to accept such appointment;
NOW THEREFORE, in consideration of these premises and mutual agreements, wherein
it is agreed as follows:
Section 1. Appointment of Broker and Sale of Contracts.
1.1 Subject to the terms and conditions of this Agreement,
Transamerica appoints Broker to solicit applications for, and
to service, the variable insurance products identified in the
Attachment(s) (the "Contracts"), and Broker accepts such
appointment. Broker is appointed, on a nonexclusive basis, as
an independent contractor free to exercise its own judgement
as to the time, place and means of performing all acts
thereunder.
1.2Broker shall distribute the Contracts only in those jurisdictions in which
the Contracts are registered or qualified for sale, as specified by
Transamerica, and only through their duly licensed registered representatives
(in accordance with
the rules of the NASD) who are also of good character and fully insurance
licensed and qualified in the applicable jurisdictions and duly appointed to
solicit applications for the Contract (in accordance with the insurance law of
such jurisdictions) with the appropriate Insurance Company. An Insurance
<PAGE>
Company may, in its sole discretion reject for appointment any
agent and may withdraw its authority to any agent to solicit
applications.
1.3 Broker shall abide by all applicable laws, rules and
regulations, including, without limitation, the rules of the
NASD, insurance law and state and federal securities and
banking law, and including, without limitation, the
maintenance of licenses and books and records required by
applicable laws and regulations.
1.4 Broker shall supervise and train its registered
representatives and other associated persons to ensure
compliance with all applicable laws and shall be responsible
for the acts of its registered representatives and associated
persons in soliciting applications for and servicing
Contracts.
1.5 All payments collected by Broker for the Insurance Companies
shall be received in trust and shall be remitted immediately,
together with all the required documentation, to Transamerica
at the address indicated on the application or by
Transamerica. All checks and money order for payments under
contracts shall be drawn to the order of the appropriate
Insurance Company. The Broker shall not withhold or deduct any
part of any payment to Transamerica for any reason unless
specifically authorized to do so in writing by Transamerica.
If authorized by Transamerica to "net commissions" by
deducting part of a payment under a Contract, Broker shall
comply with all applicable Transamerica policies and
procedures and with all applicable laws and regulations,
including, if applicable, obtaining the customer's written
consent to deduct the appropriate commission from a payment.
Transamerica may terminate its authorization to "net
commissions" at any time; thereafter, the Broker must remit
the full payment amounts.
1.6 All applications are subject to acceptance or rejection by the
Insurance Company in it sole discretion. Insurance Companies
may at any time, at their sole discretion, discontinue issuing
the Contracts or change the form or content of the Contracts
to be issued.
1.7 In soliciting applications for Contracts, Broker may not
accept any risks of any kind for or on behalf of Transamerica
and may not bind Transamerica by promise or agreement or alter
any Contract in any way.
Section 2.Prospectus, Advertisements, Sales Literature and Other Communications.
2.1 Transamerica shall use reasonable efforts to provide
information and marketing assistance to Broker, including
providing, without charge, reasonable quantities of
advertising materials, sales literature, reports and current
prospectuses for the Contracts and underlying funding
vehicles.
2
<PAGE>
2.2 In making offers of the Contracts, Broker shall deliver the
applicable currently effective prospectuses, as required by
law.
2.3 Broker and its agents shall not misrepresent the Contracts and
shall make no oral or written representation which is
inconsistent with the terms of the Contracts, prospectuses or
sales literature or is misleading in any way.
2.4 Transamerica shall deliver to Broker, and Broker shall use,
only sales literature and advertising material which conforms
to all applicable legal requirements and which has been
authorized by Transamerica.
2.5 Broker shall not print, publish, distribute or use any
advertisement, sales literature or other written materials
related to the Contracts, other than materials provided by
Transamerica hereunder, unless such has first been approved in
writing by Transamerica.
Section 3. Compensation.
3.1 In consideration of the services performed as specified in
this Agreement, Broker shall receive compensation as specified
in the Attachment(s). In any states in which Broker may not
receive compensation pursuant to state insurance law, the
insurance agency(ies) with which it has associated itself, and
which is (are) identified on the signature page, shall be paid
the compensation.
Section 4. Representation and Warranties and Compliance by Broker.
4.1 Broker represents, warrants and covenants that:
a. It is, and shall remain during the term of this Agreement, a
properly licensed and registered broker-dealer under
applicable state and federal securities law, a member of SIPC
and a member in good standing of the NASD.
b. It shall solicit applications for Contracts only through a
properly licensed insurance agents ("Insurance Agent"), duly
appointed by the appropriate Insurance Company. For purposes
of this Agreement, all acts and omissions of the Insurance
Agent within the scope of this Agreement shall be deemed to be
acts or omissions of Broker.
c. It is in compliance, and shall remain in compliance, with all
applicable laws, rules and regulations, including, without
limitation, those of the NASD and state and federal
securities, banking and insurance laws.
d. It has taken and shall continue to take the actions
appropriate to supervise its representatives and other associated persons to
ensure compliance with all
3
<PAGE>
applicable laws and regulations.
e. It shall comply, and shall cause Insurance Agent to comply,
with any applicable Transamerica policies and procedures,
including, without limitation, those contained in the Agents'
Manual and those regarding replacements of Contracts, as
amended from time to time, as communicated to Broker.
f. (i) It shall not solicit or sell any Contracts in connection with any
"market timing" or "asset allocation" program or service, and (ii)If
Transamerica determines in its sole discretion that Broker is soliciting or has
solicited Contracts subject to any such program, Transamerica may take action
it deems necessary to halt such solicitations or sales and (iii) In addition to
any indemnification provided in Section 5 of this Agreement and any other
liability that Broker may have, Broker shall be liable to Transamerica and each
underlying funding vehicle affected by any such program, for any damages or
losses, actual or consequential, sustained by them as a result of such program.
Section 5. Indemnification.
5.1 Broker shall indemnify and hold harmless Transamerica, and
each employee, director, officer and shareholder of
Transamerica, against any losses, claims, damages or
liabilities, including but not limited to reasonable attorney
fees and court costs, to which Transamerica or any employee,
officer director or shareholder may be subject, which arise
out of or are based on any violation of the terms of this
Agreement, any Transamerica policies or procedures as
communicated to Broker or any applicable law by Broker, its
representatives, the Insurance Agent, its agents and any
employee, officer, director, shareholder, principal, partner
and affiliate of the Broker or Insurance Agent. In the event
Transamerica suffers a loss resulting from Broker-Dealer
activities, BrokerDealer hereby assigns any proceeds received
under its fidelity bond to Transamerica to the extent of such
losses. If there is any deficiency amount, whether due to a
deductible or otherwise, Broker-Dealer shall promptly pay
Transamerica such amount on demand and Broker-Dealer shall
indemnify and hold harmless Transamerica from any such
deficiency and from the costs of collection thereof (including
reasonable attorneys' fees).
5.2 Transamerica shall indemnify and hold harmless Broker, and
each employee, officer, director or shareholder of Broker,
against any losses, claims, damages or liabilities, including
but not limited to reasonable attorney fees and court costs,
to which Broker or any employee, officer, director or
shareholder becomes subject which arises out of or is based on
any violation of the terms of this Agreement or any applicable
law by Transamerica and any employee, officers, director,
shareholder and affiliates.
4
<PAGE>
Section 6. Miscellaneous.
6.1 Trademarks. The provision of Contracts and prospectuses and
sales literature for the Contracts and underlying funding
vehicles to the Broker shall not provide the Broker with any
license to use any tradenames, trademarks, service marks or
logos or proprietary information of Transamerica or any
underlying funding vehicle or any affiliates thereof, except
to the extent necessary for Broker to distribute the Contracts
in accordance with the terms hereof.
6.2 Confidentiality. Each party shall keep confidential any
confidential information
it may acquire as a result of this Agreement.
6.3 Complaints and Proceedings. Broker shall promptly report to
Transamerica any customer or regulatory complaints or
inquiries involving the Contracts and shall fully cooperate
with Transamerica in any regulatory investigation or
proceeding or judicial proceeding and in the settlement of any
claim relating to the solicitation or sale of the Contracts
under this Agreement.
6.4 Communications. All communications should be sent to the
parties at the
addresses indicated on the signature page of this Agreement.
6.5 Agreement. This Agreement includes any Attachment(s) hereto
("Agreement") and constitutes the entire agreement between the
parties with respect to the subject matter hereto, and
supersedes all prior oral or written understandings or
agreements, and no prior writings between the parties shall be
used to interpret this Agreement.
6.6 Amendment. Transamerica reserves the right to amend this
Agreement, including any Attachments, at any time without
prior notice. Broker submission of an application for a
Contract subsequent to notice of such an amendment shall be
construed as consent by Broker to such amendment.
6.7 The Contracts. Transamerica may modify, change or discontinue
the offering
of any form of the Contracts at any time.
6.8 Nonwaiver. Forbearance by Transamerica to enforce any rights
in this Agreement shall not be construed as a waiver of the
conditions of this Agreement and no wavier of any provision in
this Agreement shall be deemed to be a waiver of any other
provision.
6.9 Severability. This is a severable Agreement. In the event that
any provision would require action prohibited by law or would
prohibit action required by law, then such provision shall be
enforceable to the extent permitted by law and all other
provisions shall remain valid and enforceable.
5
<PAGE>
6.10 Termination. This Agreement may be terminated by any party with or without
cause upon giving written notice to the other parties. Sections 5.1, 5.2,
and 6 and any applicable provisions contained in the Attachment(s) shall survive
the termination of this Agreement.
6.11 Assignment. This Agreement may not be assigned without the written
consent of all parties.
6.12 Counterparts. This Agreement may be executed in two or more counterparts,
which when taken together shall constitute one and the same instrument.
6.13 Governing Law. This Agreement shall be construed in accordance with the
laws of the state of California without giving effect to principles of
conflict of laws.
This Agreement is effective as of ___________________, 199____, and is made
between the parties signing below:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Signature:______________________________
Name:__________________________________
Title:__________________________________
Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, CA 90015
Signature:______________________________
Name:__________________________________
Title:___________________________________
First Transamerica Life Insurance Company
575 Fifth Avenue, 36th Floor
New York, NY 10017
Signature:_________________________
Name:___________________________
Title:_____________________________
Transamerica Securities Sales Corporation
1150 South Olive Street
Los Angeles, CA 90015
Signature:________________________
Name:__________________________
Title:___________________________
Broker-Dealer:_________________________
Address:______________________________
==============================
Phone:_______________________________
Signature:_____________________________
Name:_______________________________
Title:________________________________
If Broker may not receive compensation due to state insurance laws, please
indicated the insurance agency(ies) to receive compensation.
For compensation payable in the state of ____________, please pay:
Insurance agency:__________________
Address: _______________________________
===============================
To the attention of:_________________
phone number:____________________
For compensation payable in the state of ____________, please pay:
Insurance agency:__________________
Address: _______________________________
===============================
To the attention of:_________________
phone number:____________________
7
<PAGE>
Attachment #1
Dreyfus/Transamerica Triple Advantage Variable Annuity
A.Contracts. Broker is authroized to sell Dreyfus/Transamerica Triple Advantage
Variable Annuity Contracts and Policies (the "Contracts").
B. Compensation. In consideration of the sales of each Contract, Transamerica
shall pay Broker, or such insurance agency specified by Broker, the compensation
described in one of the attached Options. Broker shall chose the Option to be
applicable to each Contract when or before the initial Purchase Payment or
Premium ("Purchase Payment") under the Contract is received by Transamerica, by
sending to Transamerica a notice such as the attached example or such other
notice acceptable to Transamerica. Without prior notice, Transamerica may change
the amount of compensation payable pursuant to this Attachment #1 and this new
compensation will be applicable prospectively on new Contracts and on new
premiums received under then currently issued Contracts.
C. Chargebacks.
(1) Rejection of Application and Exercise of Free Look.
In the event that, a Purchase Payment is returned because an Insurance
Company rejects the application for such Contract or because the
Premium or the application for the Contract, is not timely received by
Transamerica, or a refund is made because a purchaser exercises his
free-look right under the Contract, then upon written request from
Transamerica, Broker (or specified insurance agency) shall promptly
repay any and all compensation received based on all Purchase Payments
paid into the Contract and shall pay any loss incurred as a result of a
Purchase Payment being returned which was not timely received or for
which an application was not timely received by Transamerica.
(2) Annuitization.
In the instance of the annuitization of a Contract within the first six
months of receipt of Purchase Payment(s), Transamerica shall pay the
commission due on the annuitization of the Contract and Transamerica
shall chargeback to the Broker (or specified insurance agency), or ask
that Broker repay Transamerica, as Transamerica may determine in it
discretion, the difference between the commission paid on annuitization
and the commission paid upon receipt of the Purchase Payment(s) to the
Contract.
A-1
<PAGE>
D. Right of Set Off. With respect to commissions, compensation or any other
amounts owed Broker (or insurance agency specified by it) by Transamerica,
Transamerica shall have a right of set off again such amounts any monies owed
Transamerica by Broker (or specified insurance agency) to the extent permitted
by applicable law.
E. Netting Commissions
__________
If space is initialled at left by authorized Transamerica personnel, Broker is
authorized to "net commissions" pursuant to Section 1.5 of the Sales
Agreement.
This Attachment #1 is made part of Sales Agreement with ____________________
("Broker") on behalf of Transamerica, effective ______________, 199__.
By:____________________________________
Signature:_______________________________
Name:_________________________________
Title:__________________________________
A-2
<PAGE>
EXAMPLE OF FORM TO CHOOSE COMPENSATION OPTIONS FOR EACH
CONTRACT
A-3
<PAGE>
Exhibit (10)(a)
Consent of Counsel
<PAGE>
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
202-383-0100
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015-2211
Re: Separate Account VA-2L
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal Matters"
in the prospectus filed as part of Post-Effective Amendment No. 8 to the Form
N-4 Registration Statement for Separate Account VA-2L. In giving this consent,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By:/s/ Frederick R. Bellamy
<PAGE>
Exhibit (10)(b)
Consent of Independent Auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Accountants" in the Prospectus dated May 1, 1997, and to the
use of our reports dated March 3, 1997 and February 12, 1997 with respect to
the financial statements of Separate Account VA-2L Transamerica Occidental Life
Insurance Company and Transamerica Occidental Life Insurance Company,
respectively, included in the Statement of Additional Information.
Ernst & Young LLP
Charlotte, North Carolina
April 28, 1997
<PAGE>
Exhibit 15
Power of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David E. Gooding and Charles E. LeDoyen
and each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution to each, for
him and on his behalf and in his name, place and stead, to execute and file any
of the documents referred to below relating to registrations under the
Securities Act of 1933 and under the Investment Company Act of 1940 with respect
to any life insurance or annuity policies: registration statements on any form
or forms under the Securities Act of 1933 and under the Investment Company Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and him or their substitutes being empowered
to act with or without the others or other, and to have full power and authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand,
this _____ day of February, 1997.
-------------------------------
Robert Abeles
<PAGE>
Exhibit 15
Power of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance Company, a
California corporation (the "Company"), hereby constitutes and appoints Aldo
Davanzo, James W. Dederer, David E. Gooding and James B. Roszak and each of them
(with full power to each of them to act alone), his true and lawful attorney-in-
fact and agent, with full power of substitution to each, for him and on his
behalf and in his name, place and stead, to execute and file any of the
documents referred to below relating to registrations under the Securities Act
of 1933 and under the Investment Company Act of 1940 with respect to any life
insurance or annuity policies: registration statements on any form or forms
under the Securities Act of 1933 and under the Investment Company Act of 1940,
and any and all amendments and supplements thereto, with all exhibits and all
instruments necessary or appropriate in connection therewith, each of said
attorneys-in-fact and agents and him or their substitutes being empowered to act
with or without the others or other, and to have full power and authority to do
or cause to be done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect thereto to be
done in and about the premises in order to effectuate the same, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
_____ day of March, 1997.
___________________________
Desmond Sugrue
