PROFILE OF THE
DREYFUS/TRANSAMERICATRIPLE ADVANTAGE(R)VARIABLE AND FIXED ANNUITY
Issued by
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
May 1, 1998
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 eighteen Sub-Accounts corresponding to eighteen funds
("Portfolios") in the Variable Account or in the Guaranteed Periods of the Fixed
Account from Transamerica. You could gain or 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 4 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
Sub-Accounts corresponding to the following
eighteen Portfolios:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Money Market Capital Appreciation International Value Transamerica Growth
Special Value Stock Index Disciplined Stock Core Value
Zero Coupon 2000 Socially Responsible Growth Small Company Stock MidCap Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
</TABLE>
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. 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 Account 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 and a $10 fee for transfers over 18
in one year. Advisory fees are also deducted by the Portfolios' manager, and the
Portfolios pay other expenses which, in total, vary from 0. 28% to 1.42% 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 transfer fees premium
taxes). The $30 annual Account Fee is not included in the first column because
the fee is waived for Account Values over $50,000 and the approximate average
Account Value is over $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 ten does not.
EXAMPLES:
<TABLE>
<CAPTION>
Portfolio/ Annual Annual Total Expenses Total Expenses
Sub-Account Insurance Portfolio Total Annual at end of at end of
- -----------
Charges Charges Charges One Year Ten Years
<S> <C> <C> <C> <C> <C>
Money Market 1.40% 0.61% 2.01% $71.40 $233.76
Special Value 1.40% 0.99% 2.39% $75.21 $272.63
Zero Coupon 2000 1.40% 0.61% 2.01% $71.40 $233.76
Quality Bond 1.40% 0.75% 2.15% $72.81 $248.27
Small Cap 1.40% 0.78% 2.18% $73.11 $251.35
Capital Appreciation 1.40% 0.80% 2.20% $73.31 $253.39
Stock Index 1.40% 0.28% 1.68% $68.08 $198.70
Socially Responsible 1.40% 0.82% 2.22% $73.51 $255.44
Growth and Income 1.40% 0.80% 2.20% $73.31 $253.39
International Equity 1.40% 1.06% 2.46% $75.91 $279.62
International Value 1.40% 1.42% 2.82% $79.51 $314.73
Disciplined Stock 1.40% 1.02% 2.42% $75.51 $275.63
Small Company 1.40% 1.12% 2.52% $76.51 $285.56
Balanced 1.40% 1.00% 2.40% $75.31 $273.63
Limited Term High Income 1.40% 0.89% 2.29% $74.21 $262.55
Transamerica Growth 1.40% 0.85% 2.25% $73.84 $261.67
Core Value 1.40% 1.00% 2.40% $75.36 $279.12
MidCap Stock 1.40% 1.00% 2.40% $75.36 $279.12
</TABLE>
The Annual Portfolio Charges above are for 1997 and do not reflect expense
reimbursements or fee waivers, except for the Limited
Term High Income and Transamerica Growth Portfolios. The Core Value and MidCap
Stock Portfolios did not commence
operations in 1997; the numbers for these funds are annualized estimates
including reimbursements or waivers for 1998.
Expenses may be higher or lower in the future. See the Variable Account Fee
Table on page 12 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). 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. 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. Additionally, at any time
you can withdraw accumulated earnings on your purchase payments not previously
withdrawn without a withdrawal charge. (See Page 33 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 you will always
receive the principal you invested plus 3% interest.
8. Past Investment Performance. The value of the money you allocate to the
Sub-Account(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.
<PAGE>
<TABLE>
<CAPTION>
CALENDAR YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUB-ACCOUNT 1997 1996 1995 1994 1993 1992 1991 1990
Money Market(1) 3.66% 3.53% 4.21% 3.00% 1.86% 2.71% 4.54% N/A
Special Value(1) 21.36% (5.67%) (0.48%) (3.48%) 26.74% (0.41%) 8.99% N/A
Zero Coupon 2000(1) 5.45% 1.10% 16.35% (5.41%) 13.52% 7.29% 17.14% N/A
Quality Bond(1) 7.83% 1.63% 18.91% (6.17%) 13.66% 10.45% 12.47% N/A
Small Cap(1) 15.06% 15.06% 28.84% 4.95% 65.77% 68.98% 156.07% N/A
Capital Appreciation(2) 26.21% 22.71% 32.82% 1.45% N/A N/A N/A N/A
Stock Index(3) 31.05% 19.80% 35.92% (0.60%) 7.75% 5.55% 27.98% (6.52%)
Socially Responsible(4) 26.59% 19.00% 33.67% (0.08%) N/A N/A N/A N/A
Growth and Income(5) 14.53% 18.63% 59.58% N/A N/A N/A N/A N/A
International Equity(5) 8.02% 9.82% 6.62% N/A N/A N/A N/A N/A
International Value(6) 7.13% N/A N/A N/A N/A N/A N/A N/A
Disciplined Stock(6) 29.62% N/A N/A N/A N/A N/A N/A N/A
Small Company Stock(6) 20.01% N/A N/A N/A N/A N/A N/A N/A
Transamerica Growth(7) 50.34% 26.63% 53.02% 7.71% 27.73% 13.58% 41.47% (12.58%)
</TABLE>
(1) Portfolio Inception 8-31-90 (3) Portfolio Inception 9-29-89
(2) Portfolio Inception 4-5-93 (4) Portfolio Inception 10-7-93
(5) Portfolio Inception 12-15-94
(6) Portfolio Inception 5-1-96
(7) Portfolio Inception 2-26-69
Data is for full years only. Therefore, no performance is reported for the
Balanced and Limited Term High Income Sub-Accounts because these Sub-Accounts
had not been in operation for a full year in 1997. Additionally, the Core Value
and MidCap Stock Sub-Accounts did not commence operations in 1997 and,
therefore, no performance is reported for these Sub-Accounts. The figures for
the Money Market, Special Value, Zero Coupon 2000, Quality Bond, Small Cap,
Stock Index and Transamerica Growth Sub-Accounts include data for periods before
the Sub-Accounts commenced operations, based on the actual performance of the
corresponding Portfolios since they commenced operations.
9. Death Benefit. If you or the Annuitant die during the accumulation phase, the
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 highest Account Value on the
most recent 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 Contract 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 Account 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,
Limited Term High Income or Quality Bond Sub-Accounts, or possibly from another
Sub-Account 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, but it does
not assure a profit or protect against loss and is intended to continue for some
time.
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 certain Qualified Contract
(for example: a non-Roth 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
<PAGE>
["Front Green Cover"]
[LOGO]
PROSPECTUS FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
A Variable Annuity Issued by
Transamerica Occidental
Life Insurance Company
Including Fund Prospectuses for
DREYFUS VARIABLE INVESTMENT FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS INVESTMENT PORTFOLIOS GROWTH PORTFOLIO OF
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
<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, 1998
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. , Dreyfus Investment Portfolios and Growth Portfolio of
Transamerica Variable Insurance 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.
Aninvestment 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. Eighteen Portfolios
are currently available for investment under the Contract: the Money Market,
Special Value, 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; The Dreyfus Socially
Responsible Growth Fund, Inc.; Core Value and MidCap Stock Portfolios of Dreyfus
Investment Portfolios and the Growth Portfolio of Transamerica Variable
Insurance 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 36). For more information about the Funds, see
"The Funds" (page 22) 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 existing amounts transferred to the Guarantee Periods of
the Fixed Account will be credited with interest of at least 3% per year.
Transamerica may, at 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 26.)
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.
<PAGE>
TABLE OF CONTENTS Page
DEFINITIONS...................................................... 6
SUMMARY.......................................................... 9
CONDENSED FINANCIAL INFORMATION.................................. 17
PERFORMANCE DATA................................................. 20
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE
VARIABLE ACCOUNT................................................ 21
Transamerica Occidental Life Insurance Company............ 21
Published Ratings......................................... 21
The Variable Account...................................... 21
THE FUNDS........................................................ 22
THE FIXED ACCOUNT................................................ 26
Guarantee Periods......................................... 27
Interest Adjustment....................................... 27
Expiration of a Guarantee Period.......................... 27
THE CONTRACT..................................................... 28
APPLICATION AND PURCHASE PAYMENTS................................ 28
Purchase Payments......................................... 28
Allocation of Purchase Payments......................... 29
Investment Option Limits.................................. 30
ACCOUNT VALUE.................................................... 30
TRANSFERS........................................................ 31
Before the Annuity Date................................... 31
Telephone Transfers....................................... 31
Possible Restrictions..................................... 31
Dollar Cost Averaging..................................... 31
Automatic Asset Rebalancing............................... 32
After the Annuity Date.................................... 32
CASH WITHDRAWALS................................................. 32
Withdrawals............................................... 32
Systematic Withdrawal Option.............................. 34
Automatic Payout Option .................................. 34
DEATH BENEFIT.................................................... 34
Payment of Death Benefit.................................. 35
Designation of Beneficiaries.............................. 35
Death of Annuitant Prior to the Annuity Date.............. 35
Death of Owner Prior to the Annuity Date.................. 35
Death of Annuitant or Owner After the Annuity Date........ 36
CHARGES AND DEDUCTIONS........................................... 36
Administrative Charges.................................... 37
Mortality and Expense Risk Charge......................... 38
Premium Taxes............................................. 38
Transfer Fees............................................. 39
Systematic Withdrawal Option.............................. 39
Taxes..................................................... 39
Portfolio Expenses........................................ 39
Interest Adjustment....................................... 39
Sales in Special Situations............................... 39
ANNUITY PAYMENTS................................................. 39
Annuity Date.............................................. 39
Annuity Payment........................................... 40
Election of Annuity Forms and Payment Options............. 40
Annuity Payment Options................................... 40
Fixed Annuity Payment Option.............................. 40
<PAGE>
TABLE OF CONTENTS CONTINUED
Variable Annuity Payment Option........................... 41
Annuity Forms............................................. 41
Alternate Fixed Annuity Rates............................. 42
QUALIFIED CONTRACTS.............................................. 42
Automatic Payout Option ("APO")........................... 43
Restrictions under 403(b) Programs........................ 43
FEDERAL TAX MATTERS.............................................. 43
Introduction.............................................. 43
Purchase Payments......................................... 44
Taxation of Annuities..................................... 44
Qualified Contracts....................................... 46
Possible Changes in Taxation.............................. 48
Other Tax Consequences.................................... 48
DISTRIBUTION OF THE CONTRACT..................................... 49
PREPARING FOR THE YEAR 2000...................................... 49
LEGAL PROCEEDINGS................................................ 49
LEGAL MATTERS.................................................... 49
ACCOUNTANTS...................................................... 49
VOTING RIGHTS.................................................... 50
AVAILABLE INFORMATION............................................ 50
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS.......... 51
APPENDIX A....................................................... 52
Example of Variable Accumulation Unit Value Calculations.. 52
Example of Variable Annuity Unit Value Calculations....... 52
Example of Variable Annuity Payment Calculations.......... 52
The Contract is not available in all states.
<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 or a 403(b) annuity, 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
Transamerica which evidences an individual's 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 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 Center: (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, The Dreyfus Socially
Responsible Growth Fund, Inc., Dreyfus Investment Portfolios and Transamerica
Variable Insurance 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 Fee; 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
surviving 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 or any one of the Portfolios of
Dreyfus Investment Portfolios or the Growth Portfolio of Transamerica Variable
Insurance Fund, Inc., 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
issued in connection with a retirement plan or program.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. Service Center: Transamerica's Annuity Service Center, at
P.O. Box 31848 Charlotte, North Carolina 28231-1848, and at telephone (800)
258-4260. 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. 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. 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.
<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 in connection with (a) non-qualified plans; (b) as an individual
retirement annuity that qualifies for special tax treatment under Code Section
408 and whose initial Purchase Payment is a rollover or transfer from a
qualified retirement plan receiving special tax treatment under Code Sections
401(a), 403(b) and 408 (a "rollover IRA"); or (c) as an individual retirement
annuity that qualifies for special tax treatment under Code Section 408A and
whose initial Purchase payment is a rollover, transfer or conversion from other
individual retirement plans issued under Sections 408 or 408A of the Code (a
"rollover Roth IRA"). Additionally, with Transamerica's prior permission, the
Contract may be used as an IRA or Roth IRA whose initial Purchase Payment is
limited to the contribution limitations of the Code (a "contributory IRA" or
"contributory Roth 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 28.) 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 22.)
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 a Portfolio of
Dreyfus Investment Portfolios or in the Growth Portfolio of Transamerica
Variable Insurance Fund, Inc., or in Dreyfus Stock Index Fund or The Dreyfus
Socially Responsible Growth Fund, Inc. (together "The Funds"). The following
eighteen Portfolios are currently available for investment in the Variable
Account.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Money Market Capital Appreciation International Value Transamerica Growth
Special Value Stock Index Disciplined Stock Core Value
Zero Coupon 2000 Socially Responsible Growth Small Company Stock MidCap Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
</TABLE>
Each Portfolio has distinct investment objectives and
policies which are described in the accompanying
prospectuses for the Funds. (See "The Funds" page 22.) 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 36). For more information about the Funds, see "The Funds" (page 22) 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 26.) Investment Option Limit
Currently, the Owner may not elect more than a total of
eighteen investment options over the life of the
Contract. Investment options include Sub-Accounts of the Variable Account
and the Fixed Account. See "Investment Option
Limit" page 30.
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. There is a $10 fee for
each transfer in excess of eighteen per Contract Year. Transfers specifically
excluded under certain programs will not count towards the eighteen free
transfers per Contract Year. 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 "Transfer
Fees" page 39, "The Fixed Account" page 26, and for transfers after the Annuity
Date, see "After the Annuity Date" page 32.) 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 36.) 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 42 and "Federal Tax Matters" page 43.) The annual Account Fee generally
will be deducted on a full surrender of a Contract. (See "Withdrawals" page 30.)
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 26.) Transamerica may delay payment of any
withdrawal from the Fixed Account for up to six
months. (See "Cash Withdrawals" page 32.)
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 36.)
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, after the first Contract Year the
Owner, is diagnosed with a terminal illness reasonably expected to result in
death within twelve months. (See "Contingent Deferred Sales Load" page 36.)
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 38.) 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 37.)
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 37.)
Currently, no fee for the Systematic Withdrawal Option is
imposed, but Transamerica reserves the right to charge for this option in the
future. A $10 charge is imposed for each transfer in excess of 18 during a
Contract Year. (See "Transfer Fees" page 39.) 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 38.)
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.
<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 36 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 Fees (first 18 per Contract Year)(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>
Portfolio Annual Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(6)
------------------------------------- ---------------- ------------------ --------------------------
Management Other Total Portfolio
Portfolios Fee Expenses Annual Expense
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
<S> <C> <C> <C>
Money Market 0.50% 0.11% 0.61%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Special Value 0.75% 0.24% 0.99%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Zero Coupon 2000 0.45% 0.16% 0.61%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Quality Bond 0.65% 0.10% 0.75%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Small Cap 0.75% 0.03% 0.78%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Capital Appreciation 0.75% 0.05% 0.80%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Stock Index Fund 0.25% 0.03% 0.28%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Socially Responsible Growth Fund 0.75% 0.07% 0.82%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Growth and Income 0.75% 0.05% 0.80%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
International Equity 0.75% 0.31% 1.06%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
International Value 1.00% 0.42% 1.42%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Disciplined Stock 0.75% 0.27% 1.02%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Small Company Stock 0.75% 0.37% 1.12%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Balanced 0.75% 0.25% 1.00%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Limited Term High Income 0.65% 0.24% 0.89%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Transamerica Growth 0.75% 0.10% 0.85%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
Core Value 0.75% 0.25% 1.00%
------------------------------------- ---------------- ------------------ --------------------------
------------------------------------- ---------------- ------------------ --------------------------
MidCap Stock 0.75% 0.25% 1.00%
------------------------------------- ---------------- ------------------ --------------------------
</TABLE>
<PAGE>
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. These figures are for the year ended December 31, 1997, except for
Core Value and MidCap Stock, which are annualized estimates for the year 1998,
their first year of operation. 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 36.)
(3) A Transfer Fee of $10 will be imposed for each transfer in excess of
18 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 36.)
(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 36.)
(5) The current annual Administrative Expense Charge is 0.15%; it
may be increased to 0.25%. (See "Charges and
Deductions" page 36.)
(6) From time to time, each Portfolio's investment adviser, in its sole
discretion, may waive all or part of its fees and/or voluntarily assume
certain Portfolio expenses. The expenses shown in the above Portfolio
Annual Expenses table reflect the Portfolio's Adviser's waiver of fees
or reimbursement of expenses, if applicable, for calendar year 1997,
except for Core Value and MidCap Stock Portfolios which are annualized
estimates of expenses to be paid in 1998. It is anticipated that such
waivers and reimbursements will continue for calendar year 1998.
Without such waivers or reimbursements, the management fee, other
expenses and total portfolio annual expenses for 1997 would have been,
as a percentage of assets, 0.75%, 0.23% and 0.98% for Transamerica
Growth Portfolio and 0.65%, 0.29%, and 0.94% for Limited Term High
Income Portfolio, respectively.
<PAGE>
Examples*
The following three examples reflect no 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 Fee, systematic
withdrawal fee or premium tax
have been assessed. Premium taxes may be applicable. (See "Premium Taxes"
page 38.)
These examples show expenses without reflecting fee waivers
and reimbursements for 1997. Except for the Limited Term High Income and
Transamerica Growth 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>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market $71.40 $105.55 $141.94 $233.76
Special Value $75.21 $117.05 $161.55 $272.63
Zero Coupon 2000 $71.40 $105.55 $141.94 $233.76
Quality Bond $72.81 $109.80 $149.39 $248.27
Small Capital $73.11 $110.71 $150.95 $251.35
Capital Appreciation $73.31 $111.32 $151.96 $253.39
Stock Index $68.08 $95.46 $124.16 $198.70
Socially Responsible Growth $73.51 $111.92 $152.98 $255.44
Growth Income $73.31 $111.32 $151.96 $253.39
International Equity $75.91 $119.15 $165.05 $279.62
International Value $79.51 $129.90 $182.89 $314.73
Disciplined Stock $75.51 $117.95 $163.05 $275.63
Small Company Stock $76.51 $120.95 $168.05 $285.56
Balanced Fund $75.31 $117.35 $162.05 $273.63
Limited Term High Income $74.21 $114.03 $156.51 $262.55
Transamerica Growth Fund $73.84 $113.08 $154.87 $261.67
Core Value $75.36 $117.78 $162.95 $279.12
MidCap Stock $75.36 $117.78 $162.95 $279.12
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:
1 Year 3 Years 5 Years 10 Years
Money Market $20.40 $63.05 $108.29 $233.76
Special Value $24.21 $74.55 $127.55 $272.63
Zero Coupon 2000 $20.40 $63.05 $108.29 $233.76
Quality Bond $21.81 $67.30 $115.43 $248.27
Small Capital $22.11 $68.21 $116.95 $251.35
Capital Appreciation $22.31 $68.82 $117.96 $253.39
Stock Index $17.08 $52.96 $91.26 $198.70
Socially Responsible Growth $22.51 $69.42 $118.98 $255.44
Growth Income $22.31 $68.82 $117.96 $253.39
International Equity $24.91 $76.65 $131.05 $279.62
International Value $28.51 $87.40 $148.89 $314.73
Disciplined Stock $24.51 $75.45 $129.05 $275.63
Small Company Stock $25.51 $78.45 $134.05 $285.56
Balanced Fund $24.31 $74.85 $128.05 $273.63
Limited Term High Income $23.21 $71.53 $122.51 $262.55
Transamerica Growth Fund $22.84 $70.58 $121.22 $261.67
Core Value $24.36 $75.28 $129.30 $279.12
MidCap Stock $24.36 $75.28 $129.30 $279.12
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:
1 Year 3 Years 5 Years 10 Years
Money Market $71.40 $63.05 $108.29 $233.76
Special Value $75.21 $74.55 $127.55 $272.63
Zero Coupon 2000 $71.40 $63.05 $108.29 $233.76
Quality Bond $72.81 $67.30 $115.43 $248.27
Small Capital $73.11 $68.21 $116.95 $251.35
Capital Appreciation $73.31 $68.82 $117.96 $253.39
Stock Index $68.08 $52.96 $91.26 $198.70
Socially Responsible Growth $73.51 $69.42 $118.98 $255.44
Growth Income $73.31 $68.82 $117.96 $253.39
International Equity $75.91 $76.65 $131.05 $279.62
International Value $79.51 $87.40 $148.89 $314.73
Disciplined Stock $75.51 $75.45 $129.05 $275.63
Small Company Stock $76.51 $78.45 $134.05 $285.56
Balanced Fund $75.31 $74.85 $128.05 $273.63
Limited Term High Income $74.21 $71.53 $122.51 $262.55
Transamerica Growth Fund $73.84 $70.58 $121.22 $261.67
Core Value $75.36 $75.28 $129.30 $279.12
MidCap Stock $75.36 $75.28 $129.30 $279.12
</TABLE>
*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
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 39.)
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 41.)
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,
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 31.) 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 34.) 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 43.) 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 28 and "Account Value"
page 30.) 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 the Funds which should be referred to for more detailed
information. With respect to Qualified Contracts, it should be noted that the
requirements of a particular retirement plan, an endorsement to the Contract, or
limitations or penalties imposed by the Code or the Employee Retirement Income
Security Act of 1974, as amended, may impose additional limits or restrictions
on Purchase Payments, Withdrawals, distributions, or benefits, or on other
provisions of the Contract. This Prospectus does not describe such limitations
or restrictions. (See "Federal Tax Matters" page 43.)
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 31,1997. The Core Value, MidCap Stock and
Transamerica Growth Sub-Accounts are not included because these Sub-Accounts did
not commence operations during 1997.
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 Special Zero Coupon Quality
Market Value 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 3,654,791.776 287,450.768 206,103.348 255,350.340 254,839.860
</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 $13.364
Number of Accumulation Units
Outstanding at End of Period 237,733.021 93,536.733
26,089.826
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ending December 31, 1994
---------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 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>
<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 $13.364 $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 Special Zero Coupon Quality
Market Value 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> <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>
<PAGE>
<TABLE>
<CAPTION>
Year Ending December 31, 1996
---------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 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
International
Capital Appreciation Stock Index Socially Responsible Growth and Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
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
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
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 230,868.491 618,809.191 543,949.419
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31, 1997
---------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 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 $1.132 $11.682 $14.911 $14.142 $58.773
Accumulation Unit Value
at End of Period $1.175 $14.185 $15.736 $15.260 $67.668
Number of Accumulation
Units Outstanding
at End of Period 42,660,950.364 2,649,561.005 1,350,865,.031 4,020,220.452 2,954,842.907
International
Capital Appreciation Stock Index Socially Responsible Growth and Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $21.802 $26.791 $21.221 $23.131 $14.267
Accumulation Unit Value
at End of Period $27.532 $35.128 $26.879 $26.509 $15.421
Number of Accumulation
Units Outstanding
at End of Period 6,447,159.634 3,357,236.245 1,335,814.063 7,480,387.355 2,176,230.247
<PAGE>
Limited Term
High Income Balanced
International Value Disciplined Stock Small Company Stock Sub-Account Sub-Account
Sub-Account Sub-Account Sub-Account (Inception 5/1/97)(Inception 5/1/97)
Accumulation Unit Value
at Beginning of Period $10.244 $11.776 $10.772 $10.000 $10.000
Accumulation Unit Value
at End of Period $10.982 $15.272 $12.935 $10.852 $11.738
Number of Accumulation
Units Outstanding
at End of Period 1,047,389.002 2,278,146.352 1,604,089.554 2,424,231.798 647,855.304
</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.
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.
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 eighteen Sub-Accounts, each of
which invests solely in a
specific corresponding Portfolio. (See "The Funds" below.) Changes to the
Sub-Accounts may be made at
the discretion of Transamerica. (See "Addition, Deletion, or Substitution"
page 26.)
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"), The Dreyfus Socially Responsible Growth Fund, Inc. (the
"Socially Responsible Fund"), Portfolios of Dreyfus Investment Portfolios and
the Growth Portfolio of Transamerica Variable Insurance Fund, Inc.
("Transamerica VIF"). 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 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. Dreyfus Investment
Portfolios was organized as an investment business trust under Massachusetts law
pursuant to an Agreement and Declaration of Trust dated May 14, 1993, is
registered with the Commission as an open-end management company under the 1940
Act and commenced operations May 1, 1998. Currently, two portfolios of Dreyfus
Investment Portfolios are available for the Contracts. Transamerica VIF was
incorporated under Maryland law on June 23, 1995, commenced operations on
November 1, 1996, and is registered with the SEC as a management investment
company. Transamerica VIF currently consists of two investment portfolios, one
of which is the Growth Portfolio. 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, the Stock Index Fund
and Transamerica VIF 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. Transamerica provides investment advisory
services to Transamerica VIF, with Transamerica Investment Services, Inc.,
providing sub-investment advisory services.
The Portfolios are described below. See the Variable
Fund, the Stock Index Fund, the
Socially Responsible Fund, Dreyfus Investment Portfolios and Transamerica
Variable Insurance Fund, Inc.,
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. Special
Value Portfolio
The Special Value 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 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 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 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 1% of the value of the Stock Index 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 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 and a sub-investment advisory fee is payable monthly to NCM Capital
Management Group, Inc. at the aggregate annual rate of 0.75 of 1% of the value
of the Socially Responsible Fund's average daily net assets. Core Value
Portfolio
The Core Value Portfolio is a diversified portfolio, the
primary investment objective of which is to provide long-term growth of capital;
current income is a secondary investment objective. The Portfolio anticipates
that at least 65% of the value of its total assets (except when maintaining a
temporary defensive position) will be invested in equity securities, such as
common stocks, preferred stock and securities convertible into common stocks,
including Depository Receipts, which would be characterized as "value" companies
according to criteria established by The Dreyfus Corporation. In general, the
Portfolio's investments are broadly diversified over a number of industries and,
as a matter of operating policy, the Portfolio will not invest more than 25% of
its total assets in any one industry. A management fee is payable monthly to The
Dreyfus Corporation at the annual rate of 0.75 of 1% of the Portfolio's average
daily net assets. MidCap Stock Portfolio
The MidCap Stock Portfolio is a diversified portfolio, the
investment objective of which 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 Standard & Poor's MidCap 400 Index. Medium-size
issuers will include those U.S. companies with market capitalizations (market
price per share times the number of shares outstanding) generally ranging in
value from $200 million to $5 billion. The Portfolio also may invest in large
and small capitalization companies, including emerging and cyclical growth
companies. Emerging and cyclical growth companies are firms which, while they
may not have a history of stable long-term growth, are nonetheless expected to
represent attractive investments. The equity securities in which the Portfolio
invests consist of common stocks, preferred stocks and securities convertible
into common stocks, including those in the form of Depositary Receipts. The
Portfolio is not an index fund and its investments are not limited to securities
of issuers included in the S&P 400 Index. A management fee is payable monthly to
The Dreyfus Corporation at the annual rate of 0.75 of 1% of the Portfolio's
average daily net assets. Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc., seeks long-term capital growth. Common stock (list and
unlisted) is the basic form of investment. The Growth Portfolio invests
primarily in common stocks of growth companies that are considered by the
manager to be premier companies. In the manager's view, characteristics of
premier companies include one or more of the following: dominant market share;
leading brand recognition; proprietary products or technology; low-cost
production capability; and excellent management with shareholder orientation.
The manager of the Portfolio believes in long-term investing and places great
emphasis on the sustainability of the above competitive advantages. Unless
market conditions indicate otherwise, the manager also tries to keep the
Portfolio fully invested in equity-type securities and does not try to time
stock market movements. When in the judgment of the manager market conditions
warrant, the Portfolio may, for temporary defensive purposes, hold part or all
of its assets in cash, debt or money market instruments. The Portfolio may
invest up to 10% of its assets in debt securities having a call on common stocks
that are rated below investment grade. A management fee is 0.75 of 1% of the
average daily net assets payable to Transamerica Occidental Life Insurance
Company, as adviser, and adviser pays Transamerica Investment Services, Inc. a
monthly fee at the annual rate of 0.30 of 1% of the first $50 million, 0.25 of
1% of next $150 million and 0.20 of 1% of assets in excess of $200 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, 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 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.
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.
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.
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 29); and 3) amounts paid as part of a Death Benefit (see "Death
Benefit" page 34). A Contingent
Deferred Sales Load may apply to withdrawals made at the end of a Guarantee
Period even if there is no
interest adjustment made.
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 free 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, as
rollover IRAs and as rollover Roth IRAs that qualify for special federal income
tax treatment. With Transamerica's prior permission, the Contracts may also be
available as contributory IRAs, as contributory Roth IRAs, as Section 403(b)
annuities and for use in Section 401(a) 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
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 certain Qualified Contracts.
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.
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 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 this page).
Additional Net Purchase Payments are credited to the Contract as of the date the
payment is received. Currently, additional purchase payments after the initial
purchase payment may not be made to Section 401(a) and Section 403(b) annuity
contracts.
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, 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 situations where the greater of Purchase Payments or Account Value will be
refunded on exercise of the Free Look, 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 free transfers per Contract Year.
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.
Investment Option Limit
Currently, the Owner may not allocate amounts to more than
eighteen investment options over the life of the Contract. Investment options
include Sub-Accounts of the Variable Account and Guarantee Periods of the Fixed
Account. Each Sub-Account and each duration of Guarantee Period that ever
received a transfer or purchase payment allocation count as one towards this
total of eighteen limit. Transamerica may waive this limit in the future. For
example, if the Owner makes an allocation to the Money Market Sub-Account and
later transfers all amounts of this Money Market Sub-Account, it would still
count as one for the purposes of the limitation even if it held no value. If the
Owner transfers from a Sub-Account to another Sub-Account and later back to the
first, the count towards the limitation would be two, not three. If the Owner
selects a Guarantee Period and renews for the same term, the count will be one;
but if the Owner renews to a Guarantee Period with a different term, the count
will be two.
ACCOUNT VALUE
Before the Annuity Date, the Account Value is equal to: (a)
the 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 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. 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) the minimum amount which may be
transferred is $500; (2) the minimum transfer to an Inactive Sub-Account is
$500; and (3) 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.
Transamerica imposes a transfer fee of $10 for each transfer
in excess of 18 in a Contract Year. Transamerica reserves the right to waive the
transfer fee or vary the number of transfers without charge or not count
transfers under certain options or services for purposes of the allowed number
without charge. A transfer generally will be effective on the date the request
for transfer is received by the Service Center.
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 25.) 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, Quality Bond or Limited Term High Income 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 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 the duration selected by the Owner unless (1) terminated by
the Owner, (2) automatically terminated by Transamerica because there are
insufficient funds in the Source Account, or (3) for other reasons as set forth
in the Contract. The Owner may request that monthly transfers be continued 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 18 transfers
allowed without charge 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 free 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 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 36).
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, except for
distributions from certain Qualified Contracts that may be subject to mandatory
20% withholding. 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
43.)
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 27.)
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 26.)
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
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 43.)
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 33). 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 36).
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 certain Qualified Contracts. See the Automatic Payout Option discussion
under Qualified Contracts on page 42.
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
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 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 43.) 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 43.)
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 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 27 ).
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 from Purchase Payments (on a first
in first out basis) then from earnings. 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.
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, after the first Contract Year, with a terminal illness
reasonably expected to result in death within twelve months. 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 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 Fees, 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
A $10 transfer fee is charged for each transfer in excess of
eighteen in a Contract Year. Transamerica reserves the right to waive the
transfer fee or vary the number of transfer without charge or not count
transfers under certain options or services for purposes of the allowed number
without charge.
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 22.)
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 26.
Sales in Special Situations
Transamerica may sell the Contracts in special situations that are
expected to involve reduced expenses for Transamerica. These instances may
include: 1) sales in certain group arrangements, such as employee savings plans;
2) sales to current or former officers, directors and employees (and their
families) of Transamerica and its affiliates; 3) sales to officers, directors,
and employees (and their families) of the Portfolios' investment advisers and
their affiliates; and 4) sales to officers, directors, employees and sales
agents (registered representatives) (and their families) of broker-dealers and
other financial institutions that have sales agreements with Transamerica to
sell the Contracts. In these situations, 1) the contingent deferred sales load
may be reduced or waived, 2) the mortality and expense risk charge or
administration charges may be reduced or waived; and/or 3) certain amounts may
be credited to the Contract Account Value (for example, amounts related to
commissions or sales compensation otherwise payable to a broker-dealer may be
credited to the Contract Account Value. These reductions in fees or charges or
credits to account value will not unfairly discriminate against any contract
owner. These reductions in fees or charges or credits to account value are
generally taxable and treated as Purchase Payments for purposes of income tax
and any possible premium tax charge.
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 certain Qualified Contracts. The latest Annuity
Date which may be elected is the later of (a) the first day of the calendar
month immediately preceding the month of the Annuitant's 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.
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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, 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 43.)
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 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
a Qualified Contract, 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 rollover IRAs or rollover
Roth IRAs and, with Transamerica's prior permission, to fund contributory IRAs
and contributory Roth IRAs, for use in connection with Sections 408 and 408A of
the Code. A rollover IRA is one whose initial Purchase Payment is from the
rollover or transfer of certain kinds of distributions from a non-Roth IRA,
qualified plans, or Section 403(b) tax sheltered annuities, following the rules
set out in the Code to maintain favorable tax treatment of the rollover IRA. A
rollover Roth IRA is one whose initial Purchase Payment is from the rollover,
transfer or conversion from a non-Roth IRA or Roth IRA. A contributory IRA or
contributory Roth IRA are those whose 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.
Currently, additional Purchase Payments after the initial Purchase Payment may
not be made to Contracts used as Section 401(a) or Section 403(b) annuities.
The tax rules applicable to distribution from qualified
retirement plans, including restrictions on contributions and benefits, taxation
of distributions, and 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, distributions prior to age 59 1/2
(subject to certain exceptions), distributions that do not satisfy specified
requirements and certain other transactions with respect 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 or Roth IRA, the Annuitant must also be the
Owner. In addition, under current tax law, minimum distributions are required
from certain Qualified Contracts. See "Federal Tax Matters", page 43. The Owner
should consult his/her tax adviser concerning these matters. Automatic Payout
Option ("APO")
Prior to the Annuity Date, for Qualified Contracts other than Roth
IRAs, 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. See "Federal Tax Matters", page 43. For IRAs
and SEP/IRAs this may be elected no earlier than six months prior to the
calendar year in which the Owner attains age 70 1/2, but payments may not begin
earlier than January of such calendar year. For other Qualified Contracts, APO
can be elected no earlier than six months prior to the later of when the Owner
(a) attains age 70 1/2; and (b) retires from employment. Additionally, APO
withdrawals may not begin before the later of (a) 30 days after the Contract
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 34).
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 36.)
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;
and (2) the annual withdrawal amount is the larger of the required minimum
distribution under Code Sections 401(a)(9) or 408(b)(3) or $500.
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 Date, an interest adjustment will be made to such amounts.
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 59 1/2, 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), 408 and 408A 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.
Purchase Payments
At the time the Initial Purchase Payment is paid, a
prospective purchaser must specify whether he or she is purchasing a
Non-Qualified Contract or a Qualified Contract. If the Initial 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 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.
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 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
Purchase 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. Withholding
The Code requires Transamerica to withhold federal income tax from
distributions under the Contracts. However, except for distributions from
certain Qualified Contracts, an Owner will be entitled to elect, in writing, not
to have tax withheld. Withholding applies to the portion of a distribution which
is includible in income and subject to federal income tax, where the taxable
amount is at least $200. Some states also require withholding for state income
taxes.
The withholding varies according to the type of distribution and the
Owner's tax status. "Eligible rollover distributions" from Section 401(a) plans
and Section 403(b) tax sheltered annuities are subject to mandatory federal
income tax withholding at the rate of 20%. An eligible rollover distribution is
the taxable portion of any distribution from such a plan, except for certain
distributions, such as minimum required distributions or settlement option
payments made in a specified form. The 20% mandatory withholding does not apply,
however, if the Owner chooses a "direct rollover" from the plan to another
tax-qualified plan or to an IRA (other than a Roth IRA).
The federal income tax withholding rate for a distribution that is not
an "eligible rollover
distribution" is 10% of the taxable amount of the distribution.
Penalty Tax
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
59 1/2; (2) made as a result of death or disability of the Owner; or (3)
received in substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the 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. 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, at our Service Center: (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 Owners 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.
Qualified Contracts cannot be transferred or assigned, except as permitted by
the Code or the Employee Retirement Income Security Act of 1974 (ERISA).
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 rollover IRAs
and rollover Roth IRAs. With Transamerica's prior permission, the Contract may
also be used as a contributory IRA, as a contributory Roth IRA, as a Section
403(b) annuity, and for use in pension and profit sharing plans qualified under
Section 401(a). 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 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances. We make no
attempt to provide more than general information about use of the Contracts with
the various types of retirement plans. Owners and participants under retirement
plans as well as annuitants and beneficiaries are cautioned that the rights of
any person to any benefits under Qualified Contracts may be subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contract 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.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form and manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish
various types of retirement plans for employees. Such retirement plans may
permit the purchase of the Contract in order to provide retirement savings under
the plans. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10," also permits 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, Simplified Employee Plans and Roth IRAs
The Contracts are designed for use with rollover IRAs and contributory
IRAs. A contributory IRA is a Contract in which initial and subsequent Purchase
Payments are subject to limitations imposed by the Code. Section 408 of the Code
permits eligible individuals to contribute to an individual retirement program
known as an Individual Retirement Annuity or Individual Retirement Account (each
hereinafter referred to as an "IRA"). Also, distributions from certain other
qualified plans may be "rolled over" or transferred on a tax-deferred basis into
an IRA.
Earnings in an IRA are not taxed until distributed. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's
compensation (including earned income as defined in Code Section 401(c)(2)) and
may be deductible in whole or in part depending on the individual's adjusted
gross income and whether or not the individual is considered an active
participant in a qualified plan. The limit on the amount contributed to an IRA
does not apply to distributions from certain other types of qualified plans that
are "rolled over" or transferred on a tax-deferred basis into an IRA. Amounts in
the IRA (other than nondeductible contributions) are taxed when distributed from
the IRA. Distributions prior to age 59 1/2 are subject to a 10% penalty tax,
unless certain exceptions apply. Purchasers should seek competent advice as to
the suitability of the Contract for use with IRAs.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP-IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP-IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The Contracts may also be used with rollover Roth IRAs and contributory
Roth IRAs. A contributory Roth IRA is a contract to which initial and subsequent
Purchase Payments are subject to limitations imposed by the Code. Section 408A
of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a Section 408 IRA may be converted to a Roth IRA. A Section
408 IRA is an IRA described in Sections 408(a) or 408(b), other than a Roth IRA.
You should consult a tax adviser before combining any converted amounts with any
other Roth IRA contributions, including any other conversion amounts from other
tax years. Distributions from a Roth IRA generally are not taxed, except that,
once aggregate distributions exceed contributions to the Roth IRA, income tax
and a 10% penalty tax may apply to distributions made (1) before age 59 1/2
(subject to certain exceptions) or (2) during the five taxable years starting
with the year in which the first contribution is made to the Roth IRA.
Purchasers should seek competent advice as to the suitability of the contract
for use with Roth IRAs.
The sale of a Contract for use with an IRA, SEP-IRA or Roth
IRA may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of these Contracts 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, SEP-IRA or Roth IRA or
their purchase.
Tax Sheltered Annuities
Under Code Section 403(b), payments made by public school
systems and certain tax exempt organizations to purchase annuity contracts for
their employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to Social Security
and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
Qualified Contract from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may
apply under Qualified Contracts or under the terms of the plans in respect of
which Qualified Contracts
are issued. A Qualified Contract will be amended as necessary to conform
to the requirements of the
Code.
Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
"investment in the contract" under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
Contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Contract. Other Tax
Consequences
As noted above, the foregoing discussion of the federal income
tax consequences is not exhaustive and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the Contract depend on the individual
circumstances of each Owner or recipient of the distribution. A competent tax
adviser should be consulted for further information. 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.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of
12/31/00 as the year 1900 rather than the year 2000, disruptions of business
activities may occur with the year 2000. In response, Transamerica established
in 1997 a "Y2K" committee to address this issue. With regard to the systems and
software which administer and affect the contracts, Transamerica has determined
that is own internal systems will be Year 2000 compliant. Additionally,
Transamerica requests any third party vendor which supplies software or
administrative services to Transamerica in connection with the administration of
the contracts, to certify that the software or services will be Year 2000
compliant. In determining the variable accumulation unit values for each
variable sub-account, Transamerica is reliant upon information received from the
portfolios and is confirming that Year 2000 issues will not interfere with this
flow of information. As of the date of this prospectus, it is not anticipated
that contract owners will experience negative affects on their investment, or on
the services received in connection with their contracts, as a result of Year
2000 issues. However, especially when taking into account interaction with other
systems, it is difficult to predict with precision that there will be no
disruption of services in connection with the year 2000. LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the
Variable Account. Transamerica is involved in various kinds of routine
litigation which, in management's judgment, are not of material importance to
Transamerica's assets or to the Variable Account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the
federal securities laws
applicable to the issue and sale of the Contract has been provided by
Sutherland, Asbill & Brennan, LLP.
The organization of Transamerica, its authority to issue the Contract and
the validity of the form of
the Contract have been passed upon by James W. Dederer, Executive Vice
President, Secretary and General
Counsel of Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica at
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, and the financial statements for the Variable Account at
December 31, 1997, and for each of the two years in the period then ended,
appearing in the Statement of Additional Information have been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, 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 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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
Page
THE CONTRACT.......................................................3
DOLLAR COST AVERAGING..............................................3
NET INVESTMENT FACTOR..............................................3
ANNUITY PERIOD.....................................................3
Variable Annuity Units and Payments.......................3
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................................................4
Annuity Data..............................................5
Annual Report.............................................5
Incontestability..........................................5
Ownership.................................................5
Entire Contract...........................................5
Changes in the Contract...................................5
Protection of Benefits....................................5
Delay of Payments.........................................5
Notices and Directions....................................6
CALCULATION OF YIELDS AND TOTAL RETURNS............................6
Money Market Sub-Account Yield Calculation................6
Other Sub-Account Yield Calculations......................7
Standard Total Return Calculations........................7
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..............9
FEDERAL TAX MATTERS...............................................11
Taxation of Transamerica.................................11
Tax Status of the Contract...............................11
DISTRIBUTION OF THE CONTRACT......................................12
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS............................13
TRANSAMERICA......................................................13
General Information and History..........................13
STATE REGULATION..................................................13
RECORDS AND REPORTS...............................................13
FINANCIAL STATEMENTS..............................................13
APPENDIX..........................................................14
Annuity Transfer Formula..............................14
<PAGE>
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).
<PAGE>
"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, 1998, 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 28231 or
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, 1998
<PAGE>
9
TABLE OF CONTENTS
Page
THE CONTRACT....................................................3
DOLLAR COST AVERAGING...........................................3
NET INVESTMENT FACTOR...........................................3
ANNUITY PERIOD..................................................3
Variable Annuity Units and Payments....................3
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.............................................4
Annuity Data...........................................5
Annual Report..........................................5
Incontestability.......................................5
Ownership..............................................5
Entire Contract........................................5
Changes in the Contract................................5
Protection of Benefits.................................5
Delay of Payments......................................5
Notices and Directions.................................6
CALCULATION OF YIELDS AND TOTAL RETURNS.........................6
Money Market Sub-Account Yield Calculation.............6
Other Sub-Account Yield Calculations...................7
Standard Total Return Calculations.....................7
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...........9
FEDERAL TAX MATTERS............................................11
Taxation of Transamerica..............................11
Tax Status of the Contract............................11
DISTRIBUTION OF THE CONTRACT...................................12
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS.........................13
TRANSAMERICA...................................................13
General Information and History.......................13
STATE REGULATION...............................................13
RECORDS AND REPORTS............................................13
FINANCIAL STATEMENTS...........................................13
APPENDIX.......................................................14
Annuity Transfer Formula...........................14
<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 free 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 "ex-dividend" date occurs in the Valuation Period, plus or minus
A per-share charge or credit as Transamerica may determine, as of
the end of the Valuation Period, for taxes. Where (b) is
The net asset value per share held in the Sub-Account as of
the end of the last prior Valuation
Period.
Where (c) is
The daily charge of 0.003403% (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 the New
York Stock Exchange is open.
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).
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 as may the date
of determination.
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 28 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 39.)
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, or other form relied upon to determine annuity
payment , 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.
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 Center. Transamerica is not
responsible for the adequacy of any assignment. The Owner's rights and the
interest of any Annuitant or non-irrevocable Beneficiary will be subject to the
rights of any assignee of record.
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. 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 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 or
transfers 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 30 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 Center.
Any written notice requirement by Transamerica to the Owner will be
satisfied by our mailing of any such required written notice, by first-class
mail, to the Owner's last known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, Transamerica
is required to compute the Money Market Sub-Account's current annualized yield
for a seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the Money Market Series or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of realized gains and losses on the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market
Sub-Account and income other than investment income at the beginning of such
seven-day period, dividing such net change in Account Value by the value of the
account at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in Account Value
reflects the deductions for the annual Account Fee, the Mortality and Expense
Risk Charge and Administrative Expense Charges and income and expenses accrued
during the period. Because of these deductions, the yield for the Money Market
Sub-Account of the Variable Account will be lower than the yield for the Money
Market 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:
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 Load that may be applicable to a particular period.
<PAGE>
Hypothetical Performance Data
Transamerica may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations. Such
performance information for the Sub-Account will be calculated based on the
performance of the corresponding Portfolio and the assumption that the
Sub-Account was in existence for the same periods as those indicated for the
Portfolio, with a level of Contract charges currently in effect. The Portfolio
used for these calculations will be the actual Portfolio that the Sub-Account
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.
Except for Transamerica Growth, the Funds have provided the performance
data for the Sub-Accounts. Except for Transamerica Growth none of the Funds or
their investment advisers 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
Core Value and MidCap Stock Sub-Accounts since, prior to May 1, 1998, the
related Portfolios had not yet commenced operations.
Money Market Sub-Account Yields
The annualized yield for the Money Market Sub-Account for the seven-day
period ending December 31, 1997 was 3.59%. The effective yield for the Money
Market Sub-Account for the seven-day period ending December 31, 1997 was 3.65%.
<PAGE>
Sub-Account Performance Figures Including Hypothetical Performance
The charts below show historical performance data for the Sub-Accounts,
including, for seven 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 seven
exceptions: the Money Market; Managed Assets, Zero Coupon 2000, Qualify Bond,
Small Cap and Stock Index Sub-Accounts which commenced operations January 4,
1993, and the Transamerica Growth Sub-Account which commenced operations May 1,
1998. Hence, the performance data given for these seven Sub-Accounts which
precedes these dates 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>
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
For the period
from
commencement of
SUB-ACCOUNT (date of commencement of For the 1-year For the 3-year For the 5-year Portfolio
operation of Corresponding Portfolio) period ending period ending period ending operations to
12/31/97 12/31/97 12/31/97 12/31/97
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market (8/31/90) -1.96% 2.20% 2.49% 3.42%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Special Value (8/31/90) 15.36% 2.89% 6.26% 6.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Zero Coupon 2000 (8/31/90) -0.27% 5.99% 5.27% 8.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Quality Bond (8/31/90) 1.96% 7.82% 6.19% 8.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Cap (8/31/90) 9.06% 18.31% 24.00% 41.95%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Capital Appreciation (4/5/93) 20.21% 26.16% N/A 17.65%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Stock Index (9/29/89) 25.05% 27.74% 17.57% 14.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Socially Responsible (10/7/93) 20.59% 25.24% N/A 19.21%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Growth & Income (12/15/94) 8.53% 28.45% N/A 28.16%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Equity (12/15/94) 2.14% 6.71% N/A 6.71%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Value (5/1/96) 1.30% N/A N/A 2.19%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Disciplined Stock (5/1/96) 23.62% N/A N/A 25.72%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Company Stock (5/1/96) 14.01% N/A N/A 13.30%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Balanced (5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Limited Term High Income(5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Transamerica Growth (2/26/69)* 44.94% 41.91% 29.73% 24.12%*
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
<PAGE>
Non-Standard Average annual total returns for period 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. Non-Standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
For the period
from
commencement of
SUB-ACCOUNT (date of commencement of For the 1-year For the 3-year For the 5-year Portfolio
operation of Corresponding Portfolio) period ending period ending period ending operations to
12/31/97 12/31/97 12/31/97 12/31/97
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Money Market (8/31/90) 3.66% 3.78% 3.21% 3.43%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Special Value (8/31/90) 21.36% 4.44% 6.88% 6.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Zero Coupon 2000 (8/31/90) 5.45% 7.45% 5.91% 8.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Quality Bond (8/31/90) 7.83% 9.23% 6.81% 8.02%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Cap (8/31/90) 15.06% 19.49% 24.33% 41.96%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Capital Appreciation (4/5/93) 26.21% 27.19% N/A 18.11%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Stock Index (9/29/89) 31.05% 28.76% 17.99% 14.19%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Socially Responsible (10/7/93) 26.59% 26.30% N/A 19.75%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Growth & Income (12/15/94) 14.53% 29.45% N/A 29.14%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Equity (12/15/94) 8.02% 8.15% N/A 8.13%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Value (5/1/96) 7.13% N/A N/A 5.73%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Disciplined Stock (5/1/96) 29.52% N/A N/A 28.81%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Company Stock (5/1/96) 20.01% N/A N/A 16.61%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Balanced (5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Limited Term High Income(5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Transamerica Growth (2/26/69)* 50.34% 42.65% 29.98% 24.12%*
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
</TABLE>
Non-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 standard
performance data for the required periods is also disclosed.
- ---------------------------------------- ------------------- ------------------
For the 1-year
SUB-ACCOUNT (date of commencement of period ending Since Inception
operation of Corresponding Portfolio) 12/31/97
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Money Market (8/31/90) 3.66% 28.08%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Special Value (8/31/90) 21.36% 53.51%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Zero Coupon 2000 (8/31/90) 5.45% 78.14%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Quality Bond (8/31/90) 7.83% 76.16%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Small Cap (8/31/90) 15.06% 1208.55%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Capital Appreciation (4/5/93) 26.21% 120.51%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Stock Index (9/29/89) 31.05% 199.18%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Socially Responsible (10/7/93) 26.59% 114.76%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Growth & Income (12/15/94) 14.53% 118.14%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
International Equity (12/15/94) 8.02% 26.91%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
International Value (5/1/96) 7.13% 9.75%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Disciplined Stock (5/1/96) 29.62% 52.63%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Small Company Stock (5/1/96) 20.01% 29.26%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Balanced (5/1/97) N/A% 17.38%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Limited Term High Income(5/1/97) N/A% 8.52%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Transamerica Growth (2/26/69)* 50.34% 767.83%*
- ---------------------------------------- ------------------- ------------------
*The Growth Portfolio of the Transamerica Variable Insurance Fund,
Inc., is the successor to Separate Account Fund C of Transamerica Occidental
Life Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio include performance
of its predecessor. The performance shown in the "since inception" box for the
Transamerica Growth Sub-Account is 10-year performance, not performance since
1969.
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 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 Contracts.
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 1997, $21,886,072.80 in commissions were paid to
TSSC as underwriter of the Contracts; no amounts were retained by TSSC. 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 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 1997, $2,394,358.42 in
commissions were paid to TFR as underwriter of the Contracts; no amounts were
retained by TFR. 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, $1,485,889.71 in commissions were paid to TFR as underwriter
of the Contracts; $496,781.00 was retained by TFR.
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, 1997.
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.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next Variable Accumulation Payment's due date.
Where:
(AUV1) is the variable accumulation Unit value of the Variable
sub-account that the transfer is being made from as of the end of the
valuation Period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the Variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
<PAGE>
(This page has been left blank intentionally.)
1
<PAGE>
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street, Los Angeles, California 90015, (213) 742-2111
PROSPECTUS
May 1, 1998
The Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
management investment company. The Growth Portfolio seeks long-term capital
growth. Common stock (listed and unlisted) is the basic form of investment. The
Portfolio may also invest in debt securities and preferred stock having a call
on common stocks.
Shares of the Fund are currently offered only to separate accounts of
insurance companies to fund the benefits of variable annuity contracts and
variable life insurance policies (collectively "variable insurance contracts").
Each variable insurance contract involves fees and expenses not described in
this Prospectus. See the accompanying variable insurance contract prospectus for
information regarding contract fees and expenses and any restrictions on
purchases or allocations.
This Prospectus contains information about the Fund and the Portfolio
that a prospective purchaser of a variable insurance contract should know before
allocating purchase payments or premiums to the Portfolio. It should be read in
conjunction with the Prospectus for the variable insurance contract and should
be retained for future reference. A Statement of Additional Information
containing more detailed information about the Fund is available free by writing
to the Fund at the Transamerica Annuity Service Center, 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202, or by calling 800-258-4260. The
Statement of Additional Information, which has the same date as this Prospectus,
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.
This Prospectus should be read in
conjunction with the prospectus for the
variable insurance contract.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are fund shares federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in fund shares involves certain investment risks,
including possible loss of principal.
<PAGE>
TABLE OF CONTENTS
3
Page
CONDENSED FINANCIAL INFORMATION...........................1
TRANSAMERICA VARIABLE INSURANCE FUND, INC.................3
GROWTH PORTFOLIO..........................................3
INVESTMENT OBJECTIVE AND POLICIES.........................3
INVESTMENT METHODS AND RISKS..............................4
Small Capitalization Companies...................4
Convertible Securities...........................5
High-Yield ("Junk") Bonds........................5
Repurchase Agreements............................5
State Insurance Regulation.......................6
PORTFOLIO TURNOVER........................................6
MANAGEMENT................................................6
Directors and Officers...........................6
Investment Adviser...............................6
Investment Sub-Adviser...........................7
PERFORMANCE INFORMATION...................................7
DETERMINATION OF NET ASSET VALUE..........................8
OFFERING, PURCHASE AND REDEMPTION OF SHARES...............8
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS...........9
TAXES ...................................................9
OTHER INFORMATION...........................................9
Preparing for Year 2000.............................
Reports ...................................................9
Voting and Other Rights............................9
Custody of Assets and Administrative Services.....10
Summary of Bond Ratings...........................10
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION........................11
<PAGE>
CONDENSED FINANCIAL INFORMATION
Financial Highlights
The following table gives information regarding income, expenses and
capital changes for the Growth Portfolio of the Transamerica Variable Insurance
Fund, Inc. (formerly Transamerica Occidental's Separate Account Fund C)
attributable to a Portfolio share outstanding throughout the periods indicated.
The information is presented as if the reorganization of Separate Account Fund
C, described below, in which the assets and liabilities of the Separate Account
were transferred intact to the Growth Portfolio, had always been in effect. The
activity prior to the November 1, 1996, reorganization of Separate Account Fund
C, represents accumulation unit values of Separate Account Fund C which have
been converted into share values for presentation purposes.
The per share data in the table for the period January 1, 1993, through
December 31, 1997, has been audited by Ernst & Young LLP, independent auditors
of the Fund, in connection with the annual audits of the Portfolio's financial
statements. The per share data in the table for the period January 1, 1988,
through December 31, 1991, is based upon data from the audited financial
statements of Separate Account Fund C, but Ernst & Young, LLP has not audited
the conversion of that data to Growth Portfolio share values. Prior to November
1, 1996, activity represents accumulated unit values of Separate Account Fund C
which have been converted to share values for presentation purposes. The
financial statements which appear in the Statement of Additional Information are
dated as of December 31, 1997.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
1997 1996 1995 1994 1993
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.93 $8.582 $5.615 $5.239 $4.287
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Investment Operations
Net investment income (loss) (0.05) (0.065) (0.069) (0.042) (0.030)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net realized and unrealized gain 5.13 2.413 3.036 0.418 0.982
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total from investment operations 5.08 2.348 2.967 0.376 0.952
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Distribution from realized gains (1.26) - - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net asset value, end of year $14.75 $10.930 $8.582 $5.615 $5.239
====== ======= ====== ====== ======
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total Return 46.50% 27.36% 52.84% 7.19% 22.20%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net assets, end of year (in thousands) $46,378 $32,238 $25,738 $17,267 $16,584
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Expenses to average net assets (1) 0.85% 1.27% 1.41% 1.43% 1.43%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net investment income (loss) to average net assets (2) (0.39%) (0.68%) (0.94%) (0.80%) (0.65%)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Portfolio turnover rate 20.54% 34.58% 18.11% 30.84% 42.04%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Average commission rate (3) $0.0575 $0.07 - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
1992 1991 1990 1989 1988
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, beginning of year $3.783 $2.689 $3.026 $2.266 $1.694
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Investment Operations
Net investment income (loss) (0.012) (0.009) (0.022) (0.010) (0.054)
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net realized and unrealized gain 0.492 1.085 (0.360) 0.750 0.517
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total from investment operations 0.504 1.095 (0.337) 0.760 0.572
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, end of year $4.287 $3.783 $2.689 $3.026 $2.266
====== ====== ====== ====== ======
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total Return 13.32% 40.71% (11.14%) 33.56 33.74%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net assets, end of year (in thousands) $13,966 $12,516 $9,281 $10,861 $8,453
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Expenses to average net assets (1) 1.43% 1.43% 1.43% 1.44% 1.43%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net investment income (loss) to average net assets (2) (0.31%) 0.28% 0.81% 0.37% 2.66%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Portfolio turnover rate 43.07% 32.90% 49.87% 22.39% 52.18%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Average commission rate (3) - - - - -
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
</TABLE>
(1) If the Investment Adviser had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.98% and 1.34%
for the years ended December 31, 1997 and 1996, respectively.
(2) If the Investment Adviser had not reimbursed expenses the ratio of net
investment loss to average net assets would have been (0.52%) and (0.75%)
for the years ended December 31, 1997 and 1996, respectively.
(3) This disclosure is required for fiscal periods beginning on or after
September 1, 1995, and represents
the average commission rate paid on equity security transactions on which
commissions are charged.
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.GROWTH PORTFOLIO
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
diversified management investment company established as a Maryland Corporation
on June 23, 1995. The Fund currently consists of two investment portfolios, the
Growth Portfolio and the Money Market Portfolio. This prospectus sets forth
information about the Growth Portfolio only. Additional Portfolios may be
created from time to time. By investing in the Growth Portfolio, an investor
becomes entitled to a pro rata share of all dividends and distributions arising
from the net income and capital gains, if any, on the investments of the Growth
Portfolio. Likewise, an investor shares pro-rata in any losses of the
Portfolio.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust was approved at a meeting of the Contract owners held on
October 30, 1996. The asset and liabilities of Separate Account Fund C as of the
close of business October 31, 1996, were transferred intact to the Growth
Portfolio in exchange for shares of the Growth Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's Board of Directors, Transamerica Occidental Life
Insurance Company ("Transamerica" or the "Investment Adviser") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services" or "Sub-Adviser" or "Manager") to act as the Fund's sub-advisor to
provide the day-to-day portfolio management for the Portfolio.
The Portfolios are designed primarily to serve as investment vehicles for
variable annuity and variable life insurance contracts offered by separate
accounts of various insurance companies. The Fund may sell its shares to
qualified pension and retirement plans, but currently does not do so. The Fund
does not offer its stock directly to the general public.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Growth Portfolio are
described below. There can be no assurance that the Growth Portfolio will
achieve its investment objective. Investors should not consider any one
Portfolio alone to be a complete investment program. As with any security, a
risk of loss, including possible loss of principal, is inherent in an investment
in the shares of the Portfolio.
The different types of securities, investments, and investment
techniques used by the Portfolio involve risks of varying degrees. These risks
are described in greater detail, under "Investment Methods and Risks" and in the
Statement of Additional Information. The Portfolio is subject to certain
investment restrictions that are described under the caption "Investment
Restrictions" in the Statement of Additional Information.
The investment objective of the Portfolio as well as the investment
policies that are not fundamental may be changed by the Fund's Board of
Directors without shareholder approval. Certain of the investment restrictions
of the Portfolio are fundamental, however, and may not be changed without the
approval of a majority of the votes attributable to the outstanding shares of
the Portfolio. See "Investment Restrictions" in the Statement of Additional
Information.
The Growth Portfolio's investment objective is long-term capital
growth. Common stock, listed and unlisted, is the basic form of investment. The
Growth Portfolio invests primarily in common stocks of growth companies that are
considered by the manager to be premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
dominant market share; leading brand recognition; proprietary products or
technology; low-cost production capability; and excellent management with
shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements.
Although the Portfolio invests the majority of its assets in common stocks, the
Portfolio may also invest in debt securities and preferred stocks (both having a
call on common stocks by means of a conversion privilege or attached warrants)
and warrants or other rights to purchase common stocks. When in the judgment of
Investment Services market conditions warrant, the Growth Portfolio may, for
temporary defensive purposes, hold part or all of its assets in cash, debt or
money market instruments.
The Portfolio may invest up to 10% of the Portfolio's assets in debt
securities having a call on common stocks that are rated below investment grade.
Those securities are rated Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if
unrated, deemed to be of comparable quality by Investment Services.
If a security that was originally rated "investment grade" is
downgraded by a ratings service, it may or may not be sold. This depends on
Investment Services' assessment of the issuer's prospects. However, Investment
Services will not purchase below-investment-grade securities if that purchase
would increase their representation in the Portfolio to more than 10%.
The Portfolio may invest up to 10% of its net assets in the securities
of foreign issuers that are in the form of American Depository Receipts
("ADRs"). ADRs are registered stocks of foreign companies that are typically
issued by an American bank or trust company evidencing ownership of the
underlying securities. ADRs are designed for use on the U.S. stock exchanges.
With respect to 75% of total assets, the Portfolio may not purchase
more than 10% of the voting securities of any one issuer. The Portfolio may not
invest in companies for the purposes of exercising control or management.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the salability of which is
otherwise conditioned, including real estate and certain repurchase agreements
or time deposits maturing in more than seven days ("restricted securities"), as
long as any such purchase or acquisition will not immediately result in the
value of all such restricted securities exceeding 15% of the value of the
Portfolio's net assets.
INVESTMENT METHODS AND RISKS
The Growth Portfolio is subject to the risk of changing economic
conditions and fluctuations in the price of securities owned by the Portfolio.
In addition, the different types of securities, investments, and
investment techniques used by the Portfolio involve risks of varying degrees.
For example, with respect to equity securities, there can be no assurance of
capital appreciation and there is a substantial risk of decline in value. With
respect to debt securities, there exists the risk that the issuer of a security
may not be able to meet its obligations on interest or principal payments at the
time required by the investment. Certain risks associated with the types of
investments in which the Portfolio may invest are discussed below. For more
information on investment methods and risks, see "Special Investment Methods and
Risks" in the Statement of Additional Information.
Small Capitalization Companies
The Growth Portfolio may invest in securities of smaller, lesser-known
companies. Such investments involve greater risks than the investments of
larger, more mature, better known issuers, including an increased possibility of
portfolio price volatility. Historically, small capitalization stocks and stocks
of recently organized companies have been more volatile in price than the larger
capitalization stocks included in the S&P 500. Among the reasons for the greater
price volatility of these small company stocks are the less certain growth
prospects of smaller firms, the lower degree of liquidity in the markets for
such stocks and the greater sensitivity of small companies to changing economic
conditions. For example, these companies are associated with higher investment
risk than that normally associated with larger, more mature, better known firms
due to the greater business risks of small size and limited product lines,
markets, distribution channels and financial and managerial resources.
The values of small company stocks may fluctuate independently of
larger company stock prices. Small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should therefore expect that to the extent the Portfolio
invests in stock of small capitalization companies, the net asset value of the
Portfolio's shares may be more volatile than, and may fluctuate independently
of, broad stock market indices such as the S&P 500. Furthermore, the securities
of companies with small stock market capitalizations may trade less frequently
and in limited volume.
Convertible Securities
The Growth Portfolio may invest in convertible securities. Convertible
securities may include corporate notes or preferred stock but are ordinarily a
long-term debt obligation of the issuer convertible at a stated exchange rate
into common stock of the issuer. Convertible securities have general
characteristics similar to both fixed-income and equity securities. As with all
debt securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
In addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock, and therefore, will react to variations in the general market for
equity securities. As the market price of the underlying common stock declines,
the convertible security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common stock.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Like all fixed-income securities, there is no assurance of current
income as the issuer might default in its obligations. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, rank senior to common stocks
in an issuer's capital structure and are consequently of higher quality and
entail less risk of declines in market value than the issuer's common stock.
However, the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed-income security.
High-Yield ("Junk") Bonds
High-yield bonds (commonly called "junk" bonds) are lower-rated bonds
that involve higher current income but are predominantly speculative because
they present a higher degree of credit risk than higher-rated bonds. Credit risk
is the risk that the issuer of the bonds will not be able to make interest or
principal payments on time. The prices of junk bonds tend to be more reflective
of prevailing economic and industry conditions, the issuer's unique financial
situation, and the bond's coupon than to small changes in the market level of
interest rates. During an economic downturn or a period of rising interest
rates, highly leveraged companies may experience difficulties in making
principal and interest payments, meeting projected business goals, and obtaining
additional financing. See "Summary of Bond Ratings" on page 10 and the Statement
of Additional Information for a description of bond rating categories.
Repurchase Agreements
The Growth Portfolio may enter into repurchase agreements with Federal
Reserve System member banks or U.S. securities dealers. A repurchase agreement
occurs when the Portfolio purchases an interest-bearing debt obligation and the
seller agrees to repurchase the debt obligation on a specified date in the
future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Portfolio's money is invested in the security.
Since the security constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a collateralized loan. The Portfolio's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller is unable to make a timely repurchase, the Portfolio's
expected proceeds could be delayed, or the Portfolio could suffer a loss in
principal or current interest, or incur costs in liquidating the collateral. In
evaluating whether to enter into a repurchase agreement, Investment Services
will carefully consider the creditworthiness of the seller pursuant to
procedures established by the Fund's Board of Directors.
The Growth Portfolio will not invest in repurchase agreements maturing
in more than seven days if that would constitute more than 10% of the
Portfolio's net assets when taking into account the remaining days to maturity
of the Portfolio's existing repurchase agreements.
State Insurance Regulation
The Portfolio is intended to be a funding vehicle for variable annuity
contracts and variable life policies to be offered by insurance companies and
will seek to be offered in as many jurisdictions as possible. Certain states
have regulations or guidelines concerning concentration of investments and other
investment techniques. If such regulations and guidelines are applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its portfolio with the flexibility provided herein. It
is the Portfolio's intention that it operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
PORTFOLIO TURNOVER
The Growth Portfolio will not consider portfolio turnover to be a
limiting factor in making investment decisions. Changes will be made in the
Portfolio if such changes are considered advisable to better achieve the
Portfolio's investment objective. The portfolio turnover rate is calculated by
dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of the portfolio securities, excluding
debt securities having a maturity at the date of purchase of one year or less.
Investment Services anticipates that the annual turnover rate for the Growth
Portfolio will generally not exceed 75%.
High rates of portfolio turnover involve correspondingly greater
expenses which must be borne by the Portfolio and its shareholders, including
higher brokerage commissions, dealer mark-ups and other transaction costs on the
sale of securities and reinvestment of other securities. High rate of turnover
may result in the acceleration of taxable gains and may under certain
circumstances make it more difficult for a Portfolio to qualify as a regulated
investment company under the Internal Revenue Code.
See "Federal Tax Matters" in the Statement of Additional Information.
MANAGEMENT
Directors and Officers
The Fund's Board of Directors is responsible for deciding matters of
general policy and reviewing the actions of the Investment Adviser and
Investment Sub-Adviser, the custodian, the accounting and administrative
services providers and other providers of services to the Portfolio. The
officers of the Fund supervise its daily business operations. The Statement of
Additional Information contains information as to the identity of, and other
information about, the directors and officers of the Fund.
Investment Adviser
Transamerica Occidental Life Insurance Company ("Transamerica"), 1150
South Olive Street, Los Angeles, California 90015, is the investment adviser of
the Portfolio. Transamerica is a stock life insurance company incorporated in
the state of California on June 30, 1906. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. Transamerica acted as
investment adviser to Transamerica Occidental's Separate Account Fund C
("Separate Account Fund C"), the Fund's predecessor.
The Fund has entered into an Investment Advisory Agreement with
Transamerica under which the Transamerica assumes overall responsibility,
subject to the supervision of the Fund's Board of Directors, for administering
all operations of the Fund and for monitoring and evaluating the management of
the assets of the Portfolio by Investment Services on an ongoing basis.
Transamerica provides or arranges for the provision of the overall business
management and administrative services necessary for the Fund's operations and
furnishes or procures any other services and information necessary for the
proper conduct of the Fund's business. Transamerica also acts as liaison among,
and supervisor of, the various service providers to the Fund.
For its services to the Portfolio, Transamerica receives an annual
advisory fee of 0.75% of the average daily net assets of the Growth Portfolio.
The fee is deducted daily from the assets of the Portfolio. This fee may be
higher than the average advisory fee paid to the investment advisers of other
growth portfolios. Transamerica may waive some or all of its fee from time to
time at its discretion.
Sub-Adviser
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services" or "Sub-Adviser" or "Manager"), a wholly-owned subsidiary
of Transamerica Corporation, to render investment services to the Portfolio.
Investment Services has been in existence since 1967 and has provided investment
services to investment companies since 1968 and to the Transamerica Life
Companies since 1981. Investment Services is located at 1150 South Olive Street,
Los Angeles, California 90015-2211. Transamerica has agreed to pay Investment
Services a monthly fee at the annual rate of 0.30% of the first $50 million of
the Portfolio's average daily net assets, 0.25% of the next $150 million, and
0.20% of assets in excess of $200 million. Investment Services will provide
recommendations on the management of Portfolio assets, provide investment
research reports and information, supervise and manage the investments of the
Portfolio, and direct the purchase and sale of Portfolio investments.
Investment Services is also responsible for the selection of brokers
and dealers to execute transactions for the Fund. Some of these brokers or
dealers may be affiliated persons of Transamerica and Investment Services,
although presently none are. Although it is the policy of Investment Services to
seek the best price and execution for each transaction, Investment Services may
give consideration to brokers and dealers who provide Investment Services with
statistical information and other services in addition to transaction services.
Additional information about the selection of brokers and dealers is provided in
the Statement of Additional Information.
The transactions and performance of the Growth Portfolio are
reviewed continuously by the
senior officers of Investment Services. The portfolio manager for the
Growth Portfolio is Jeffrey S.
Van Harte, C.F.A., Vice President and Senior Fund Manager at Investment
Services. Mr. Van Harte is a
member of the San Francisco Society of Financial Analysts and received a
B.A. from California State
University at Fullerton in 1980. Mr. Van Harte has been managing
the portfolio of the Fund's
predecessor, Separate Account Fund C, since 1984.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return
figures for the Portfolio in advertisements and communications to shareholders
or sales literature.
Average annual total return is determined by computing the annual
percentage change in value of $1,000 invested for specified periods ending with
the most recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The average annual total return calculation
assumes a complete redemption of the investment at the end of the relevant
period.
The Fund also may from time to time disseminate year-by-year total
return, cumulative total return and yield information for the Portfolio in
advertisements, communications to shareholders or sales literature. These may be
provided for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a specified
period are each derived by calculating the percentage rate required to make a
$1,000 investment in the Portfolio (assuming all distributions are reinvested)
at the beginning of such period equal to the actual total value of such
investment at the end of such period.
In addition, the Fund may from time to time publish performance of the
Portfolio relative to certain performance rankings and indices.
As the successor to Separate Account Fund C, the Growth Portfolio
treats the historical performance data of Separate Account Fund C as its own for
periods prior to the reorganization. The performance data for the Growth
Portfolio prior to the reorganization does not reflect any sales or insurance
charges, or any other separate account or contract level charges, that were
imposed under the annuity contracts issued through Separate Account Fund C.
Since the Fund is not available directly to the public, its performance
data is not advertised unless accompanied by comparable data for the applicable
variable annuity or variable life insurance policy. The Portfolio's performance
data does not reflect separate account or contract level charges.
The investment results of the Portfolio will fluctuate over time and
any presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the
Portfolio's performance may be in any future period. In addition to information
provided in shareholder reports, the Fund may, in its discretion, from time to
time make a list of the Portfolio's holdings available to investors upon
request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is normally determined
once daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open, except as noted below. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year, except for certain holidays. The
net asset value of the Portfolio's shares will not be calculated on the Friday
following Thanksgiving, the Friday following Christmas if Christmas falls on a
Thursday and the Monday before Christmas if Christmas falls on a Tuesday. The
net asset value of the Portfolio is determined by dividing the value of the
Portfolio's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the
Portfolio outstanding.
The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. The short-term debt securities
having remaining maturities of sixty days or less held by the Growth Portfolio
(if any) are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Fund's Board of Directors. See "Determination of Net Asset
Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to a participation agreement between the Fund and
Transamerica, shares of the Portfolio are sold in a continuous offering and are
authorized to be offered to Separate Account C to support its variable annuity
contracts (the "Contracts"). Net purchase payments under the Contracts are
placed in Separate Account C and the assets of the Separate Account C are
invested in the shares of the Growth Portfolio. Separate Account C purchases and
redeems shares of the Portfolio at net asset value without sales or redemption
charges.
For each day on which the Portfolio's net asset value is calculated,
Separate Account C will transmit to the Fund any orders to purchase or redeem
shares of the Portfolio based on the purchase payments, redemption (surrender)
requests, and transfer requests from Contract owners, annuitants and
beneficiaries that have been processed on that day. Shares of the Portfolio are
purchased and redeemed at the Portfolio's net asset value per share calculated
as of that same day although such purchases and redemptions may be executed the
next morning.
In the future, the Fund may offer shares of the Portfolio (including
new Portfolios that might be added to the Fund) to other separate accounts of
various insurance companies, whether or not affiliated with Transamerica, to
support variable annuity contracts or variable life insurance contracts.
Likewise, the Fund may also, in the future, offer shares of the Portfolio
directly to qualified pension and retirement plans.
In the event that shares of the Portfolio are offered to a separate
account supporting variable life insurance or to qualified pension and
retirement plans, a potential for certain conflicts may exist between the
interests of variable annuity contract owners, variable life insurance contract
owners and plan participants. The Fund currently does not foresee any
disadvantage to owners of the Contracts arising from the fact that shares of the
Portfolio might be held by such entities. However, in such an event, the Fund's
Board of Directors will monitor the Portfolio in order to identify any material
irreconcilable conflicts of interest which may possibly arise, and to determine
what action, if any, should be taken in response to such conflicts.
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Growth Portfolio distributes substantially all of its net
investment income in the form of dividends to its shareholders. The Growth
Portfolio declares its dividends and capital gain distributions at least
annually.
TAXES
The Fund believes that the Portfolio qualifies as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Portfolio intends to distribute substantially all
of its net income and net capital gains to its shareholders. As a result, under
the provisions of subchapter M, there should be little or no income or gains
taxable to the Portfolio. In addition, the Portfolio intends to comply with
certain other distribution rules specified in the Code so that it will not incur
a 4% nondeductible federal excise tax that otherwise would apply.
See "Federal Tax Matters" in the Statement of Additional Information.
The shareholders of the Portfolio are currently limited to Separate
Account C and Transamerica. For more information regarding the tax implications
for the purchaser of a Contract who allocates investments to the Portfolio,
please refer to the prospectus for Separate Account C.
OTHER INFORMATION
Preparing For Year 2000
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem." This issue could adversely impact the Fund if
the computer systems used by the Fund's Investment Adviser, Sub-Adviser,
Custodian, transfer agent and other service providers do not accurately process
date information after January 1, 2000. The Investment Adviser and Sub-Adviser
are addressing this issue by testing the computer systems they use to ensure
that those systems will operate properly after January 1, 2000, and they are
also seeking assurances from the Custodian, transfer agent and other service
providers they use that their computer systems will be adapted to address the
Year 2000 Problem in time to prevent adverse consequences after January 1, 2000.
However, especially when taking into account interaction with other systems, it
is difficult to predict with precision that there will be no disruption of
services in connection with the year 2000.
<PAGE>
Reports
Annual Reports containing audited financial statements of the Fund and
Semi-Annual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Fund at the telephone number or
address set forth on the cover page of this Prospectus.
Voting and Other Rights
Each share outstanding is entitled to one vote on all matters submitted
to a vote of shareholders (of the Portfolio or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolio and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of the Portfolio), when issued, is nonassessable and
has no preemptive or conversion rights. The shares have noncumulative voting
rights.
As a Maryland corporation, the Fund is not required to hold regular
annual shareholder meetings and does not intend to do so. The Fund is, however,
required to hold shareholder meetings for the following purposes: (i) approving
certain agreements as required by the 1940 Act; (ii) changing fundamental
investment objectives, policies and restrictions of the Portfolio; and (iii)
filling vacancies on the Board of Directors in the event that less than a
majority of the members of the Board of Directors were elected by shareholders.
Directors may also be removed by shareholders by a vote of two-thirds of the
outstanding votes attributable to shares at a meeting called at the request of
holders of 10% or more of such votes. The Fund has the obligation to assist in
shareholder communications.
Transamerica currently owns more than 25% of the outstanding shares of
the Portfolio which may result in it being deemed a controlling person of the
Portfolio, as that term is defined in the 1940 Act.
Custody of Assets and Administrative Services
Pursuant to a custody agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian"), 225 Franklin Street, Boston,
Massachusetts 02110, will hold all securities and cash assets of the Fund,
provide recordkeeping and certain accounting services and serve as the custodian
of the Fund's assets. The custodian will be authorized to deposit securities in
securities depositories and to use the services of sub-custodians.
Summary of Bond Ratings
Following is a summary of the grade indicators used by two of the most
prominent, independent rating agencies (Moody's Investors Service, Inc. and
Standard & Poor's Corporation) to rate the quality of bonds. The first four
categories are generally considered investment quality bonds. Those below that
level are of lower quality, commonly referred to as "junk bonds."
<TABLE>
<CAPTION>
Investment Grade Moody's Standard & Poor's
- --------------------------------------------------------------------------- -----------------
<S> <C> <C> <C>
Highest quality Aaa AAA
High quality Aa AA
Upper medium A A
Medium, speculative features Baa BBB
Lower Quality
Moderately speculative Ba BB
Speculative B B
Very speculative Caa CCC
Very high risk Ca CC
Highest risk, may not be
paying interest C C
In arrears or default D D
</TABLE>
For more information on bond ratings, including gradations within each
category of quality, see the Statement of Additional Information.
FOR MORE INFORMATION
The Statement of Additional Information ("SAI") contains more detailed
information on the Portfolios. The current SAI has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
prospectus (is legally part of this prospectus).
To request a free copy of the SAI, please write or call the Fund at:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-258-4260
<PAGE>
5
STATEMENT OF ADDITIONAL INFORMATION
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the May 1, 1998,
Prospectus write to the Fund at the Transamerica Annuity Service Center, 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202, or by calling
800-258-4260.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
ADDITIONAL INVESTMENT POLICY INFORMATION 1
SPECIAL INVESTMENT METHODS AND RISKS 2
Restricted and Illiquid Securities
2
Borrowing 2
Other Investment Companies 2
Options on Securities and Securities Indices
3
Warrants and Rights
4
Repurchase Agreements 4
High-Yield ("Junk") Bond 5
Foreign Securities 5
INVESTMENT RESTRICTIONS 5
Fundamental Restrictions
5
Non-Fundamental Restrictions
7
Interpretive Rules
7
INVESTMENT ADVISER 8
Investment Advisory Agreement
8
Investment Sub-Advisory Agreement 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE 9
DETERMINATION OF NET ASSET VALUE 10
PERFORMANCE INFORMATION 11
FEDERAL TAX MATTERS 13
SHARES OF STOCK 14
CUSTODY OF ASSETS 15
DIRECTORS AND OFFICERS 15
Compensation 16
LEGAL PROCEEDINGS 17
OTHER INFORMATION 17
Legal Counsel
17
Other Information 17
Independent Auditors 18
Financial Statements
18
APPENDIX A
19
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio") and the Money Market
Portfolio. This Statement of Additional Information sets forth information about
the Growth Portfolio only. By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
The Fund currently offers shares of the Growth Portfolio to insurance
companies as an underlying funding vehicle for variable annuity and variable
life insurance contracts (the "Contracts"). The Contracts are registered with
the Securities and Exchange Commission ("SEC"), and have separate prospectuses
and Statements of Additional Information.
The Fund may, in the future, offer its stock to qualified pension and
retirement plans. The Fund does not offer its stock directly to the general
public.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares were owned by Transamerica Life Insurance and Annuity
Company on behalf of Separate Account VA-6.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage. Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase options that are traded on United
States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price and that the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgment may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" means the lesser of: (a) 67% or more of the votes
attributable to shares of the Portfolio present at a meeting, if the holders of
more than 50% of such votes are present or represented by proxy; or (b) more
than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the Portfolio
may not purchase more than 10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than 25% of the
value of its total assets in securities issued by companies engaged in any one
industry. This limitation does not apply to investments in Government
Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets in real properties, including property acquired in
satisfaction of obligations previously held or received in part payment on the
sale of other real property owned. The purchase and sale of real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell commodities or
commodities contracts.
9. Senior Securities The Portfolio may not issue senior securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities Purchases or acquisitions may be
made of securities which are not readily marketable by reason of the fact that
they are subject to the registration requirements of the Securities Act of 1933
or the salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio to own securities of any one investment company that have a
total value greater than 5% of the value of the total assets of the Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns an equal amount of such securities or securities currently
exchangeable, without payment of any further consideration, for securities of
the same issue as, and at least equal in amount to, the securities sold short
(generally called a "short sale against the box") and unless not more than 10%
of the value of the Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain any short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
INVESTMENT ADVISER
Transamerica is the investment adviser of the Fund and its Portfolio.
It will oversee the management of the assets of the Portfolio by Investment
Services. In turn, Investment Services is responsible for the day-to-day
management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of the Portfolio and paid to Transamerica periodically.
Transamerica or its affiliates pays the salaries and fees, if any, of all
officers and directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of Transamerica and of all personnel of Transamerica performing
services relating to research, statistical and investment activities and the
fees of the Sub-Adviser.
The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, registration fees and
expenses, and fees and expenses of directors unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed 0.10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The total dollar amounts paid by the Portfolio, and/or its predecessor
Separate Account Fund C, to Transamerica under the applicable investment
advisory contract for the last three fiscal years are as follows: Separate
Account Fund C paid $67,198 in 1995; Separate Account Fund C and the Portfolio
together paid $66,831 in 1996; and the Portfolio paid $313,749 in 1997.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and by the Contract Owners of Separate Account Fund C at a
Contract Owners meeting held on October 30, 1996. The investment advisory
agreement will remain in effect from year to year provided such continuance is
specifically approved as to the Portfolio at least annually by: (a) the Board of
Directors or the vote of a majority of the votes attributable to shares of the
Portfolio; and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Portfolio at any time by the Board of Directors or by vote of a
majority of the votes attributable to outstanding voting securities of the
applicable Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica.
Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services is located at 1150 South Olive Street, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. Investment Services will provide recommendations on the
management of Fund assets, provide investment research reports and information,
supervise and manage the investments of the Portfolio, and direct the purchase
and sale of Portfolio investments. Investment decisions regarding the
composition of the Portfolio and the nature and timing of changes in the
Portfolio are subject to the control of the Board of Directors of the Fund.
The sub-advisory agreement was approved for the Portfolio by the Board
of Directors, including a majority of the Directors who are not parties to the
sub-advisory agreement or "interested persons" (as such term is defined in the
1940 Act) of any party thereto (the "non-interested Directors"), on July 24,
1996, and by the Contract Owners of Separate Account Fund C at a Contract Owners
meeting held on October 30, 1996. The sub-advisory agreement will remain in
effect from year to year provided such continuance is specifically approved as
to the Portfolio at least annually by: (a) the Board of Directors or the vote of
a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The sub-advisory agreement
will terminate automatically if assigned (as defined in the 1940 Act). The
sub-advisory agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 30 days written
notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
activities, and some of such services obtained in connection with the execution
of transactions for the Portfolio may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of the Portfolio, and the services furnished by such brokers
may be used by Investment Services in providing investment sub-advisory services
for the Portfolio. The aggregate dollar amounts of the brokerage commissions
paid with respect to portfolio transactions of the Portfolio by Investment
Services as sub-adviser to Separate Account Fund C (the Portfolio's predecessor)
were $7,253 for fiscal year 1995, and $19,115 for the first ten months of 1996.
The aggregate dollar amount of brokerage commissions paid by the Portfolio after
the reorganization, during November and December 1996, was $5,550, so that the
total paid by Investment Services and the Portfolio during fiscal year 1996 was
$24,665. The total paid by the Portfolio during fiscal year 1997 was $16,312.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Portfolio's
predecessor) for 1995 was 30.84%. The portfolio turnover rate for 1996, when
combining the experience of Separate Account Fund C through October 31, 1996,
and the Portfolio's experience for November and December 1996 was 34.58%. The
Portfolio's portfolio turnover rate for 1997 was 20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments
("Equities") listed on any U.S. stock market or the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last sale price on that exchange
or NASDAQ on the valuation day; if no sale occurs, Equities
traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices; (b)
over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; (c)
debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors; (d) options and futures contracts
are valued at the last sale price on the market where any such
option contracts are principally traded; (e) over-the-counter
options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; (f) all
other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not
deemed by Investment Services to be representative of market
values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and (g) debt securities with a
remaining maturity of 60 days or less will be valued at their
amortized cost which approximates market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the price will be determined in good faith by or under procedures
established by the Board of Directors.
PERFORMANCE INFORMATION
The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment 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).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C, as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, its investment performance for periods prior to the reorganization
reflect total mutual fund fees and expenses of 0.98% per year.
In computing its standardized total returns for periods prior to the
reorganization, the Portfolio assumes that the charges currently imposed by the
Portfolio were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data does not reflect
any sales or insurance charges, or any other separate account or contract level
charges, that were imposed under the annuity contracts issued through Separate
Account Fund C.
Any performance data quoted for the Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio does not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Portfolio recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 5000 Index; (k) the Salomon Brothers
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of the Portfolio varies based
on market conditions, portfolio expenses, portfolio investments and other
factors. The value of the Portfolio's shares fluctuates and an investor's shares
may be worth more or less than their original cost upon redemption. The Fund may
also, at its discretion, from time to time make a list of the Portfolio's
holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. The Portfolio must have, at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United States
Government securities, securities of other regulated investment companies, and
other securities which, in respect of any one issuer, do not exceed 5% of the
value of the Portfolio's total assets and that do not represent more than 10% of
the outstanding voting securities of the issuer. In addition, not more than 25%
of the value of the Portfolio's total assets may be invested in securities
(other than United States Government securities or the securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian") 225 Franklin Street, Boston,
Massachusetts 02110 holds the cash and portfolio securities of the Fund as
custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald E. Cantlay (76) Board of Directors Director, Managing General Partner of Cee
'n' Tee Company; Director of California
Trucking Association and Western Highway
Institute; Director of FPA Capital Fund
and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and
Director of Transamerica Investment
Services, Inc.; Senior Vice President and
Chief Investment Officer of Transamerica
Corporation. Director and Chief
Investment Officer of Transamerica
Occidental Life Insurance Company.
Jon C. Strauss (58) Board of Directors President of Harvey Mudd College;
Previously Vice President and Chief
Financial Officer of Howard Hughes Medical
Institute; President of Worcester
Polytechnic Institute; Vice President and
Professor of Engineering at University of
Southern California; Vice President Budget
and Finance, Director of Computer
Activities and Professor of Computer and
Decision Sciences at University of
Pennsylvania.
Gary U. Rolle (57)* Chairman, Board of Director,
Directors Executive Vice President and Chief
Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company.
Peter J. Sodini (57) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive
Officer and Director, The Pantry, Inc. (a
supermarket). Director Pamida Holdings
Corp. (a retail merchandiser) and Buttrey
Food and Drug Co. (a supermarket).
Barbara A. Kelley (45) President President, Chief Operating Officer and
Director of Transamerica Financial
Resources, Inc. and President and Director
of Transamerica Securities Sales
Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica
Product, Inc. I, Transamerica Product,
Inc. II, Transamerica Product, Inc. IV,
and Transamerica Leasing Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of
the Institutional Marketing Services
Division of Transamerica Life Insurance
and Annuity Company and prior to 1994,
Vice President and National Sales Manager
of the Dreyfus Service Organization .
Sally S. Yamada (47) Assistant Secretary Vice President and Treasurer of
Transamerica
Occidental Life Insurance Company
and Treasurer of Transamerica Life
Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life
Insurance Company and prior to 1994
Counsel and Vice President for Colonial
Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams
& Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief Financial
Officer, Transamerica Investment Services,
Inc., since 1997; Independent Financial
Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940
Act.
** Except as otherwise noted, the mailing address of each Board member and
officer is 1150 South Olive, Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same or similar position with Transamerica Occidental's Separate Account Fund B.
The members of the Board of Directors are also members of the Board of Directors
of Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ended December 31, 1997, to all Directors of
the Fund.
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Total Pension or From Registrant
Aggregate Retirement Benefits and Fund Complex
Compensation Accrued As Part of Fund Paid to Directors3/
Name of Person From Fund1/ Expenses2/
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini -$1500- -0- $4,750
Jon C. Strauss $500 -0- $500
---------------------
</TABLE>
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent auditors.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for the fiscal year ended December 31, 1997.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1A. Moody's Investors Service, Inc. Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
a medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or maybe
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements and their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Unrated:
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following:1. An application
for rating was not received or accepted.2. The issue or issuer belongs to a
group of securities or companies that are not rated as a matter of policy.3.
There is a lack of essential data pertaining to the issue or issuer.4.The issue
was privately placed, in which case the rating is not published in Moody's
publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.Note: Those
bonds in the Aa, A and Baa groups which Moody's believe possess the strongest
investment attributes are designated by the symbols Aa1, A1 and Baa1.B. Standard
& Poor's Corporations AAA: Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong. AA: Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. A: Bonds rated A have
a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. BBB: Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than in
higher rated categories. BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.Notes: Bonds which are
unrated expose the investor to risks with respect to capacity to pay interest or
repay principal which are similar to the risks of lower-rated speculative
obligations. Investment Services'
uses its judgment, analysis and experience to evaluate such bonds.
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1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement of Additional
Information for the securities listed. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligations to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these securities on
the date of the Fund's fiscal year end.
