<PAGE>
As filed with the Securities and Exchange Commission on December 21, 2000
Registration No. 33-49998
811-7042
---------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 15 [x]
--
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 17 [x]
--
SEPARATE ACCOUNT VA-2L
----------------------
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
----------------------------------------------
(Name of Depositor)
1150 South Olive, Los Angeles, CA 90015
----------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (213) 742-2111
Name and Address of Agent for Service: Copy to:
James W. Dederer, Esquire Frederick R. Bellamy, Esquire
Executive Vice President, General Counsel Sutherland, Asbill & Brennan, LLP
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Co. Washington, D.C. 20004-2402
1150 South Olive
Los Angeles, CA 90015
Approximate date of proposed sale to the public:
As soon as practicable after effectiveness of the Registration Statement.
Title of Securities being registered:
Variable Annuity Contracts
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[x] on January 22, 2001 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
If appropriate, check the following box:
[ ] This Post-Effective Amendment designates a new effective date
for a previously filed Post-Effective Amendment.
<PAGE>
PROFILE OF THE
DREYFUS/TRANSAMERICA
TRIPLE ADVANTAGE(R)
VARIABLE AND FIXED ANNUITY
Issued by
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
January 22, 2001
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(R) 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 27 sub-accounts corresponding to 27 funds
("portfolios") in the variable account or in the guaranteed periods of our
fixed account. You could gain or lose money you invest in the portfolios, but
you could also earn more than investing in the fixed account options. We
guarantee 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 we will make periodic payments to you. The dollar
amount of the payments may depend on the amount of money invested and earned
during the accumulation phase (and 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 us. 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
explained in item 10 of this profile.
The Dreyfus/Transamerica Triple Advantage(R) 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.
There are various additional fees and charges associated with variable
annuities. You should consider whether the features and benefits unique to
variable annuities, such as the opportunity for lifetime payments, a
1
<PAGE>
guaranteed death benefit, and the guaranteed level of certain charges are
appropriate for your needs. Variable annuities also provide tax-deferral. The
tax deferral features of variable annuities are unnecessary when purchased to
fund a qualified plan.
4. Investment Options -- VARIABLE ACCOUNT: You can invest in any of the sub-
accounts corresponding to the following portfolios:
Appreciation(/1/) -- Small Cap -- Service European Equity --
Service Class Class Service Class
Balanced -- Service Class Small Company Stock -- Founders Discovery --
Service Class Service Class
Disciplined Stock -- Special Value -- Service Founders Growth --
Service Class Class Service Class
Growth and Income -- Stock Index -- Service Founders International
Service Class Class Equity -- Service Class
International Equity -- Socially Responsible
Service Class Growth -- Service Class Founders Passport --
Service Class
International Value --
Service Class Core Bond -- Service Japan -- Service Class
Class
Limited Term High
Income -- Service Class Core Value -- Service MidCap Stock -- Service
Class Class
Money Market
Emerging Leaders -- Technology Growth --
Quality Bond -- Service Service Class Service Class
Class Transamerica VIF Growth
Emerging Markets --
Service Class
(1) Formerly known as Capital Appreciation.
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 we guarantee 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 us money to provide these benefits,
so there are charges in connection with the contract. If you withdraw your
money within seven years of investing it, there may be a withdrawal charge of
up to 6% of the amount invested. 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). We deduct insurance and administrative charges of 1.40% per year
against your average daily value in the variable account and a $10 fee for
transfers over 18 in one year. If you elect the guaranteed minimum income
benefit rider, then there is an annual fee during the accumulation phase of
0.30% of the minimum annuitization value. If you annuitize under the rider and
choose the guaranteed minimum payment option, then there is a guaranteed
minimum payment fee at an annual rate of 1.25% of the daily net asset value in
the separate account. Advisory fees are also deducted by the portfolios'
managers, and the portfolios pay other expenses which, in total, vary from
0.26% to 4.67% 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 (excluding the optional Guaranteed
Minimum Income Benefit Rider fee, transfer fees and 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 Annual Portfolio Charges reflect a fee waiver
and/or expense reimbursement. 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 $1,000, 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>
Total
Expenses Total
Annual Annual Total at end Expenses
Insurance Portfolio Annual of at end of
Portfolio/Sub-Account Charges Charges Charges One Year Ten Years
--------------------- --------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Appreciation -- Service Class 1.40% 1.03% 2.43% $78 $277
Balanced -- Service Class 1.40% 1.00% 2.40% $78 $274
Disciplined Stock -- Service
Class 1.40% 1.00% 1.40% $78 $274
Growth and Income -- Service
Class 1.40% 1.00% 1.40% $78 $274
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Annual Annual Total Total Expenses Total Expenses
Portfolio/ Insurance Portfolio Annual at end of at end of
Sub-Account Charges Charges Charges One Year Ten Years
----------- --------- --------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
International Equity --
Service Class 1.40% 1.27% 2.67% $81 $300
International Value --
Service Class 1.40% 1.40% 2.80% $82 $313
Limited Term High
Income -- Service Class 1.40% 0.90% 2.30% $77 $264
Money Market 1.40% 0.58% 1.98% $74 $231
Quality Bond -- Service
Class 1.40% 0.99% 2.39% $78 $273
Small Cap -- Service
Class 1.40% 1.03% 2.43% $78 $277
Small Company Stock --
Service Class 1.40% 1.22% 2.62% $80 $295
Special Value -- Service
Class 1.40% 1.00% 2.40% $78 $274
Stock Index -- Service
Class 1.40% 0.51% 1.91% $73 $223
Socially Responsible
Growth -- Service Class 1.40% 1.04% 2.44% $79 $278
Core Bond -- Service
Class 1.40% 0.80% 2.20% $76 $253
Core Value -- Service
Class 1.40% 1.00% 2.40% $78 $109
Emerging Leaders --
Service Class 1.40% 1.50% 2.90% $83 $322
Emerging Markets --
Service Class 1.40% 2.00% 3.40% $88 $368
European Equity --
Service Class 1.40% 1.25% 2.65% $81 $298
Founders Discovery --
Service Class 1.40% 1.50% 2.90% $83 $322
Founders Growth --
Service Class 1.40% 1.00% 2.40% $78 $274
Founders International
Equity -- Service Class 1.40% 1.50% 2.90% $83 $322
Founders Passport --
Service Class 1.40% 1.50% 2.90% $83 $322
Japan -- Service Class 1.40% 1.50% 2.90% $83 $322
MidCap Stock -- Service
Class 1.40% 1.00% 2.40% $78 $274
Technology Growth --
Service Class 1.40% 1.04% 2.44% $79 $278
Transamerica VIF Growth 1.40% 0.85% 2.25% $77 $258
</TABLE>
Expense information regarding the portfolios has been provided by the funds. We
have no reason to doubt the accuracy of the information, but have not verified
those figures. In preparing the table above, we have relied on the figures
provided by the funds. These figures are for the year ended December 31, 1999,
except that the figures for the Core Bond, Emerging Leaders, Emerging Markets,
Founders Discovery, and Japan Portfolios are estimates for the 2000 fiscal
year. Actual expenses in future years may be higher or lower than the figures
given above.
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. We may deduct a withdrawal charge of up to 6% of a
purchase payment, but we will not deduct a withdrawal charge 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 care facility for a long
period or, in some states, if you are diagnosed with a terminal illness. After
the first 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.
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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% annual 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 optional Guaranteed
Minimum Income Benefit rider fee, the fund manager's fee and all the expenses
of the portfolio, but these figures do not include the withdrawal charge, which
would reduce performance if it applied. Remember, past performance is no
guarantee of future performance or earnings.
CALENDAR YEAR
<TABLE>
<CAPTION>
Portfolio/Sub-account 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation(/2/)* 9.84% 28.34% 26.21% 22.71% 32.82% 1.45% N/A N/A N/A N/A
Balanced(/6/)* 6.56% 20.57% N/A N/A N/A N/A N/A N/A N/A N/A
Disciplined Stock(/5/)* 16.74% 24.90% 29.62% N/A N/A N/A N/A N/A N/A N/A
Growth and Income(/4/)* 15.20% 10.19% 14.53% 18.63% 59.58% N/A N/A N/A N/A N/A
International
Equity(/4/)* 57.49% 2.97% 8.02% 9.82% 6.62% N/A N/A N/A N/A N/A
International
Value(/5/)* 25.98% 7.16% 7.13% N/A N/A N/A N/A N/A N/A N/A
Limited Term High
Income(/6/)* (2.97%) (1.17%) N/A N/A N/A N/A N/A N/A N/A N/A
Money Market(/1/) 3.27% 3.59% 3.66% 3.53% 4.21% 3.00% 1.86% 2.71% 4.54% N/A
Quality Bond(/1/)* (1.29%) 3.96% 7.83% 1.63% 18.91% (6.17%) 13.66% 10.45% 12.47% N/A
Small Cap(/1/)* 21.37% (4.86%) 15.06% 15.06% 28.84% 4.95% 65.77% 68.98% 156.07% N/A
Small Company
Stock(/5/)* 9.00% (7.35%) 20.01% N/A N/A N/A N/A N/A N/A N/A
Special Value(/1/)* 5.72% 14.02% 21.36% (5.67%) (0.48%) (3.48%) 26.74% (0.41%) 8.99% N/A
Stock Index(/1/)* 18.86% 26.37% 31.05% 19.80% 35.92% (0.60%) 7.75% 5.55% 27.98% (6.52%)
Socially Responsible
Growth(/3/)* 28.21% 27.52% 26.59% 19.00% 33.67% (0.08%) N/A N/A N/A N/A
Core Bond(/10/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Core Value(/7/)* 18.00% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Emerging Leaders(/10/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Emerging Markets(/10/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
European Equity(/9/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Founders
Discovery(/10/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Founders Growth(/8/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Founders International
Equity(/9/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Founders Passport(/8/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Japan(/10/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
MidCap Stock(/7/)* 9.21% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Technology Growth(/9/)* N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Transamerica VIF
Growth(/7/) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Since the Service Class Shares of the Portfolios/Sub-Accounts were not
available as of December 31, 1999, the figures shown reflect the performance
of the Initial Class Shares for each Portfolio. Performance would have been
lower for the Service Class Shares if they had been in existence.
4
<PAGE>
(1) Sub-Account (5) Sub-Account Inception 5-1-96
Inception 1-4-93 (8) Sub-Account
Inception 5-3-99
(6) Sub-Account Inception 5-1-97
(2) Sub-Account (9) Sub-Account
Inception 4-5-93 Inception 10-1-99
(7) Sub-Account Inception 5-1-98
(3) Sub-Account
Inception 10-7-93 (10) Sub-Account
(4) Sub-Account Inception 5-1-2000
Inception 12-15-94
Data is for full years only. The Technology Growth, European Equity, Founders
Growth, Founders Passport and Founders International Equity sub-accounts were
not in operation for all of 1999, and the Core Bond, Emerging
Leaders, Emerging Markets, Founders Discovery, and Japan sub-accounts began
operations in 2000, therefore no performance is reported for these sub-
accounts.
9. Death Benefit. If you or the annuitant die during the accumulation phase, we
guaranteed that the beneficiary will 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) an annual
step-up death benefit, which is the highest account value on the date you
purchase your policy or any anniversary prior to the date you, your joint
owner, or the annuitant reaches age 86 (adjusted for additional investments and
any adjusted partial withdrawals since that anniversary less premium taxes
applicable to those withdrawals); or (3) your investments, less adjusted
partial withdrawals and any premium taxes applicable to those withdrawals,
compounded at 5% annual effective interest (the 5% interest stops on the
contract anniversary prior to the date that you, your joint owner, or the
annuitant reaches age 86, or when it has doubled the amount of your investment
(whichever is earlier) or at the death of any owner or annuitant).
10. Other Information. The contract offers other features that might interest
you. These features may not be available in all states and may, or 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 your account value (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.
TELEPHONE TRANSFERS. You can generally arrange to transfer money between the
investments in your contract by telephone.
DOLLAR COST AVERAGING. You can instruct us to automatically transfer amounts
from the purchase payments you allocated to the Money Market, Limited Term High
Income, Quality Bond sub-accounts, or the Dollar Cost Averaging Account of the
fixed account, 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 assets among the sub-accounts to change. You may instruct us to
periodically automatically rebalance the amounts in the sub-accounts by
reallocating assets among them.
SYSTEMATIC WITHDRAWAL OPTION. During the accumulation phase, you can arrange to
have us send you money automatically each month out of your contract. 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 contracts (for example:
a non-Roth IRA), you can arrange to have the minimum distributions required by
the IRS automatically paid to you.
5
<PAGE>
GUARANTEED MINIMUM INCOME BENEFIT RIDER. If you elect this optional rider, you
will be guaranteed a minimum annuitization value and the option of electing
guaranteed minimum annuity payments (if you annuitize with the minimum
annuitization value and the payment options in the rider).
11. Inquiries. You can get more information and have your questions answered by
calling the Transamerica Service Center at 877-717-8861 or by writing to us at:
Transamerica Annuity Service Center
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499-0001
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<PAGE>
Dreyfus/Transamerica Triple
Advantage(R) Variable Annuity
A Flexible Purchase Payment Deferred Variable Annuity
Issued By
Transamerica Occidental Life Insurance Company
Offering 27 Sub-Accounts within the Variable Account
Designated as Separate Account VA-2L
In Addition to A Fixed Account
Prospectus
January 22, 2001
. This prospectus contains information you should know before investing.
Please keep this prospectus for future reference.
. You can obtain more information about the contract by requesting a copy of
the Statement of Additional Information (SAI) dated January 22, 2001. The
SAI is available free by writing to Transamerica Occidental Life Insurance
Company, Annuity Service Center, 4333 Edgewood Road N.E., Cedar Rapids, Iowa
52499-0111, or by calling 877-717-8861. The current SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by
reference into this prospectus. The table of contents of the SAI is included
at the end of this prospectus.
. The SEC's web site is http://www.sec.gov
. Transamerica's web site is http://www.transamerica.com
. The contracts and the investment options are:
. subject to risks, including loss of your investment;
. not guaranteed to achieve their goal;
. not bank deposits; and
. not insured.
. Neither the SEC nor any state securities commission has approved this
investment offering or determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
DREYFUS VARIABLE INVESTMENT FUND--SERVICE CLASS
Managed by The Dreyfus Corporation
Appreciation Portfolio
Balanced Portfolio
Disciplined Stock Portfolio
Growth and Income Portfolio
International Equity Portfolio
International Value Portfolio
Limited Term High Income Portfolio
Quality Bond Portfolio
Small Cap Portfolio
Small Company Stock Portfolio
Special Value Portfolio
DREYFUS VARIABLE INVESTMENT FUND
Managed by The Dreyfus Corporation
Money Market Portfolio
DREYFUS STOCK INDEX FUND--SERVICE CLASS
Managed by The Dreyfus Corporation and Mellon Equity Associates
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.--SERVICE CLASS
Managed by The Dreyfus Corporation
DREYFUS INVESTMENT PORTFOLIOS--SERVICE CLASS
Managed by The Dreyfus Corporation
Core Bond Portfolio
Core Value Portfolio
Emerging Leaders Portfolio
Emerging Markets Portfolio
European Equity Portfolio
Founders Discovery Portfolio
Founders Growth Portfolio
Founders International Equity Portfolio
Founders Passport Portfolio
Japan Portfolio
MidCap Stock Portfolio
Technology Growth Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Managed by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
SUMMARY................................................................... 4
PERFORMANCE DATA.......................................................... 13
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT... 14
Transamerica Occidental Life Insurance Company........................... 14
Published Ratings........................................................ 14
Insurance Marketplace Standards Association.............................. 15
The Variable Account..................................................... 15
THE FUNDS................................................................. 15
Resolution of Possible Conflicts......................................... 16
Sources of Additional Information........................................ 16
Addition, Deletion or Substitution....................................... 16
The Establishment of New
Sub-Accounts............................................................ 17
THE FIXED ACCOUNT......................................................... 17
The Interest Rate of the Fixed Account................................... 17
Guarantee Periods........................................................ 18
Interest Adjustment...................................................... 18
Expiration of Guarantee Period........................................... 18
THE GUARANTEED MINIMUM INCOME BENEFIT RIDER............................... 19
Minimum Annuitization Value.............................................. 19
Minimum Annuitization Value Upgrade...................................... 20
GMIB Rider Fee........................................................... 20
Conditions of Exercise of the GMIB....................................... 20
Guaranteed Minimum Payment Option........................................ 21
Guaranteed Minimum Payment Fee........................................... 21
Termination of the GMIB Rider............................................ 21
THE CONTRACT.............................................................. 21
CONTRACT APPLICATION AND PURCHASE PAYMENTS................................ 22
Purchase Payments........................................................ 22
Ten day Cancellation Option.............................................. 22
Additional Purchase Payments............................................. 22
Choosing One or More Investment Options.................................. 22
Investment Option Limit.................................................. 23
ACCOUNT VALUE............................................................. 23
How Your Variable Accumulation Units Are Created......................... 23
How Variable Accumulation Unit Values Are Calculated..................... 24
TRANSFERS................................................................. 24
Before the Annuity Date.................................................. 24
Telephone Transfers...................................................... 25
Possible Restrictions.................................................... 25
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Dollar Cost Averaging..................................................... 25
Special Dollar Cost Averaging Option...................................... 26
Automatic Asset Rebalancing............................................... 26
After the Annuity Date.................................................... 26
CASH WITHDRAWALS........................................................... 27
Withdrawals............................................................... 27
Fees and Taxes Relating to Withdrawals or Surrenders...................... 27
Additional Withdrawal and Surrender Provisions............................ 28
Systematic Withdrawal Option.............................................. 28
Eligibility and Rules of the Systematic Withdrawal Option................. 28
Automatic Payout Option................................................... 29
DEATH BENEFIT.............................................................. 29
Guaranteed Minimum Death Benefit.......................................... 29
Adjusted Partial Withdrawals.............................................. 30
Payment of Death Benefit.................................................. 30
Designation of Beneficiaries.............................................. 30
Death of Annuitant Before the Annuity Date................................ 30
Death of Owner Before the Annuity Date.................................... 31
Death of Annuitant or Owner After the Annuity Date........................ 31
CHARGES AND DEDUCTIONS..................................................... 31
Contingent Deferred Sales Load/Surrender Charge........................... 31
Administrative Charges.................................................... 33
Mortality and Expense Risk Charge......................................... 33
Premium Taxes............................................................. 34
Transfer Fee.............................................................. 34
Systematic Withdrawal Option.............................................. 34
Automatic Asset Rebalancing Option........................................ 34
Taxes..................................................................... 34
Portfolio Expenses........................................................ 34
Guaranteed Minimum Income Benefit Rider................................... 34
Interest Adjustment....................................................... 35
DISTRIBUTION OF THE CONTRACT............................................... 35
ANNUITY PAYMENTS........................................................... 35
Annuity Date.............................................................. 35
Annuity Payment........................................................... 36
Election of Annuity Forms and Payment Options............................. 36
Annuity Payment Options................................................... 36
Fixed Annuity Payment Option.............................................. 36
Variable Annuity Payment Option........................................... 37
Annuity Forms............................................................. 37
Alternate Fixed Annuity Rates............................................. 38
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued) Page
<S> <C>
QUALIFIED CONTRACTS...... 38
Automatic Payout
Option................. 39
Restrictions under
Section 403(b)
Programs............... 40
FEDERAL TAX MATTERS...... 40
Introduction............ 40
Purchase Payments....... 40
Taxation of Annuities In
General................ 41
Withdrawals............. 41
Annuity Payments........ 41
Withholding............. 42
Penalty Tax............. 42
Taxation of Death
Benefit Proceeds....... 42
Required Distributions
upon Owner's Death..... 42
Transfers, Assignments,
or Exchanges of the
Contract............... 43
Multiple Policies....... 43
QUALIFIED CONTRACTS...... 44
In General.............. 44
Qualified Pension and
Profit Sharing Plans... 44
Individual Retirement
Annuities, Simplified
Employee Plans and Roth
IRAs................... 45
Tax Sheltered
Annuities.............. 45
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Restrictions Under Qualified Contracts.................................... 46
Possible Changes in Taxation.............................................. 46
Other Tax Consequences.................................................... 46
LEGAL PROCEEDINGS.......................................................... 46
LEGAL MATTERS.............................................................. 46
ACCOUNTANTS AND FINANCIAL STATEMENTS....................................... 46
VOTING RIGHTS.............................................................. 47
AVAILABLE INFORMATION...................................................... 47
STATEMENT OF ADDITIONAL INFORMATION--Table of Contents..................... 47
APPENDIX A................................................................. 48
Example of Variable Accumulation Unit Value Calculations.................. 48
Example of Variable Annuity Unit Value Calculations....................... 48
Example of Variable Annuity Payment Calculations.......................... 48
APPENDIX B................................................................. 49
Condensed Financial Information........................................... 49
APPENDIX C................................................................. 53
Definitions............................................................... 53
APPENDIX D................................................................. 56
Disclosure Statement for Individual Retirement Annuities.................. 56
</TABLE>
3
<PAGE>
SUMMARY
You will find a list of definitions of the terms used in this prospectus in
Appendix C.
The Contract
We designed the flexible premium deferred variable annuity, the contract
described in this prospectus, to aid individuals in long-term financial
planning for retirement or other purposes. You may use the contract:
. with non-qualified plans;
. as an individual retirement annuity that qualifies for special tax
treatment under Internal Revenue Code (the "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
. 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 approval, you may use the contract:
. as an IRA or Roth IRA whose initial purchase payment is limited to the
contribution limitations of the Code with respect to contributory IRAs or
contributory Roth IRAs under Code Sections 408 or 408A;
. as an annuity under Code Section 403(b) Revenue Rule 90-24 (transfers
only); and
. with various types of qualified pension and profit-sharing plans under Code
Section 401(a).
Variable Account Fee Table
The purpose of the following table is to help you understand the various costs
and expenses that you, as the owner will bear directly and indirectly. The
table reflects expenses of the variable account and the portfolios. The table
assumes that the entire account value is in the variable account and that the
contract is owned during the accumulation period. Different fees may apply
after the annuity date including the guaranteed minimum payment option fee
applicable after annuitization under the payment options in the Guaranteed
Minimum Income Benefit Rider. The information set forth should be considered
together with the narrative provided under the heading Charges and Deductions
in this prospectus, and with the funds' prospectuses. In addition to the
expenses listed below, premium taxes may apply.
4
<PAGE>
ANNUITY CONTRACT FEE TABLE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Transaction Expenses(/1/)
------------------------------------------
<S> <C>
Sales Charge Imposed On Purchase
Payments....................... 0
Maximum Contingent Deferred
Sales Load(/2/)................ 6%
Transfer Fee(/3/)............... $0 - $10
Annual Account Fee(/4/)......... $30
</TABLE>
<TABLE>
<CAPTION>
Variable Account Annual Expenses
(as a percentage of average account
value)
<S> <C>
Mortality and Expense Risk
Charges..................... 1.25%
Administrative Expense
Charge(/5/)................. 0.15%
TOTAL VARIABLE ACCOUNT
ANNUAL EXPENSES.............. 1.40%
-----------------------------------
</TABLE>
Portfolio Annual Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rule
Management Other 12b-1 Total Portfolio
Fees Expenses Fees(/6/)(/7/)(/8/) Annual Expenses
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciation(/9/) 0.75% 0.03% 0.25% 1.03%
Balanced(/9/)(/10/) 0.75% 0.11% 0.14% 1.00%
Disciplined
Stock(/9/)(/10/) 0.75% 0.06% 0.19% 1.00%
Growth and
Income(/9/)(/10/) 0.75% 0.04% 0.21% 1.00%
International
Equity(/9/) 0.75% 0.27% 0.25% 1.27%
International
Value(/9/)(/10/) 1.00% 0.35% 0.05% 1.40%
Limited Term High
Income(/9/)(/10/) 0.65% 0.19% 0.06% 0.90%
Money Market 0.50% 0.08% - 0.58%
Quality Bond(/9/) 0.65% 0.09% 0.25% 0.99%
Small Cap(/9/) 0.75% 0.03% 0.25% 1.03%
Small Company Stock(/9/) 0.75% 0.22% 0.25% 1.22%
Special Value(/9/)(/10/) 0.75% 0.11% 0.14% 1.00%
Stock Index(/9/) 0.25% 0.01% 0.25% 0.51%
Socially Responsible
Growth(/9/) 0.75% 0.04% 0.25% 1.04%
Core Bond(/10/)(/11/) 0.12% 0.68% 0.00% 0.80%
Core Value(/9/)(/10/) 0.25% 0.75% 0.00% 1.00%
Emerging
Leaders(/10/)(/11/) 0.56% 0.94% 0.00% 1.50%
Emerging
Markets(/10/)(/11/) 0.49% 1.51% 0.00% 2.00%
European
Equity(/9/)(/10/) 0.00% 1.25% 0.00% 1.25%
Founders
Discovery(/10/)(/11/) 0.87% 0.63% 0.00% 1.50%
Founders
Growth(/9/)(/10/) 0.00% 1.00% 0.00% 1.00%
Founders International
Equity(/9/)(/10/) 0.00% 1.50% 0.00% 1.50%
Founders
Passport(/9/)(/10/) 0.00% 1.50% 0.00% 1.50%
Japan(/10/)(/11/) 0.00% 1.50% 0.00% 1.50%
MidCap Stock(/9/)(/10/) 0.29% 0.71% 0.00% 1.00%
Technology Growth(/9/) 0.75% 0.04% 0.25% 1.04%
Transamerica VIF
Growth(/12/) 0.70% 0.15% - 0.85%
</TABLE>
5
<PAGE>
Expense information regarding the portfolios has been provided by the funds. We
have no reason to doubt the accuracy of the information, but have not verified
those figures. In preparing the table above and the examples that follow, we
have relied on the figures provided by the funds. These figures are for the
year ended December 31, 1999, except that they have been restated to reflect
the Rule 12b-1 fee for the Service Class Shares. Actual expenses in future
years may be higher or lower than the figures given above.
Notes to Fee Table:
1. The contract transaction expenses apply to each contract, regardless of how
the contract value is allocated between the variable account and the fixed
account. The variable account annual expenses do not apply to the fixed
account.
2. You may withdraw a portion of the purchase payments each year after the
first contract year without any contingent deferred sales load (CDSL). After
we have held a premium for seven contract years, you may withdraw the
remaining premium payments without any CDSL. You may always withdraw
accumulated earnings without a CDSL.
3. There is currently no fee for transfers. However, Transamerica may charge a
fee equal to the lesser of $10 or 2% of the amount transfers in excess of 18
per year. Transamerica may also charge a fee of up to $25 per year if you
elect the systematic withdrawal option, but we currently do not deduct this
charge.
4. The current annual contract fee is the lesser of $30 or 2% of the contract
value. We may change the fee annually, but it will not exceed the lesser of
$60 or 2% of the contract value. This fee is waived if your account value is
over $50,000.
5. The current annual administrative expense charge is 0.15%. We may increase
it to 0.25%.
6. The Fees shown are for the Service Class Shares, except for the Money Market
Portfolio and Transamerica VIF Growth Portfolio. If you are invested in the
Initial Class Shares of each portfolio, the Total Portfolio Annual Expenses
would be lower, since the Initial Class Shares are not subject to a Rule
12b-1 Fee.
7. The Rule 12b-1 Fees deducted from the Service Class Shares of these
portfolios cover certain distribution and shareholder support services
provided by Transamerica Occidental Life Insurance Company selling contracts
investing in those portfolios. The maximum amount of the Rule 12b-1 Fee is
0.25%.
8. The Dreyfus Corporation has agreed, until December 31, 2001, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class (excluding taxes, brokerage commissions,
extraordinary expenses, interest expenses and commitment fees on borrowing)
exceed the Total Portfolio Annual Expenses.
9. Other Expenses for Service Shares are based on other expenses for Initial
Shares for the past fiscal year.
10. Total Portfolio Annual Expenses shown are net of any fee waiver and/or
expense reimbursement. Total Portfolio Annual Expenses in the Fee Table,
without such fee waiver and/or expense reimbursement, would be as follows:
1.11% - Balanced; 1.06% - Disciplined Stock; 1.04% - Growth and Income;
1.60% - International Value; 1.09% - Limited Term High Income; 1.11% -
Special Value; 1.53% - Core Bond; 1.75% - Core Value; 2.09% - Emerging
Leaders; 3.01% - Emerging Markets; 5.28% - European Equity; 1.78% -
Founders Discovery; 2.58% - Founders Growth; 4.02% - Founders
International Equity; 3.89% - Founders Passport; 3.04% - Japan; and 1.71% -
MidCap Stock.
11. Other Expenses are estimated fees to be paid by the portfolio for the
current fiscal year.
12. From time to time, the 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 expense table reflect the portfolio's adviser's waiver of fees for
calendar year 1999. Without such waivers, the management fee, other
expenses and total portfolio annual expenses for 1999 for the Transamerica
VIF Growth Portfolio would have been, as a percentage of assets: 0.75%,
0.15%, 0.90%, respectively.
6
<PAGE>
Examples(/1/)
The following tables show the total expenses an owner would incur in various
situations. These examples assume an average account value of $50,000 and,
therefore, no deduction has been made to reflect the $30 account fee. The
examples assume that the entire account value is allocated to the variable
account and that the optional Guaranteed Minimum Income Benefit rider has not
been selected.
These examples all assume that no transfer fees, systematic withdrawal fee or
premium tax have been assessed. Premium taxes may be applicable. See Premium
Taxes. These examples also show expenses reflecting fee waivers and
reimbursements for 1999.
<TABLE>
<CAPTION>
If the contract
annuitized at
the end of the
applicable time
period under an
annuity form
with life
If the contract is contingencies,(/2/) or
surrendered if
at the end of the the contract is not
applicable surrendered
time period. or annuitized.
---------------------------------------------------
Subaccounts 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation(/3/) $78 $110 $147 $277 $25 $ 76 $130 $277
------------------------------------------------------------------------------
Balanced(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Disciplined Stock(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Growth and Income(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
International Equity(/3/) $81 $117 $159 $300 $27 $ 83 $141 $300
------------------------------------------------------------------------------
International Value(/3/) $82 $121 $166 $313 $28 $ 87 $148 $313
------------------------------------------------------------------------------
Limited Term High Income(/3/) $77 $106 $140 $264 $23 $ 72 $123 $264
------------------------------------------------------------------------------
Money Market $74 $ 96 $124 $231 $20 $ 62 $107 $231
------------------------------------------------------------------------------
Quality Bond(/3/) $78 $108 $145 $273 $24 $ 75 $128 $273
------------------------------------------------------------------------------
Small Cap(/3/) $78 $110 $147 $277 $25 $ 76 $130 $277
------------------------------------------------------------------------------
Small Company Stock(/3/) $80 $115 $157 $295 $27 $ 81 $139 $295
------------------------------------------------------------------------------
Special Value(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Stock Index(/3/) $73 $ 94 $120 $223 $19 $ 60 $103 $223
------------------------------------------------------------------------------
Socially Responsible Growth
Fund(/3/) $79 $110 $147 $278 $25 $ 76 $130 $278
------------------------------------------------------------------------------
Core Bond(/3/) $76 $103 $135 $253 $22 $ 69 $118 $253
------------------------------------------------------------------------------
Core Value(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Emerging Leaders(/3/) $83 $124 $171 $322 $29 $ 90 $153 $322
------------------------------------------------------------------------------
Emerging Markets(/3/) $88 $139 $195 $368 $34 $104 $177 $368
------------------------------------------------------------------------------
European Equity(/3/) $81 $116 $158 $298 $27 $ 82 $141 $298
------------------------------------------------------------------------------
Founders Discovery(/3/) $83 $124 $171 $322 $29 $ 90 $153 $322
------------------------------------------------------------------------------
Founders Growth(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Founders International
Equity(/3/) $83 $124 $171 $322 $29 $ 90 $153 $322
------------------------------------------------------------------------------
Founders Passport(/3/) $83 $124 $171 $322 $29 $ 90 $153 $322
------------------------------------------------------------------------------
Japan(/3/) $83 $124 $171 $322 $29 $ 90 $153 $322
------------------------------------------------------------------------------
MidCap Stock(/3/) $78 $109 $145 $274 $24 $ 75 $128 $274
------------------------------------------------------------------------------
Technology Growth(/3/) $79 $110 $147 $278 $25 $ 76 $130 $278
------------------------------------------------------------------------------
Transamerica VIF Growth $77 $104 $138 $258 $23 $ 70 $120 $258
</TABLE>
(1) In preparing the examples above, we have relied on the data provided by the
funds. We have no reason to doubt the accuracy of that information. However,
we have not verified those figures.
(2) For annuitization under a form that does not include life contingencies, a
contingent deferred sales load may apply.
(3) The above expense figures are calculated using the Service Class Shares.
The figures would have been slightly lower if the Initial Class Shares were
used because the Initial Class Shares are not subject to a Rule 12b-1 Fee.
7
<PAGE>
These examples do not reflect the annual fee of 0.30% of the minimum
annuitization value for the family income protector rider. The above expense
figures would be approximately $3 per year higher if you elected that rider.
You should not consider these examples to represent 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.
--------------------------------------------------------------------------------
Condensed Financial Information
You will find condensed financial information on each sub-account in Appendix
C. You will find the full financial statements and reports of independent
auditors for the variable account in the Statement of Additional Information.
The Issuer
The contract is issued by Transamerica Occidental Life Insurance Company
(Transamerica, we, us or our).
We will issue the contract as a certificate under a group annuity contract in
some states and as an individual annuity contract in other states. This
contract is not available in all states.
This prospectus does not offer the sub-accounts or the fixed account in any
jurisdiction where they are not allowed to be sold. We do not authorize any
dealer, salesperson or other person to give information or make representations
not contained in this prospectus. You should not rely on any information or
representation that is not in this prospectus.
Account Value
We will establish and maintain an account for each individual annuity contract
and for each certificate issued under a group contract. You, as owner, will
receive either an individual annuity contract, or a certificate evidencing your
coverage under a group annuity contract. The word "contract" as used herein
refers to either the individual contract or the certificate.
Before the annuity date, the account value will depend on the investment
experience of each sub-account of the variable account you select. This does
not apply to the fixed account. 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, before the
annuity date you, as the owner, bear the entire investment risk for amounts you
allocate 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.
Initial Purchase Payment
The initial purchase payment for each contract must generally be at least
$5,000. We will waive this minimum if the contract is sold as a qualified
contract to certain retirement plans. Generally, each additional purchase
payment must be at least $500. We will waive this minimum if you select an
automatic payment plan. In no event, however, may the total of all purchase
payments under a contract exceed $1,000,000 without our prior approval. The
minimum net purchase payment that you may allocate to a sub-account with no
current allocations is $500. The minimum amount that you can allocate to a new
guarantee period is $1,000. See Contract Application and Purchase Payments.
The Variable Account
The variable account is a separate account, designated as Separate Account VA-
2L, divided into sub-accounts. Assets of each sub-account are invested in a
specified mutual fund portfolio.
The Sub-Accounts
The following 27 sub-accounts are currently available for investment in the
variable account:
. Appreciation(/1/)
. Balanced
. Disciplined Stock
. Growth and Income
. International Equity
8
<PAGE>
. International Value
. Limited Term High Income
. Money Market
. Quality Bond
. Small Cap
. Small Company Stock
. Special Value
. Stock Index
. Socially Responsible Growth
. Core Bond
. Core Value
. Emerging Leaders
. Emerging Markets
. European Equity
. Founders Discovery
. Founders Growth
. Founders International Equity
. Founders Passport
. Japan
. Mid Cap Stock
. Technology Growth
. Transamerica VIF Growth
(/1/)Formerly known as Capital Appreciation.
As of January 22, 2001, new contract owners may only invest in the Service
Class sub-accounts, with the exception of the Money Market Sub-account and the
Transamerica VIF Growth Sub-account. The Initial Class sub-accounts (other than
the Money Market Sub-account and Transamerica VIF Growth Sub-account) are only
available to contract owners that purchased the contract before January 22,
2001.
Each portfolio has distinct investment objectives and policies. These are
described in the accompanying prospectuses for the funds. The funds pay their
investment adviser and administrators certain fees charged against the assets
of each portfolio. The account value, if any, and the amount of any variable
annuity payments will vary to reflect the investment performance of all of the
sub-accounts you select and the deduction of the charges. See Charges and
Deductions on 33. For more information about the underlying portfolios, see the
current prospectuses for the underlying fund portfolios, what are attached to
this prospectus.
The Fixed Account
Each amount you initially allocate or transfer to the fixed account will
establish a new guarantee period. Each guarantee period will have its own
guaranteed interest rate with its own expiration date. The minimum interest
rate will be 3% per year. You must allocate at least $1,000 to a new guarantee
period. If you withdraw or transfer amounts from a guarantee period before its
expiration date, you will generally be subject to an interest adjustment. This
will reduce the interest credited to the amount withdrawn to 3% per year, which
is the minimum annual rate.
Investment Option Limit
Currently, you may not elect more than a total of eighteen investment options
over the life of the contract. Investment options include each sub-account of
the variable account and each guaranteed period of the fixed account.
Transfers Before the Annuity Date
Before the annuity date, you may make transfers among the sub-accounts and the
guarantee periods of the fixed account. A "transfer" is the reallocation of
amounts between the guaranteed periods of the fixed account and the sub-
accounts, among the guarantee periods of the fixed account, and among sub-
accounts.
We charge a fee equal to the lesser of $10 or 2% of the transfer amount for
each transfer in excess of 18 per contract year. Transfers under certain
programs, such as Dollar Cost Averaging, will not count towards the 18 free
transfers per contract year. If you transfer amounts from a guarantee period
before its expiration date, it will generally be subject to an interest
adjustment. This will reduce the interest credited to 3%, the minimum annual
rate.
Withdrawals
You may withdraw all or part of the cash surrender value on or before the
annuity date. However, amounts you withdraw may be subject to a contingent
deferred sales load, depending on how
9
<PAGE>
long the withdrawn purchase payments have been held under the contract. Amounts
you withdraw may be subject to a premium tax or similar tax, depending upon the
state in which you live. Withdrawals may further be subject to any federal,
state or local income tax, and a penalty tax. Withdrawals from qualified
contracts may be subject to severe restrictions. Except for IRAs and Roth IRAs,
qualified contracts are sold only with our prior approval. We will generally
deduct the annual account fee on a full surrender of a contract. We will allow
only one, and in some states no, partial withdrawal while the systematic
withdrawal option is in effect. If you transfer amounts from a guarantee period
before its expiration date, it will generally be subject to an interest
adjustment. This will reduce the interest credited to 3%, the minimum annual
rate. See Cash Withdrawals.
The Contingent Deferred Sales Load/Surrender Charge
We do not deduct a sales charge from purchase payments, although we may deduct
premium taxes.
However, if any part of the account value is withdrawn, we may assess a
contingent deferred sales load/surrender charge as follows:
<TABLE>
<CAPTION>
Contingent Deferred
Sales Load
(as a % of purchase
Contract Years Since payments
Purchase Payment Receipt surrendered)
------------------------ -------------------
<S> <C>
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%
</TABLE>
After we have held a purchase payment for seven contract years, you may
withdraw the remaining purchase payment without a contingent deferred sales
load/surrender charge. You may make withdrawals each contract year before the
annuity date up to the allowed amount described below without incurring a
contingent deferred sales load.
The allowed amount is equal to:
. during the first contract year, the accumulated earnings not previously
withdrawn;
. after you have held your contract for at least one full contract year, and
only for the first withdrawal in a contract year, the sum of:
1. 100% of purchase payments not previously withdrawn and received at least
seven contract years before the date of withdrawal; plus,
2. the greater of:
a) the accumulated earnings not previously withdrawn; or,
b) 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.
. after the first contract year and after the first withdrawal in a contract
year, the sum of:
1. 100% of purchase payments not previously withdrawn and received at least
seven complete contract years before the date of withdrawal; plus,
2. accumulated earnings not previously withdrawn.
We will waive the contingent deferred sales load/surrender charge 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 if
other conditions are met. We will also waive the contingent deferred sales load
in some states if the owner is diagnosed with a terminal illness after the
first contract year. The illness must reasonably be expected to result in death
within twelve months and other conditions apply. See Contingent Deferred Sales
Load/Surrender Charge and Cash Withdrawals.
Other Charges and Deductions
We deduct a daily charge referred to as the Mortality and Expense Risk Charge.
This charge is 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 your contract. See Mortality and Expense Risk
Charge. We guarantee that this mortality and expense risk charge will not be
increased.
10
<PAGE>
We also deduct a daily charge referred to as the Administrative Expense Charge.
This charge equals 0.15% annually of your net asset value in the variable
account. It helps cover some of the costs of administering the contract and the
variable account. This charge may change, but it is guaranteed not to exceed
0.25% annually. See Administrative Charges.
There is also an administrative charge each year for contract maintenance,
referred to as the Account Fee. This fee is currently $30, or 2% of the account
value, if less. It will not be assessed for contract years in which the account
value exceeds $50,000 on the last business day of the contract year or as of
the date the contract is surrendered. For contracts valued less than $50,000,
we will deduct the account fee at the end of the contract year or when you
surrender the contract, if earlier. We may change the account fee for any
contract year. But we guarantee it will not exceed the lesser of $60 or 2% of
the account value.
After the annuity date this fee is referred to as the annuity fee. The annuity
fee is $30 and will not change.
Currently we impose no fee for the systematic withdrawal option. But we reserve
the right to charge for this option in the future.
We charge a transfer fee of $10 or 2% of the transfer amount, whichever is
less, for each transfer in excess of eighteen during a contract year. See
Transfer Fee. If you elect the Guaranteed Minimum Income Benefit Rider, there
is an annual fee during the accumulation phase (before the annuity date) of
0.30% of the minimum annuitization value. If you annuitize under the rider and
elect the guaranteed minimum payment option, there is a guaranteed minimum
payment fee at an effective annual rate of 1.25% of the daily net asset value
in the separate account.
Charges for state premium taxes, including retaliatory premium taxes, will be
imposed in some states. Depending on the applicability of such state taxes, we
could deduct the charges from premiums, from amounts withdrawn, and/or from the
annuity purchase amount upon annuitization. See Premium Taxes.
In addition, if you withdraw or transfer amounts out of a guarantee period of
the fixed account before its expiration date, it will generally be subject to
an interest adjustment. This will reduce the interest earned on that amount to
3%, the minimum annual rate.
Annuity Payments
We will make annuity payments either on a fixed basis or a variable basis, or a
combination of a fixed and variable basis, as you select. The annuity date
cannot be earlier than the first day of the month coinciding with or
immediately following the third contract anniversary, except for qualified
contracts. We will begin annuity payments on the first day of the calendar
month following the annuity date. You have a choice of four annuity forms:
(1) Life Annuity;
(2) Life and Contingent Annuity;
(3) Life Annuity with Period Certain; and
(4) Joint and Survivor Annuity.
Payments on Death Before the Annuity Date
The death benefit will be equal to the greater of:
1. the account value; and
2. the Guaranteed Minimum Death Benefit
The Guaranteed Minimum Death Benefit is the greater of:
1) the largest account value on any contract anniversary prior to any owner's
or annuitant's 86 birthday, adjusted for any subsequent purchase payments
and adjusted withdrawals; or
2) the sum of purchase payments less adjusted withdrawals plus interest at a 5%
annual effective rate up to:
a) the contract anniversary prior to any owner's or annuitant's 86th
birthday; or
b) when this sum has grown to two times the amount of the payments less
adjusted withdrawals; or
c) the death of any owner or annuitant.
We will generally pay the death benefit within seven days of receipt of the
required proof of death. We must have sufficient information about the
beneficiary to make the payment. We must receive
11
<PAGE>
the beneficiary's election of the method of settlement. If we receive no
election of the settlement method, we will pay the death benefit no later than
one year from the date of death. We do not charge a contingent deferred sales
load or interest adjustment. The beneficiary may elect to receive the death
benefit as either a lump sum or as an annuity.
Federal Income Tax Consequences
An owner who is a natural person, meaning an individual, rather than a
corporation or trust, generally should not be taxed on increases in the account
value until a distribution under the contract occurs. A withdrawal or annuity
payment, for example, would qualify as a distribution, thereby triggering a
taxable event. A deemed distribution would also trigger a taxable event. Deemed
distributions occur when owners pledge, loan, or assign a contract as
collateral.
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.
Mandatory withholding may apply for certain qualified contracts. In addition, a
federal penalty tax may apply to certain distributions or deemed distributions.
Right to Cancel
You have the right to examine the contract for a limited period, known as a
free look period. You can cancel the contract by delivering or mailing a
written notice of cancellation, or sending a telegram to our service center.
You must do this before midnight of the tenth day (or longer if required by
state law) after you receive the contract. If you give us notice and return the
contract by mail, notice will be effective on the date we receive the notice.
The amount of the refund may depend on the state of issuance. In most cases, we
will refund the account value as of the date we receive the written notice and
the contract. In some states, you may receive more than the account value. You
should consult your registered representative for the applicable provision. See
Purchase Payments and Account Value.
You may request more information concerning your contract by contacting:
Transamerica Annuity Service Center
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499-0001
1-877-717-8861
You should provide the contract number and the owner's and annuitant's names
when requesting information regarding a specific contract.
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. They should be referred to for more detailed information.
For qualified contracts, limits or restrictions may be imposed on purchase
payments, withdrawals, distributions, benefits or other contract provisions due
to:
. 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.
This prospectus does not describe such limitations or restrictions.
There are various additional fees and charges associated with variable
annuities. You should consider whether the features and benefits unique to
variable annuities, such as the opportunity for lifetime payments, a guaranteed
death benefit, and the guaranteed level of certain charges are appropriate for
your needs. Variable annuities also provide tax-deferral. The tax deferral
features of variable annuities are unnecessary when purchased to fund a
qualified plan.
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PERFORMANCE DATA
From time to time, we may advertise yields and average annual total returns for
the sub-accounts of the variable account. In addition, we may advertise the
effective yield of the Money Market Sub-Account.
These figures will be based on historical information and do not indicate
future performance.
Yield Calculations
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:
. the income generated for that seven-day period is generated each seven-day
period over a 52-week period; and
. it 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 that of 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 apply to a particular contract. When the
contingent deferred sales load is applied to a particular contract, the yield
of that contract will be reduced. For additional information about how yields
and total returns are calculated, please refer to the Statement of Additional
Information.
Total Returns
Average annual total returns for each sub-account are based on performance data
compiled since the sub-account commenced operations. Performance results are
also measured over 1, 5 and 10 year time periods. Each return 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. This will
include the deduction of any applicable contingent deferred sales load, but
exclude the deduction of any premium taxes.
Performance Information
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. It should
be considered in light of:
. the investment objectives;
. investment policies;
. characteristics of the portfolios in which the sub-account invests; and
. the market conditions during the given time period.
You should not consider it 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
but not limited to:
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, and
. Bank Rate Monitor.
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It may also include 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.
These may include a comparison, at various points in time, of the return from
an investment, or returns in general, on a tax-deferred basis, assuming one or
more tax rates, with the return on a currently taxable basis. We may also use
other ranking services and indices.
In our advertisements and sales literature, we may use charts and graphs to
discuss and illustrate:
. the implications of longer life expectancy for retirement planning;
. the tax and other consequences of long-term investments;
. the effects of the lifetime payout option;
. the operation of certain special investment features in the policy - such as
the dollar cost averaging option;
. the effects of certain investment strategies, such as allocating purchase
payments between the fixed account and an equity sub-account; and
. the Social Security system and its projected payout levels and retirement
plans generally.
We may, from time to time, disclose average annual total returns and cumulative
total returns for the sub-accounts in non-standard formats. We will assume that
no contingent deferred sales load is applicable to these returns. Whenever we
show non-standard performance, we will also show standardized performance. You
will find additional information about the calculation of performance data in
the Statement of Additional Information.
We may also advertise performance figures for the sub-accounts based on the
performance of the portfolios before the time the variable account started.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT
Transamerica Occidental Life Insurance Company
Transamerica Occidental Life Insurance Company, Transamerica is an Iowa stock
life insurance company incorporated on June 30, 1906. It is mainly engaged in
the sale of life insurance and annuity contracts. The address for Transamerica
is 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499.
Transamerica is a wholly owned subsidiary of Transamerica Insurance Corporation
of California, which in turn is a direct subsidiary of Transamerica
Corporation. Our principal office is at 1150 South Olive Street, Los Angeles,
California 90015. Transamerica is indirectly owned by Transamerica Corporation.
On July 21, 1999, Transamerica Corporation was acquired by AEGON N.V., one of
the world's leading international insurance groups.
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. These ratings
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. Once it has completed its
analysis of each insurer's financial strength, A.M. Best assigns the insurer a
Best Rating.
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, other rating companies, such
as by Standard & Poor's Insurance Ratings Services, Moody's or Duff & Phelps
assess our claims-paying ability. They also 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 contracts in
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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.
Insurance Marketplace Standards Association
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry established the Insurance Marketplace Standards Association (IMSA).
As an IMSA member, we agree to follow a set of standards in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
The Variable Account
On May 22, 1992, Transamerica's Board of Directors passed resolutions to
establish the Separate Account VA-2L of Transamerica, also referred to as the
variable account, under the laws of the State of California. The variable
account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a unit investment trust. It meets the
definition of a separate account under the federal securities laws. However,
the SEC does not supervise the management or the investment practices or
contracts 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 Transamerica's other income, gains or losses. 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 Transamerica maintains. The variable account has 27 sub-
accounts, each of which invests solely in a specific corresponding portfolio.
Changes to the sub-accounts may be made at Transamerica's discretion.
THE FUNDS
The companies that provide investment advice and administrative services for
the portfolios offered through this contract are listed below. The following
portfolios are currently offered through this contract:
DREYFUS VARIABLE INVESTMENT FUND--SERVICE CLASS
Managed by The Dreyfus Corporation
Appreciation Portfolio
Balanced Portfolio
Disciplined Stock Portfolio
Growth and Income Portfolio
International Equity Portfolio
International Value Portfolio
Limited Term High Income Portfolio
Quality Bond Portfolio
Small Cap Portfolio
Small Company Stock Portfolio
Special Value Portfolio
DREYFUS VARIABLE INVESTMENT FUND
Managed by The Dreyfus Corporation
Money Market Portfolio
DREYFUS STOCK INDEX FUND-- SERVICE CLASS
Managed by The Dreyfus Corporation and Mellon Equity Associates
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.--SERVICE CLASS
Managed by The Dreyfus Corporation
DREYFUS INVESTMENT PORTFOLIOS--SERVICE CLASS
Managed by The Dreyfus Corporation
Core Bond Portfolio
Core Value Portfolio
Emerging Leaders Portfolio
Emerging Markets Portfolio
European Equity Portfolio
Founders Discovery Portfolio
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Founders Growth Portfolio
Founders International Equity Portfolio
Founders Passport Portfolio
Japan Portfolio
MidCap Stock Portfolio
Technology Growth Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Managed by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
As of January 22, 2001, new contract owners may only invest in the Service
Class sub-accounts, with the exception of the Money Market Sub-account and the
Transamerica VIF Growth Sub-account. The Initial Class sub-accounts (other than
the Money Market Sub-account and Transamerica VIF Growth Sub-account) are only
available to contract owners
that purchased the contract before January 22, 2001.
Meeting objectives depends on various factors, including, but not limited to,
how well the portfolio managers anticipate changing economic and market
conditions. You should be aware of the following risks:
. There is no assurance that any of these portfolios will achieve their stated
objectives.
. An investment in the contract is not insured or guaranteed by the FDIC or
any other government agency.
. Investing in the contract involves certain investment risks, including
possible loss of principal.
The portfolios are open-end management investment companies, or portfolios or
series of, open-end management companies registered with the SEC under the 1940
Act, that are often referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios.
Shares of the portfolios are not offered to the public but solely to the
insurance company separate accounts and other qualified purchasers as limited
by federal tax laws. These portfolios are not the same as mutual funds that may
have very similar names that are sold directly to the public, and the
performance of such publicly available funds, which have different portfolios
and expenses, should not be considered as an indication of the performance of
the portfolios.
The assets of each portfolio are held separate from the assets of the other
portfolios. Each portfolio operates as a separate investment vehicle. The
income or losses of one portfolio have no effect on the investment performance
of another portfolio. The sub-accounts reinvest dividends and/or capital gains
distributions received from a portfolio in more shares of that portfolio as
retained assets.
The Rule 12b-1 Fees deducted from the Service Class Shares of these portfolios
cover certain distribution and shareholder support services provided by
Transamerica Occidental Life Insurance Company selling contracts investing in
those portfolios.
Resolution of Possible Conflicts
Since variable insurance products from other companies as well as Transamerica
can invest in all of the portfolios, there is a possibility that a material
conflict may arise between the interests of the variable account and other
companies. If conflict occurs, the affected insurance companies will take the
needed steps to resolve the matter. This may include stopping their separate
account from investing in the portfolios.
Sources of Additional Information
You will find additional information in the current prospectuses for the
portfolios, which accompany this prospectus, including:
. the investment objectives;
. the investment policies;
. the investment advisory services;
. the administrative services; and
. charges.
You should read the portfolios' prospectuses carefully before you make any
decision concerning the allocation of purchase payments to, or transfers among,
the sub-accounts.
Addition, Deletion or Substitution
Transamerica does not control the portfolios. We therefore cannot guarantee
that any of the sub-
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accounts of the variable account or any of the portfolios will always be
available to investors for allocation of purchase payments or transfers. We
retain the right to make changes in the variable account and in its
investments.
We reserve the right to:
. eliminate the shares of any portfolio held by a sub-account; or
. substitute shares of another portfolio or of another investment company for
the shares of any portfolio.
If the shares of a portfolio are no longer available for investment or if, in
our judgement, a portfolio is not fulfilling its intended purpose within the
variable account, we reserve the right to remove it. To the extent required by
the 1940 Act, we will inform shareholders in advance of any substitutions. We
will also seek the SEC's advance approval before making substitutions. These
potentially necessary substitutions should not be construed in any way as
preventing or limiting the variable account from purchasing other securities
for other series or classes of variable annuity contracts, or from effecting an
exchange between series or classes of variable contracts on the basis of
requests made by owners.
The Establishment of New Sub-Accounts
At our discretion, based on marketing, tax, investment or other conditions, we
can elect to establish new sub-accounts. We will make these new sub-accounts
available to our existing contract owners on a basis which we will determine at
that time. Each additional sub-account will purchase shares in a portfolio or
in another mutual fund or investment vehicle. We may also eliminate one or more
sub-accounts if, in our sole discretion, marketing, tax, investment or other
conditions so warrant. In the event any sub-account is eliminated, we 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, we may change the contracts in a
way that appropriately reflects substitutions or changes. Furthermore, if we
believe it 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. It may also be
deregistered under this 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 owners 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 Transamerica's general account, which supports insurance and
annuity obligations. 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. 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 Transamerica's general
account. The general account consists of all Transamerica's general assets,
other than those in the variable account, or assets in any other segregated
asset account. Instead of the owner bearing the investment risk as with the
variable account, we bear the full investment risk for all values in the fixed
account. We have the sole right to determine how we will invest the assets of
our general account while adhering to applicable laws.
The Interest Rate of the Fixed Account
You bear the risk that after the initial guarantee period we will not credit
interest in excess of 3% per year to amounts you allocate to the fixed account.
The allocation or transfer of funds to the fixed account does not entitle you
to share in the overall investment returns of Transamerica's general account.
Instead, we guarantee that the funds you allocate or transfer to the fixed
account will accrue a specified annual interest rate for a specific duration.
The rate of interest we credit will always be at least
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3% per year. Consequently, if you allocate all net purchase payments only to
the fixed account and make no transfers or withdrawals, the minimum amount of
the account value will be determinable and guaranteed.
We will establish a new guarantee period of a duration you select from those we
are offering on net purchase payments you allocate to the fixed account. Every
guarantee period we offer will have a duration of at least one year. The
minimum amount you may allocate or transfer to a guarantee period is $1,000. We
will credit net purchase payments you allocate to the fixed account on the date
we receive the payment at our service center. We will establish a new guarantee
period as of the effective date of the transfer for any amount you transfer
from another guarantee period, or from a sub-account of the variable account to
the fixed account.
We may delay payment of any withdrawal or transfer from the fixed account for
up to six months after we receive the request. If we delay payment for more
than 30 days, we 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 it is established and the duration you choose. The guarantee period
you choose may not extend beyond the annuity date.
We reserve the right to change the maximum number of guarantee periods that may
be in effect at any one time.
We will establish effective annual interest rates for each guarantee period.
The effective annual interest rate we establish for a guarantee period will
remain in effect for the duration of the guarantee period. We will credit
interest to a guarantee period based on its daily balance at a daily rate which
is equivalent to the guaranteed interest rate applicable to that guarantee
period for amounts held during the entire guarantee period. Amounts withdrawn
or transferred from a guarantee period before its expiration date will be
subject to an interest adjustment as described below. In no event will the
effective annual interest rate 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; and
3. amounts paid as part of a death benefit.
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, before the expiration date of a
guarantee period, we will notify you of the options available when a guarantee
period expires. You may elect one of the following options:
1. transfer the guarantee amount of that guarantee period to a new guarantee
period from among those being offered by us. The new guarantee period will
be established on the later of:
a) the date you select; or
b) the date the notice, in a form and manner acceptable to us, is received
at our service center, but in no event later than the day immediately
following the expiration date of the previous guarantee period; or
2. transfer the guarantee amount of that guarantee period to one or more sub-
accounts of the variable account.
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We must receive your notice electing one of these options at our service center
before the expiration date of the guarantee period. If such election has not
been received by us at our service center, the guarantee amount of that
guarantee period will remain in the fixed account. A new guarantee period of
the same duration as the expiring guarantee period, if offered, will
automatically be established by us with a new guaranteed interest rate. The new
guarantee period will start on the day following the expiration date of the
previous guarantee period.
If we are not currently offering guarantee periods having the same duration as
the expiring guarantee period, the new guarantee period will be the next longer
duration. If we are not offering guarantee periods longer than the duration of
the expiring guarantee period, the new guarantee period will be the next
shorter duration.
If the guarantee amount of an expiring guarantee period is less than $1,000, we
reserve the right to transfer such amount to the Money Market Sub-Account of
the variable account.
If you make a transfer from a guarantee period within the 30-day period ending
on its expiration date, it will not be counted for the purpose of determining
the eighteen free transfers per contract year. This transfer will not be
subject to any interest adjustment.
THE GUARANTEED MINIMUM INCOME BENEFIT (GMIB) RIDER
The Guaranteed Minimum Income Benefit Rider may not be available in all states.
The Guaranteed Minimum Income Benefit (GMIB) Rider assures you of a minimum
level of income in the future by guaranteeing a minimum annuitization value
(discussed below) 7 years after you elect the rider. If you want to purchase
this optional rider, you must do so within 30 days after the contract date or
within 30 days after any contract anniversary before you turn 81. Once elected,
the GMIB Rider can not be terminated.
The GMIB Rider guarantees:
1) the amount you will have to apply to a GMIB payment option, and
2) if you elect the guaranteed minimum payment option, that a minimum amount of
those payments will be guaranteed once you begin to receive them.
By electing this benefit, you can participate in the gains of the underlying
variable investment options you select while knowing that you are guaranteed a
minimum level of income in the future, regardless of the performance of the
underlying variable investment options.
Minimum Annuitization Value
The minimum annuitization value on the rider date (the date the rider is added
to your contract) is equal to the account value. After that, the minimum
annuitization value is equal to the greater of the following:
1) the largest account value on the rider date or on any rider anniversary
prior to the earlier of any owner's or annuitant's 86th birthday, adjusted
for any subsequent purchase payments (less the sum of all subsequent
withdrawals adjusted as below and any premium taxes); or
2) the minimum annuitization value on the rider date plus the sum of all
purchase payments received after the rider date, less withdrawals (adjusted
as below) and premium taxes, plus interest thereon equal to the annual
effective interest rate specified on page one of the rider up to:
a) the rider anniversary prior to the earlier of any owner's or annuitant's
86th birthday; or
b) the date the sum of all purchase payments, (less the sum of all adjusted
withdrawals and premium taxes), together with credited interest, has
grown to two times the amount of all purchase payments (less all
adjusted withdrawals and premium taxes) as a result of such interest
accumulation, if earlier.
You can annuitize under the GMIB Rider (subject to the conditions described in
this section) at the greater of the annuity purchase amount or the minimum
annuitization value.
The annual effective interest rate is currently 5% per year; we may, at our
discretion, change the rate in
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the future, but the rate will never be less than 3% per year, and once the
rider is added to your contract, the annual rate will not vary during the life
of that rider. Withdrawals may reduce the minimum annuitization value on a
basis greater than dollar-for-dollar. See the Statement of Additional
Information for more information.
The GMIB Rider does not establish or guarantee account value or guarantee
performance of any investment option. Because this benefit is based on
conservative actuarial factors, the level of lifetime income that it guarantees
may be less than the level that would be provided by application of the account
value at otherwise applicable annuity factors. Therefore, the GMIB Rider should
be regarded as a safety net.
The minimum annuitization value may only be used to annuitize using the GMIB
payment options provided by the GMIB Rider and may not be used with any of the
annuity payment options listed in the Annuity Payment section. The GMIB payment
options are:
. Life Income - An election may be made for "No Period Certain" or "10 Years
Certain." In the event of the death of the annuitant prior to the end of the
chosen period certain, the remaining period certain payments will be
continued to the beneficiary.
. Joint and Full Survivor - An election may be made for "No Period Certain" or
"10 Years Certain." Payments will be made as long as either the annuitant or
joint annuitant is living. In the event of the death of both the annuitant
and joint annuitant prior to the end of the chosen period certain, the
remaining period certain payments will be continued to the beneficiary.
The minimum annuitization value is used solely to calculate the GMIB payment
and does not establish or guarantee an account value or guarantee performance
of any investment option. Other benefits and fees under the rider (the rider
fee, the guaranteed payment fee, and the waiting period before the GMIB can be
exercised, as well as the annual interest rate) are also guaranteed not to
change after the rider is added. However, all of these benefit specifications
may change if you elect to upgrade the minimum annuitization value.
Minimum Annuitization Value Upgrade
You can upgrade your minimum annuitization value to the account value, on a
contract anniversary. This may be done within 30 days after any rider
anniversary before your 88th birthday (earlier if required by state law). For
your convenience, we will put the last date to upgrade on page one of the
rider.
If you upgrade, the current rider will terminate and a new one will be issued
with its own specified guaranteed benefits and fees. There will be a new
waiting period. Please note that the benefits and fees under the new rider may
differ from your benefits and fees prior to upgrading.
It generally will not be to your advantage to upgrade unless your contract
value exceeds your minimum annuitization value on the applicable contract
anniversary. You should also consider the new riders terms and conditions,
which may be more or less advantageous than the current riders.
GMIB Rider Fee
A rider fee, currently 0.30% of the minimum annuitization value on the each
rider anniversary, is charged annually on the rider anniversary prior to
annuitization. We will also charge this fee if you take a complete withdrawal.
The rider fee is deducted from each variable sub-account in proportion to the
amount of account value in each sub-account.
Conditions of Exercise of the GMIB
You can only annuitize using the GMIB within 30 days after the seventh or later
rider anniversary after the GMIB is elected or, in the case of an upgrade of
the minimum annuitization value, the seventh or later rider anniversary
following the upgrade; we may, at our discretion, change the waiting period
before the GMIB can be exercised in the future. You cannot, however, annuitize
using the GMIB after the rider anniversary after your 94th birthday (earlier if
required by state law). For you convenience, we will put the first and last
date to annuitize using the GMIB on page one of the rider.
Note Carefully - If you annuitize at any time other than indicated above, you
cannot use the GMIB.
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Guaranteed Minimum Payment Option
If you elect the guaranteed minimum payment option, annuity payments under the
GMIB are guaranteed to never be less than the initial payment. See the
Statement of Additional Information for information concerning the calculation
of the initial payment.
It is not clear whether payments under the Guaranteed Minimum Payment Option
will be treated as fixed or variable payments for federal income tax purposes.
You should consult a competent tax adviser on this issue.
Under this option, the payments will also be "stabilized" or held constant
during each year after annuitization. During the first year after annuitizing
using the GMIB, each stabilized payment will equal the initial payment. On each
anniversary of annuitization thereafter, the stabilized payment will increase
or decrease depending on the performance of the investment options you
selected, and then be held constant at that amount for that year. The
stabilized payment on each annuitization anniversary will equal the greater of
the initial payment or the payment supportable by the annuity units in the
selected investment options.
If you elect not to receive guaranteed minimum payments, your payments:
. are not guaranteed and may be less than the initial payment;
. will vary according to the investment performance of the investment options
you select; and
. will not be stabilized.
See the Statement of Additional Information for additional information
concerning stabilized payments.
Guaranteed Minimum Payment Fee
If you elect the guaranteed minimum payment option, a guaranteed minimum
payment fee, currently equal to an effective annual rate of 1.25% of the daily
net asset value in the variable investment options, is reflected in the amount
of the variable payments you receive. The guaranteed minimum payment fee is
included on page one of the rider.
Termination of the GMIB Rider
The GMIB Rider is irrevocable. You have the option not to use the benefit of
the rider but you will not receive a refund of any fees you have paid. The GMIB
Rider will terminate upon the earliest of the following:
. annuitization (you can get guaranteed minimum payments if you so elect if
you annuitize using the GMIB),
. upgrade of the minimum annuitization value (although a new rider will be
issued),
. termination of your contract, and
. 30 days after the last date to annuitize under the rider as specified on the
first page of your rider.
THE CONTRACT
The contract is a flexible purchase payment multi-funded individual deferred
annuity contract. The rights and benefits under the contract, or in the
certificate and group contract, are described below and in the contract. We
reserve the right to modify the individual contract and the group contract and
its certificates so that they conform to any federal or state statute, rule or
regulation. Such modifications will give contract owners the benefits of these
changes. We are responsible for the obligations stated in the contract.
The contracts may be used for IRAs and Roth IRAs that qualify for special
federal income tax treatment. With our prior approval, the contracts may also
be available 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 restrictive provisions limiting the
timing and amount of payments 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
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calculated separately. The various administrative rules described below will
apply separately to each contract, unless otherwise noted.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
Purchase Payments
Please send all of your purchase payments to our service center. We will send
you a confirmation to acknowledge the acceptance of each purchase payment.
The initial purchase payment for each contract must generally be at least
$5,000. We may, at our discretion, accept lower initial purchase payments for
certain qualified contracts.
We will ordinarily issue the contract and derive the net purchase payment from
the initial purchase payment within two days of receipt of a properly completed
application and the purchase payment. At this time, the contract is accepted
and funded with your purchase payment. A net purchase payment is defined as a
purchase payment minus any applicable premium taxes. Acceptance of the
application is subject to it being received in good order. We reserve the right
to reject any application or purchase payment. Contracts normally will not be
issued if an owner or annuitant is more than 90 years old, although we, in our
discretion, may waive this restriction in certain cases.
If the initial purchase payment allocated to the variable sub-account(s) cannot
be credited within two days of receipt because the information is incomplete,
or for any other reason, we will contact you. We will explain the reason for
the delay and will refund the initial purchase payment within five business
days, unless you consent to our retaining the initial purchase payment. Then,
we will credit it to the variable sub-account of your choice as soon as the
requirements are fulfilled.
Ten Day Cancellation Option
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 you may cancel the
contract. To cancel the contract you must return it to us with a written notice
of cancellation. In most states, including for some ages of owners in some
states, and in all states for IRAs, we will refund the greater of the purchase
payments or account value as of the date the written notice and the contract
are received by us. In some states you may receive a refund of more than the
account value. You should consult your registered representative or investment
adviser (or see your contract) for the applicable provision.
Additional Purchase Payments
You may make additional purchase payments into the contract at any time before
the annuity date, as long as the annuitant or contingent annuitant (if any) is
living. Additional purchase payments must be at least $500, or at least $100 if
paid through an automatic payment plan. If you use an automatic payment plan,
we will automatically deduct the additional purchase payments from a bank
account. In addition, minimum allocation amounts apply. Additional net purchase
payments are credited to the contract as of the date the payment is received.
Currently, additional purchase payments 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 our
prior approval. In no event may the sum of all purchase payments for a contract
during any taxable year exceed the limits imposed by any applicable federal or
state laws, rules, or regulations.
Choosing One or More Investment Options
You specify how purchase payments will be allocated under the contract. You 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. Portions must be whole number percentages and any allocation
percentage for a sub-account must be at least 10%. If an allocation of an
additional net purchase payment is directed to an inactive sub-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.
Each net purchase payment will be subject to the allocation percentages in
effect at the time of receipt of such purchase payment. You may change the
allocation percentages for new purchase payments
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among the sub-accounts and the guarantee period at any time by submitting a
request for such change, in a form acceptable to us, to our service center. Any
changes to the allocation percentages are subject to the limitations above. Any
change will take effect with the first purchase payment we receive with or
after the request for such change at our service center, and will continue in
effect until you change it again.
Investment Option Limit
Currently, you may not allocate account value 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 a guarantee period of the fixed account that ever
received a transfer or purchase payment allocation count as one towards this
total of eighteen limit. We may waive this limit in the future.
For example, if you make an allocation to the Money Market Sub-Account and
later transfer all amounts out 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
you transfer 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 you select
a guarantee period and renew for the same term, the count will be one. If you
renew to a guarantee period with a different term, the count will be two.
ACCOUNT VALUE
Before the annuity date, the account value is the sum of:
. the fixed account accumulated value; plus
. the variable account accumulated value.
The fixed account accumulated value is the total dollar amount of all guarantee
amounts held under the fixed account for the contract before the annuity date.
The fixed account accumulated value is determined without any interest
adjustment. The variable account accumulated value is the total dollar amount
of all variable accumulation units under each sub-account of the variable
account held for the contract before the annuity date. The variable account
accumulated value before 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 and GMIB rider fee, if applicable;
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.
The variable accumulated value is expected to change from valuation period to
valuation period. The changes reflect the investment performance all of the
selected portfolios, and also reflect the deductions for charges. 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.
It 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.
How Your Variable Accumulation Units Are Created
When you pay purchase payments into your contract, those payments are used to
purchase variable accumulation units in the sub-accounts in which you have
chosen to invest. At the end of each valuation period during which we received
purchase payments, you will be credited with variable accumulation units. The
number of units you receive is determined by dividing:
. the portion of each net purchase payment allocated to the sub-accounts, by
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. the variable accumulation unit value, at the end of the valuation period.
When you pay your first purchase payment, which is defined as the initial net
purchase payment, variable accumulation units for that payment are credited to
the account value.
The variable accumulation units credited to your contract as the result of your
initial net purchase payment are credited to your contract's value within two
valuation days of:
1. the date upon which our service center receives an acceptable and properly
completed application; and
2. the date upon which our service center receives the initial purchase
payment.
The variable accumulation units credited to your contract as the result of
subsequent purchase payments will be credited to your contract's value at the
end of the valuation period during which we received your payment.
How Variable Accumulation Unit Values Are Calculated
The value of a variable accumulation unit for each sub-account for a valuation
period is established at the end of each valuation period. It 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
When you transfer account values among the sub-accounts, those transfers will
result in the purchase and/or cancellation of variable accumulation units. The
value of these units will equal the total dollar amount you are transferring to
or from a sub-account. These transactions are valued at the end of the
valuation day on which we received your transaction request.
Before the Annuity Date
Before the annuity date, you may transfer any portion of the account value
among the sub-accounts and the guarantee periods then offered by us. You can
make transfers by giving a written request to our service center subject to the
following conditions:
. the minimum amount that may be transferred is $500; and
. the minimum transfer to an inactive sub-account is $500; and
. the minimum transfer required to establish a new guarantee period is $1,000.
Transfers are also subject to terms and conditions that may be imposed by the
portfolios.
Your transfer request must specify:
. the sub-account or guarantee period from which the transfer is to be made;
. the amounts you wish to transfer, subject to the minimum transfer amount;
and
. the sub-account or guarantee period you wish to receive the transfer.
We impose a transfer fee equal to the lesser of $10 or 2% of the amount of the
transfer for each transfer over 18 in a contract year. We also reserve the
right to:
. waive the transfer fee;
. vary the number of transfers without charge (but not fewer than 12); or
. not count transfers under certain options or services.
The transfer will generally be effective on the date your request is received
at our service center. If the transfer is made from a guarantee period before
its expiration date, it will be subject to an interest adjustment.
If a transfer from a guarantee period is made within the 30-day period ending
on its expiration date, we will not count it for purposes of the 18 allowable
transfers. It will also not be subject to any interest adjustment.
If a transfer reduces the value in a sub-account to less than $500, then we
reserve the right to transfer
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the remaining amount along with the amount you requested to be transferred
according to your transfer instructions.
Under current law, there will not be any tax liability to you as the owner if
you make a transfer.
Telephone Transfers
We will allow telephone transfers if you have provided proper authorization for
such transfers. We will provide you with limitations and rules for these
transfers. We reserve the right to suspend telephone transfer privileges at any
time, for some or all contracts, for any reason. Withdrawals are not permitted
by telephone.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we follow such procedures we will not be liable
for any losses due to unauthorized or fraudulent instructions. The procedures
we will follow for telephone transfers may include:
a) requiring some form of personal identification before acting on instructions
received by telephone;
b) providing written confirmation of the transaction; and/or
c) tape recording the instructions given by telephone.
Possible Restrictions
We reserve the right without prior notice, to modify, restrict, suspend or
eliminate the transfer privileges, including telephone transfers, at any time
and for any reason. For example, restrictions may be necessary to protect
owners from adverse impacts on portfolio management of large and/or numerous
transfers by market timers or others. We have determined that the movement of
significant sub-account values from one sub-account to another may prevent the
portfolio impacted by these transfers from taking advantage of investment
opportunities. This occurs because the portfolio must maintain a significant
cash position in order to handle redemptions.
The contract you are purchasing was not designed for professional market timing
organizations or other persons that use programmed, large, or frequent
transfers. The use of such transfers may be disruptive to a portfolio. We
reserve the right to reject any premium payment or transfer request from any
person, if, in our judgment, an underlying fund portfolio would be unable to
invest effectively in accordance with its investment objectives and policies or
would otherwise be potentially adversely affected or if a portfolio would
reject our purchase order.
Such large and sudden movement of assets in any one portfolio may also cause a
substantial increase in portfolio transaction costs. These costs must be
indirectly borne by owners. Therefore, we reserve the right to require that all
transfer requests be made by you, the owner and not by a third party holding a
power of attorney. We may also require that each transfer request be made by a
separate communication to us. We also reserve the right to require that each
transfer request be submitted in writing and be manually signed by the owner or
owners.
Dollar Cost Averaging
Before the annuity date, you, as the owner, may request that a designated
amount of money be automatically transferred from one, and only one, of the
sub-accounts which invests in:
. the Money Market Portfolio;
. the Quality Bond Portfolio;
. the Limited Term High Income Portfolio.
Or you can have it transferred from the fixed account. This money may be
transferred to any of the sub-accounts on a monthly basis by submitting a
request to our service center. The request must be in a form and manner
acceptable to us. You may not Dollar Cost Average into the fixed account. You
may be able to transfer amounts from other source accounts in addition to the
Money Market, Quality Bond and Limited Term High Income Sub-Accounts. These
other source accounts can include the shortest guarantee period. Call our
service center for the availability of source account options. Your transfers
will begin the month after we receive your request (however, you must wait at
least one week after we receive it). Dollar cost averaging transfers will not
begin until 30 days after the contract date.
Transfers will continue for the duration you selected unless terminated:
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1. by you;
2. automatically by us because there are insufficient funds in the source
account, or
3. for other reasons as set forth in the contract. You may request that monthly
transfers be continued. You can accomplish this by giving notice to our
service center in a form and manner acceptable to us within 30 days before
the last monthly transfer. If no request to continue the monthly transfers
is made by you, 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 you may transfer 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.
Please note that dollar cost averaging transfers can not be made from a source
account from which you are receiving systematic withdrawals or automatic
payouts.
You will not be charged for the dollar cost averaging service. Transfers that
result from dollar cost averaging practices will not count toward your 18 free
transfers. We will make no interest adjustments on dollar cost averaging
transfers from the fixed account if we allow it as a source account.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
When you make a purchase payment to the contract, you may elect to allocate the
entire purchase payment to either the six or twelve month special Dollar Cost
Averaging accounts of the fixed account. The purchase payment will be credited
with interest at a guaranteed fixed rate. Amounts will then be transferred from
the special Dollar Cost Averaging account to the variable sub-accounts pro rata
on a monthly basis for six or twelve months (depending on the option you
select) in the allocations you specified when you applied for the contract.
Amounts from the sub-accounts and/or fixed account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if
you request a transfer (other than a Dollar Cost Averaging transfer) or a
withdrawal from a special Dollar Cost Averaging account, any amounts remaining
in the special account will be transferred to the variable sub-accounts
according to your original allocation instructions. The special Dollar Cost
Averaging option will end and cannot be reelected. The special Dollar Cost
Averaging Option cannot be in effect at the same time the regular Dollar Cost
Averaging is in effect.
Automatic Asset Rebalancing
When you allocate purchase payments to certain portfolios in certain
percentages, you define how you want your investments balanced. Changing market
conditions affect each portfolio's performance, and can throw your allocations
out of balance. You may instruct us to automatically rebalance the amounts by
reallocating them among the variable sub-accounts, at the time and in the
percentages that you specify. You must specify automatic asset rebalancing in
your instructions to us. As the owner, you may elect to have the rebalancing
done on an annual, semi-annual or quarterly frequency, and on a contract-year
or calendar year basis. You may also elect to have amounts allocated among the
sub-accounts using whole percentages, with a minimum of 10% allocated to each
sub-account.
You may elect to establish, change or terminate the automatic asset rebalancing
by submitting a request to our service center in a form and manner acceptable
to us. Automatic asset rebalancing 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, we reserve the right to charge for this feature. We
also reserve the right to discontinue offering automatic asset rebalancing at
any time and for any reason.
After the Annuity Date
If you elect a variable annuity payout option, you may make transfers among
sub-accounts after the annuity date by submitting a request in a form
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acceptable to us to our service center. Transfers will generally be processed
as of the date of the request for the transfer.
Transfers may be made by telephone, subject to the limitations described under
"Telephone Transfers."
Your request will be 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
needed to support a current $75 monthly payment.
Your 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
You may generally withdraw all or part of your contract's surrender value at
any time during the life of the annuitant and before the annuity date. You can
do this by giving a written request to our service center. Your request will be
subject to the rules below. Federal or state laws, rules or regulations may
also apply. You cannot make withdrawals after the annuity date. Withdrawals may
be taxable and subject to a penalty tax. Withdrawals from qualified contracts
may be restricted or prohibited.
If you surrender your contract on or before the annuity date we will pay you
the cash surrender value. The cash surrender value is equal to:
. the account value; minus
. any account fee; minus
. any interest adjustment; minus
. any applicable contingent deferred sales load; minus
. any GMIB rider fee; and minus
. any applicable premium taxes.
If the account value exceeds $50,000 on the date the contract is surrendered,
and where permitted by law, we will waive the account fee. A full surrender of
your contract will result in a cash withdrawal payment equal to the contract's
cash surrender value at the end of the valuation period during which we receive
your request with all of your completed forms.
Only one partial withdrawal will be allowed while the systematic withdrawal
option is in effect. Partial withdrawals must be at least $500.
In the case of a partial withdrawal, you may instruct our service center as to
the amounts to be withdrawn from each sub-account or fixed account. If you do
not specify from where the withdrawal is to be made, the withdrawal will be
taken pro rata from all sub-accounts with current values. If the requested
withdrawal reduces the value of the sub-account to less than $500, we reserve
the right to transfer the remaining value of that sub-account pro rata. You
will be notified in writing of any such transfer.
A partial withdrawal will not be processed if it would reduce the account value
to less than $2,000. In that case, you will be notified that you 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 you, your withdrawal
request will be considered null and void, and no withdrawal will be processed.
Fees and Taxes Relating to Withdrawals or Surrenders
The account fee, unless waived, and the GMIB rider fee and premium taxes, if
applicable, will be deducted from a full surrender before the application of
any contingent deferred sales load. Your withdrawals may be taxable
transactions. Moreover, the Code provides that a 10% penalty tax may be imposed
on the taxable portions of distributions for certain early withdrawals.
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The Code also requires us to withhold federal income tax from certain
withdrawals.
However, as an owner, you generally will be entitled to elect, in writing, not
to have tax withholding apply. This is true 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 includable in
income and subject to federal income tax. The federal income tax withholding
rate for partial withdrawals and full surrenders is currently 10%, or 20% for
certain qualified contracts, 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. Withdrawals,
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 we receive your
request, except that we 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;
2. an emergency exists as defined by the SEC, or the SEC requires that trading
be restricted; or
3. the SEC permits a delay for the protection of owners.
The withdrawal request will be effective when all appropriate forms are
received. Payments of any amounts derived from purchase payments paid by check
may be delayed until the check has cleared your 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. The payment of a withdrawal
from the fixed account may be delayed for up to six months. If payment from the
fixed account is delayed for more than 30 days, interest will be paid on the
withdrawal amount up to the date of payment.
You, as the owner, assume the investment risk for amounts allocated to the
variable account. 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.
Additional Withdrawal and Surrender Provisions
After a withdrawal of the total cash surrender value, or at any time that the
account value is zero, all of your rights as the owner will terminate.
Qualified contracts will be issued in connection with retirement plans which
meet the requirements of the Code. You should refer to the terms of the
particular retirement plans for any additional limitations or restrictions on
your cash withdrawals, as these limitations or restrictions may supercede those
of the contract issued by us.
You may elect, under the systematic withdrawal option or automatic payout
option (but not both), to withdraw certain amounts on a periodic basis from the
sub-accounts before the annuity date.
Systematic Withdrawal Option
Before to the annuity date, you may elect to have withdrawals automatically
made from one or more sub-account(s) on a monthly basis. You can do this by
giving written notice to our service center. Other distribution modes may be
allowed. The withdrawals will begin the month following, but no sooner than one
week following, receipt of your written notice. Please note, however, payments
will not begin sooner than the later of:
a. 30 days after the contract date; or
b. the end of the free look period, allowing 5 days for delivery of the
contract by mail.
Upon written notice to you, we may change the day of the month on which
withdrawals are made under this option. Withdrawals will be from the sub-
account, or sub-accounts, and in the percentage allocations specified by you.
If no specifications are made, withdrawals will be pro rata from all sub-
accounts. Systematic withdrawals can not be made from a sub-account from which
dollar cost averaging transfers are being made.
Eligibility and Rules of the Systematic Withdrawal Option
To be eligible for the systematic withdrawal option:
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. the account value must be at least $12,000 at the time you elect to use this
option;
. the minimum monthly amount that can be withdrawn is $100; and
. 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 10% of remaining
purchase payments.
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.
Systematic withdrawals will continue unless you terminate them or they are
automatically terminated by us as described in the contract. If this option is
terminated it may not be used again until the next contract anniversary. In
some states, any partial withdrawal will automatically terminate the systematic
withdrawal option. Any portion of such partial withdrawal which exceeds the
allowed amount for withdrawals will be subject to a contingent deferred sales
load. In other states, more than one partial withdrawal while this option is in
effect will automatically terminate the systematic withdrawal option.
We reserve 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 the fixed account.
Before requesting withdrawals from a qualified contract, consult your tax
adviser and, if applicable, the particular retirement plan. There may be severe
restrictions on withdrawals from qualified contracts.
Automatic Payout Option, or APO
Before the annuity date, you may elect the automatic payout option, referred to
as the APO, to satisfy minimum distribution requirements under the Internal
Revenue Code for certain qualified contracts.
DEATH BENEFIT
If an owner or annuitant dies before the annuity date, a death benefit is
payable. In most states, the death benefit will be equal to the greatest of:
(1) the account value on the date we receive the required information (see
below); or
(2) the Guaranteed Minimum Death Benefit, plus additional purchase payments
received, less any partial withdrawals and any applicable premium taxes
from the date of death to the date of payment of death proceeds.
Guaranteed Minimum Death Benefit
The Guaranteed Minimum Death Benefit (GMDB) for contracts purchased by any
owner or with an annuitant age 86 or younger, is equal to the greater of:
1) the largest account value on the contract date or on any contract
anniversary prior to the earlier of the date of death or any owner's or
annuitant's 86th birthday, adjusted for any subsequent purchase payments
(less the sum of all subsequent adjusted partial withdrawals and any premium
taxes applicable to those withdrawals up to the date of death); or
2) the sum of all purchase payments, less adjusted partial 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:
a) the contract anniversary prior to the earlier of any owner's or
annuitant's 86th birthday;
b) the date the sum of all purchase payments, (less the sum of all adjusted
partial withdrawals and any premium taxes), together with credited
interest, has grown to two times the amount of all purchase payments
(less all adjusted partial withdrawals and any premium taxes) as a
result of such interest accumulation, if earlier; or
c) the date of death of any owner or annuitant.
For contracts purchased by any owner or with an annuitant age 85 or older, the
Guaranteed Minimum Death Benefit available will be the sum of all purchase
payments, less adjusted partial withdrawals and any premium taxes applicable to
these withdrawals.
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The death benefit will be determined as of the valuation period during which
the later of:
a) proof of death of the owner or annuitant is received by our service center;
or
b) written notice of the method of settlement elected by the beneficiary is
received at our service center.
If no settlement method is elected, the death benefit will be calculated and
paid as of a date 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
according to instructions received by us from all beneficiaries. Therefore, the
account value will fluctuate with the investment performance of the applicable
sub-accounts. As a result, the amount of the death benefit will depend on the
account value at the time the death benefit is paid, not as of the date of
death. There is no extra charge for the death benefit, and it applies
automatically, i.e., no election by the owner is necessary.
(The GMDB may not be available in all states.)
Adjusted Partial Withdrawals
When you request a partial withdrawal, your guaranteed minimum death benefit
may be reduced by an amount called the adjusted partial withdrawal. Under
certain circumstances, the adjusted partial withdrawal may be more than the
amount of your withdrawal request. It is also possible that if a death benefit
is paid after you have made a partial withdrawal, then the total amount paid
could be less than the total purchase payments. We have included a detailed
explanation of this adjustment in the Statement of Additional Information.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death of the
annuitant or any owner. Where the owner is not an individual, the death benefit
is generally payable upon receipt of proof of death of the annuitant. Once our
service center receives this proof and the beneficiary's choice of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as we have sufficient information to make the payment. The
death benefit may be paid in a lump sum cash benefit. Subject to any
limitations under any state or federal law, rule, or regulation, it may be paid
under one of the annuity forms, unless a settlement agreement effective under
the contract prevents this choice. 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.
Designation of Beneficiaries
You, as the owner, may select one or more beneficiaries and name them in a form
and manner acceptable to us. If you select more than one beneficiary, unless
you indicate otherwise, they will each share equally in any death benefits
payable. Different beneficiaries may be named with respect to the annuitant's
death and the owner's death. Respectively, these individuals are referred to as
the annuitant's beneficiary and the owner's beneficiary. Before the annuitant's
death, you may change the beneficiary by notice to our service center in a form
and manner acceptable to us. You may also make the designation of beneficiary
irrevocable by sending notice to and obtaining approval from our service
center. Irrevocable beneficiaries may only be changed 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 said 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
interests of all designated beneficiaries have terminated, any benefits payable
will be paid to the owner's estate.
We 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 Before the Annuity Date
If the annuitant dies before the annuity date and the annuitant is not the
owner and there is no contingent annuitant, a death benefit under the contract
relating
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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 Before the Annuity Date
If an owner dies before the annuity date, a death benefit will be paid to that
owner's beneficiary. If the contract has joint owners, the surviving joint
owner will be deemed the owner's beneficiary. If the owner's beneficiary is
the deceased owner's spouse, then the spouse may elect to continue the
contract as his or her own or receive payment of the death benefit. If the
spouse elects to continue the contract, an amount equal to the excess, if any,
of the Death Benefit over the account value will then be added to the account
value. This amount will be added only once, at the time of such election.
Furthermore, all future contingent deferred sales loads will be waived. The
payment of the death benefit may be subject to certain distribution
requirements under the federal income tax laws.
Death of Annuitant or Owner After the Annuity Date
If the annuitant or an owner dies after the annuity payments start, 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 or the fixed account.
As more fully described below, charges under the contract are assessed in
three ways:
1. as deductions for the contract or annuity fees, any transfer fees, rider
fees, systematic withdrawal option or asset rebalancing fees, (if any), any
interest adjustment (for withdrawals and transfers 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 funds for
investment management fees and expenses. These fees and expenses are described
in the funds' prospectuses and their statements of additional information.
Contingent Deferred Sales Load/
Surrender Charge
No deduction for sales charges is made from your purchase payments, although
premium taxes may be deducted. However, a contingent deferred sales load, or
surrender charge, of up to 6% of purchase payments paid may be imposed on
certain withdrawals or surrenders from the account value to partially cover
certain expenses incurred by us relating to the sale of the contracts,
including commissions paid to salespersons, the costs of preparation of sales
literature and other promotional costs and acquisition expenses.
We may also deduct the contingent deferred sales load if you annuitize your
contract.
The contingent deferred sales load/surrender charge 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 this charge is determined by
multiplying the amount withdrawn and subject to the contingent deferred sales
load by the contingent deferred sales load percentage according to the
following table.
<TABLE>
<CAPTION>
Number of Contract Years Contingent
Since Receipt of Deferred
Each Purchase Payment Sales Load
------------------------ ----------
<S> <C>
Less than one year................................................... 6%
1 year but less than 2 years......................................... 6%
2 years but less than 3 years........................................ 5%
3 years but less than 4 years........................................ 5%
4 years but less than 5 years........................................ 4%
5 years but less than 6 years........................................ 4%
6 years but less than 7 years........................................ 2%
7 or more years...................................................... 0%
</TABLE>
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In no event will the total contingent deferred sales load/surrender charge
assessed against the contract exceed 6% of the aggregate purchase payments paid
to a contract.
Certain amounts may be withdrawn free of any contingent deferred sales load.
You may make withdrawals up to this "allowed amount" without incurring a
contingent deferred sales load/surrender charge 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 you may withdraw is
equal to the sum of:
1. 100% of purchase payments not previously withdrawn and received at least
seven contract years before the date of withdrawal; plus
2. the greater of:
a. accumulated earnings not previously withdrawn; or
b. 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 prior withdrawals deemed to be 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:
1. 100% of purchase payments not previously withdrawn and received at least
seven contract years before the date of withdrawal; plus
2. accumulated earnings not previously withdrawn.
Withdrawals will always be made first from your accumulated earnings, and then
from your purchase payment on a first-in first-out basis. This is done so that
accumulated earnings may be depleted with the first withdrawal and the 15% of
purchase payments discussed above is not used in the calculation of the allowed
amount. 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 your certificate value are always available as the allowed amount. No
withdrawals are allowed from purchase payments made by a check which has not
cleared.
Some contract owners may hold contracts issued before 1995 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 than seven
contract years; plus
2. 10% of purchase payments held between one and seven contract years not
reduced by any withdrawals made by the owner 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 that applies
to these 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 you were eligible to withdraw the amount without
charge but had not made such a withdrawal during the contract year. In
addition, no contingent deferred sales load is charged:
1. upon annuitization after the first three contract years to an option
involving life contingencies;
2. upon payment of the death benefit;
3. upon transfers of account value among the sub-accounts and the guarantee
periods;
4. under the systematic withdrawal option; or,
5. 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 rider fee or 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 you.
The contingent deferred sales load arising from a withdrawal or surrender of
the contract will be waived if you receive extended medical care in a licensed
hospital or nursing care facility for at least
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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 our service center during the term of such care or within 90 days
after the last day upon which you received such extended care. This waiver of
the contingent deferred sales load may not be available in all states and does
not apply if you are receiving extended medical care in a licensed hospital or
nursing care facility at the time you 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 you are 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 our 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, we deduct an annual
account fee as partial compensation for expenses relating to the issue and
maintenance of the contract and the variable account. The annual account fee is
equal to the lesser of $30 or 2% of the account value. No account fee will be
deducted for a contract year if your account value exceeds $50,000 on the last
business day of the contract year or as of the date the contract is
surrendered. The account fee may be changed upon 30 days advance written notice
to you. In no event may this fee 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 you surrender your contract, we will
deduct the account fee in full at the time of the surrender. The account fee
will be deducted on a pro rata basis from each sub-account in which the
contract is invested at the time of such deduction or from the fixed account if
there are insufficient funds in the sub-accounts. If the entire amount is in
the fixed account, then the annual account fee will be deducted on a pro rata
basis from all guarantee periods
After the annuity date, we deduct an annual annuity fee of $30 in equal amounts
from each variable annuity payment made during the year. If monthly payments
are made, the amount paid per month will be $2.50. This fee will not be
changed. No annuity fee will be deducted from fixed annuity payments.
We also deduct an 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. This
deduction is for administrative expenses attributable to the contracts and the
variable account which exceed the revenues received from the account fee, any
transfer fee, and any fee imposed for systematic withdrawals.
We have the ability to increase or decrease this charge, but the charge is
guaranteed not to exceed 0.25%. We will provide 30 days written notice of any
change in fees. The administrative charges do not bear any relationship to the
actual administrative costs of a particular contract. The administrative
expense charge is reflected in the variable accumulation or variable annuity
unit values for each sub-account.
Mortality and Expense Risk Charge
We impose a charge called the mortality and expense risk charge to compensate
us for bearing certain mortality and expense risks under the contracts. For
assuming these risks, we make a daily charge equal to 0.003403% corresponding
to an effective annual rate of 1.25% of the value of the net assets in the
variable account. This charge is imposed both before and after the annuity
date. We guarantee that this charge of 1.25% will never increase.
The mortality and expense risk charge is reflected in the variable accumulation
or 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 us. The mortality risks
assumed by us arise from our contractual obligations to make annuity payments
and to pay death benefits before the annuity date. The annuity payments are
determined in accordance with the annuity tables and other provisions contained
in the contract. Thus, you 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.
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We also bear substantial risk in connection with the death benefit before the
annuity date, since we will pay a death benefit that may be greater than the
account value.
The expense risk assumed by us is the risk that our actual expenses in
administering the contract 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 us. Conversely, if this charge is more
than sufficient, any excess will be profit to us. Currently, we expect a profit
from this charge.
We anticipate that the contingent deferred sales load will not generate
sufficient funds to pay the cost of distributing the contracts. To the extent
that the contingent deferred sales load is insufficient to cover the actual
cost of contract distribution, the deficiency will be met from our general
corporate assets which may include amounts, if any, derived from the mortality
and expense risk charge.
Premium Taxes
We 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, we may deduct a charge for 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 us an amount equal to the premium taxes that
would otherwise be attributable to that entity's customers. In such cases, we
will not impose a premium tax charge on those contracts.
Transfer Fee
We charge a fee equal to the lesser of $10 or 2% of the amount of transfer for
each transfer in excess of 18 in a contract year. We reserve the right to:
a) waive the transfer fee;
b) vary the number of transfers without charge, but not fewer than 12; or
c) not count transfers under certain options or services for purposes of the
allowed number without charge.
Systematic Withdrawal Option
We reserve the right to impose an annual fee, not to exceed $25, for
administrative expenses associated with processing systematic withdrawals. This
fee, which is currently waived, will be deducted in equal installments from
each systematic withdrawal you take during a contract year.
Automatic Asset Rebalancing Option
We currently do not charge for automatic asset rebalancing, but we reserve the
right to impose a fee for this feature in the future.
Taxes
Under present laws, we 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, we reserve the right to
deduct charges in the future for federal, state and local taxes or the economic
burden resulting from the application of any tax laws that we determine to be
attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of portfolio
shares and therefore the fees and expenses paid by each portfolio.
Guaranteed Minimum Income Benefit Rider
If you elect the optional Guaranteed Minimum Income Benefit Rider, there is an
annual rider fee during the accumulation phase (before the annuity date) of
0.30% of the minimum annuitization value. This fee is deducted on each rider
anniversary from each variable sub-account in proportion to the amount of
account value in each sub-account. A proportional amount of this rider fee will
also be deducted upon a complete withdrawal.
If you annuitize under the Guaranteed Minimum Income Benefit Rider and select
the guaranteed minimum payment option at the time of
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annuitization, then a guaranteed minimum payment option fee will be charged.
This fee is reflected in the amount of the variable payments payable under this
option. The guaranteed minimum payment option fee is currently 1.25% of the
daily net asset value in the variable investment options.
Once the Guaranteed Minimum Income Benefit Rider is added to your contract,
neither the rider fee nor the guaranteed minimum payment option fee that is in
effect at that time will change during the life of that Guaranteed Minimum
Income Benefit Rider. They could change if you upgrade the minimum
annuitization value.
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.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation, also referred to as TSSC, is the
principal underwriter of the contracts under a Distribution Agreement with
Transamerica. TSSC may also serve as an underwriter and distributor of other
contracts issued through the variable account and certain other separate
accounts of Transamerica and its affiliates. TSSC is an indirect wholly owned
subsidiary of Transamerica Insurance Corporation. TSSC is registered with the
SEC as a broker/dealer and is a member of the National Association of
Securities Dealers, Inc., (the NASD). Its principal offices are located at 1150
South Olive, 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 SEC and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
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 paid, 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 certain circumstances.
Transamerica Financial Resources, Inc., referred to as 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
SEC and the NASD as a broker/dealer.
ANNUITY PAYMENTS
Annuity Date
Initially, you select the annuity date at the time you pay the initial purchase
payment. After that, you may change the annuity date from time to time by
giving notice to our service center in a form and manner acceptable to us. Our
service center must receive notice of each change at least 30 days before the
then-current annuity date. The annuity date must not be earlier than the third
contract anniversary, except for certain qualified contracts.
The annuity date is the date that the annuity purchase amount is applied to
provide the annuity payments under the contract. The annuity date will be used
together with the annuity form and payment option you have selected. The
annuity date will remain effective unless the entire account value has been
withdrawn or the death benefit has been paid to the beneficiary before that
date.
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 on the first day of the month
immediately following the annuity date.
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Annuity Payment
The annuity purchase amount is the account value, minus any interest
adjustment, minus any applicable contingent deferred sales load and minus any
applicable premium taxes. Any contingent deferred sales load will be waived if
the annuity form involves life contingencies and begins on or after the third
contract anniversary.
If the amount of the monthly annuity payment from the payment options which you
select results in a monthly annuity payment of less than $150, or if the
annuity purchase amount is less than $5,000, we reserve the right to offer a
less frequent mode of payment or pay the cash surrender value in a cash
payment. Monthly annuity payments from the variable annuity payment option will
further be subject to a minimum monthly annuity amount of $75 from each sub-
account of the variable account from which such payments are made.
You may choose from the annuity forms below. We 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 and in some jurisdictions. We reserve the
right to ask for satisfactory proof of the annuitant's, or the joint or
contingent annuitant's age. We 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 will be greater for older
annuitants than for younger annuitants.
You 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, we have not
received a proper written election not to have federal income taxes withheld,
we 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.
Election of Annuity Forms and Payment Options
Before the annuity date and while the annuitant is living, you may, by written
request, change the annuity form or annuity payment option or may request
payment of the cash surrender value of the contract. The request for change of
the annuity date or annuity payment option must be received by our service
center at least 30 days before the annuity date.
If you do not select an annuity form and payment option within at least 30 days
before the annuity date, we will make variable and/or fixed annuity payments
according to the 120 month period certain and life annuity form and the
applicable provisions of the contract (we would apply the variable accumlated
value to variable payments and the fixed accumulated value to fixed payments).
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, will reflect the investment experience of the sub-account or sub-
accounts you choose.
You may elect a fixed annuity, a variable annuity, or a combination of both, in
25% increments of the annuity purchase amount. If you elect a combination, you
must specify what part of the annuity purchase amount is to be applied to the
fixed and variable payment options.
Unless you specify otherwise, the applied annuity purchase amount will be used
to provide a variable annuity. The initial allocation of variable annuity units
for the variable sub-accounts will be in proportion to the contract's value in
the sub-accounts on the annuity date.
Fixed Annuity Payment Option
A fixed annuity provides for annuity payments that remain constant according to
the terms of the
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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. 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 performance 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 you applied to the fixed annuity option. 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-accounts of the variable
account. The variable annuity purchase rate tables in the contract reflect an
assumed, but not guaranteed, annual interest rate of 4%, so if the actual net
investment performance of the sub-accounts 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-accounts 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 performance of the sub-accounts
you select, and on the allocations you make among the sub-accounts. For
further details as to the determination of variable annuity payments, see the
Statement of Additional Information.
Annuity Forms
You may choose any of the annuity forms described below. Subject to our
approval, you may also select any other annuity form we may offer.
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 the annuitant and the contingent annuitant 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. We will need proof of age for the annuitant and 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
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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. You may elect
to have the present value of any remaining period certain payments paid to
you in a single sum.
If you do not elect to have the commuted value paid in a single sum after
the annuitant's death, you 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. We
will need proof of age for the joint annuitants before payments start.
5. Other Forms of Payment. Benefits can be provided under any other annuity
form not described in this section subject to our agreement and any
applicable state or federal law or regulation. Requests for any other
annuity form must be made in writing to our service center at least 30 days
before the annuity date.
Once payments start under the annuity form and payment option you selected:
a) no changes can be made in the annuity form and payment option;
b) no additional purchase payments will be accepted under the contract;
and
c) no further withdrawals will be allowed.
General
You 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 you specify.
If the contract is issued as a qualified contract, you 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 our current single
premium fixed annuity rates at the time, whichever would result in a higher
amount of monthly fixed annuity payments.
QUALIFIED CONTRACTS
The qualified contracts may be used to fund contributory and rollover IRAs and
Roth IRAs. With
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our prior approval, qualified contracts may also be used for various types of
qualified pension and profit sharing plans under Code Section 401, which
permits corporate employers to establish various types of retirement plans for
employees, and as Section 403(b) annuities. Currently, additional premiums
after the initial premium may not be made to certificates 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 the conditions of the plan itself.
Various tax penalties may apply to:
a) contributions in excess of specified limits;
b) distributions before age 59 1/2, subject to certain exceptions;
c) distributions that do not satisfy specified requirements; and
d) certain other transactions subject to qualified plans.
If you are purchasing a contract for use in a qualified plan, you (the owner)
should seek competent advice regarding the suitability of the proposed plan
documents and the contracts to their specific needs. We reserve the right to
decline to sell the contract to certain qualified plans or terminate the
contract if, in our judgment, the contract is not appropriate for the plan.
If a contract is purchased to fund an IRA or Roth IRA, you must also be the
annuitant. In addition, under current tax law, minimum distributions are
required from certain qualified contracts. You should consult your tax adviser
concerning these matters.
The Automatic Payout Option, or APO
Before to the annuity date, for qualified contracts other than Roth IRAs, you
may elect the automatic payout option, or APO, to satisfy minimum distribution
requirements under Code Sections 401(a)(9), 403(b), and 408(b)(3).
For IRAs and SEP/IRAs, (and if you are a 5% owner for other qualified
contracts) this may be elected no earlier than six months before the calendar
year in which you attain age 70 1/2, and payments may not begin earlier than
January of such calendar year. For other qualified contracts, APO can be
elected no earlier than six months before the later of when you:
a) attain age 70 1/2; and
b) retire 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.
You may elect APO in any calendar month, but no later than the month in which
you attain age 84. APO withdrawals will be from the sub-accounts and in the
percentage allocations which you specify. If no specifications are made,
withdrawals will be pro rata from all sub-accounts with value. Withdrawals can
not 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 you or
automatically terminated by us 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. However, if a partial withdrawal is taken,
that partial withdrawal and any subsequent withdrawals in that contract year
will be subject to a contingent deferred sales load to the extent they exceed
the allowed amount.
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-accounts
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
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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 we will make calculations and
distributions from this contract only.
Restrictions under Section 403(b) Programs
Certain restrictions apply to annuity contracts used in connection with Section
403(b) retirement plans. Code Section 403(b) provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations.
According to the requirements of the Code, Section 403(b) annuities generally
may not permit distribution of:
a) elective contributions made in years beginning after December 31, 1988;
b) earnings on those contributions; or
c) 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. If you are concerned about these tax implications, you
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon our understanding of the present federal income tax
laws as they are currently interpreted by the Internal Revenue Service, or
simply, the IRS. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased:
a) on a non-tax qualified basis for use as a non-qualified contract; or
b) in connection with plans qualifying for special tax treatment as a
qualified contract.
Qualified contracts are designed for use by individuals solely as plans
entitled to special income tax treatment under Code Sections 401, 403(b), 408
and 408A.
The ultimate effect of federal income taxes on the amounts held under a
contract, on annuity payments, and on the economic benefit to the owner, the
annuitant, or the beneficiary may depend on:
a) the type of retirement plan or arrangement for which the contract is
purchased;
b) the tax status of the individual concerned; or
c) our tax status.
In addition, certain requirements must be satisfied in purchasing a qualified
contract with proceeds from a tax qualified retirement plan or other
arrangement. Certain requirements must also be met when receiving distributions
from a qualified contract in order to continue receiving special tax treatment.
Therefore, if you are considering the purchase of a qualified contract, you
should seek competent legal and tax advice regarding the suitability of the
contract for your situation. You will also need to be aware of 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 also
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, as a prospective purchaser,
you must specify whether you
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are purchasing a non-qualified contract or a qualified contract. If the initial
purchase payment is derived from an exchange or surrender of another annuity
contract, we may require that you provide information with regard to the
federal income tax status of the previous annuity contract. We will require
that you purchase separate contracts if you desire to invest monies qualifying
for different annuity tax treatment under the Code.
Each such separate contract would require the minimum initial purchase payment
previously described. Additional purchase payments under a contract must
qualify for the same federal income tax treatment as the initial purchase
payment under the contract. We will not accept an additional purchase payment
under a contract if the federal income tax treatment of such purchase payment
would be different from that of the initial purchase payment.
Taxation of Annuities In General
Code Section 72 governs taxation of annuities in general. We believe that the
owner who is a natural person generally is not taxed on increases in the value
of a contract until distribution occurs by withdrawing all or part of the
account value, for example, through 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 as income any increase in the excess of the account value over the
investment in the contract during the taxable year. There are some exceptions
to this rule and a prospective owner that is not a natural person, for example,
a trust, 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. This portion is 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 apply to 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.
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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 adviser regarding deductibility of the unrecovered
amount.
Withholding
The Code requires us 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, Section 403(a) annuities, 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
A federal income tax penalty equal to 10% of the amount treated as taxable
income may be imposed. In general, however, there is no penalty tax on
distributions:
1. made on or after the date on which the owner attains age 59 1/2;
2. made as a result of death or disability of the owner; or
3. received in substantially equal periodic payments as a life annuity or a
joint and survivor annuity for the lives or life expectancies of the owner
and a designated beneficiary.
Other tax penalties may apply to certain distributions under a qualified
contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of an owner
or the annuitant. Generally such amounts are includable in income 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 were 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 a non-qualified contract will
be allowed that does not satisfy the requirements of Code Section 72(s). 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.
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Please note that Item b) is based on the following provisions:
1. the annuity must be distributed in substantially equal installments over the
life of the owner's beneficiary or over a period not extending beyond the
life expectancy of the owner's beneficiary; and
2. the distributions must not begin later than one year after the owner's date
of death.
Notwithstanding Items a) and b) above, if the sole owner's beneficiary is the
deceased owner's surviving spouse, then the surviving 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. If the spouse elects to
continue the contract, an amount equal to the excess, if any, of the Death
Benefit over the account value will then be added to the account value. This
amount will be added only once, at the time of such election. Furthermore, all
future contingent deferred sales loads will be waived.
Upon receipt of such election from the spouse, in a form and manner acceptable
to us, at our service office:
1. all rights of the spouse as owner's beneficiary under the contract in effect
before 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 us 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 the Annuitant Dies After Annuity Payments Start - 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 the Owner Dies After Annuity Payment Start - 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, subject to the provisions described above.
Similar rules apply to qualified contracts.
Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a contract, the designation of an annuitant, payee,
or 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.
If you are contemplating any such designation, transfer, assignment, or
exchange, you should contact a competent tax adviser with respect to the
potential tax effects of such a transaction. Certain qualified contracts cannot
be transferred or assigned, except as permitted by the Code or the Employee
Retirement Income Security Act of 1974, or simply ERISA.
Multiple Policies
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
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amount includable in gross income under Code Section 72(e). In addition, the
Treasury Department has specific authority to issue regulations that prevent
the avoidance of Section 72(e) through the serial purchase of 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 a separate
deferred annuity contract 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 an IRA or Roth IRA. With our
prior approval, the contract may also be used as a Section 403(b) annuity, and
for use in qualified pension and profit sharing plans established by corporate
employers.
The tax rules applicable to participants and beneficiaries in retirement plans
vary according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions.
Adverse tax consequences may result from:
. contributions in excess of specified limits;
. distributions before age 59 1/2, subject to certain exceptions;
. distributions that do not conform to specified commencement and minimum
distribution rules; and
. 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 contracts or 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:
1. reaches age 70 1/2; or
2. retires; and
3. distribution must be made in a specified manner.
If the plan participant is a "5 percent owner" as defined in the Code,
distributions generally must begin no later than April 1 of the calendar year
following the calendar year in which the owner, or plan participant reaches,
age 70 1/2.
For IRAs described in Section 408, distributions generally must commence no
later than of April 1 of the calendar year following the calendar year in which
the owner, or plan participant, reaches age 70 1/2. Roth IRAs under Section
408A do not require distributions at any time before the owner's death.
Qualified Pension and Profit Sharing Plans
Code Section 401(a) permits employers to establish various types of retirement
plans for employees. Such retirement plans may permit the purchase of the
contract in order to provide retirement savings under the plans. 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.
The death benefit could be characterized as an incidental death benefit, the
amount of which is limited in any pension or profit-sharing plan. Because the
death benefit may exceed this limitation, employers using the contract in
connection with such plans should consult their tax adviser.
Adverse tax consequences to the plan, to the participant, or to both, may
result if this contract is assigned or transferred to any individual as a means
to provide benefits payments. If you are buying a
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contract for use with such plans you 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 contract is designed for use with contributory and rollover IRAs and Roth
IRAs.
Code Section 408 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. A contributory IRA
is a contract in which initial and subsequent purchase payments are subject to
limitations imposed by the Code. Also, distributions from certain other
qualified plans may be rolled over, or transferred on a tax-deferred basis into
an IRA described in Code Section 408.
A Section 408 IRA is an IRA described in Sections 408(a) or 408(b), other than
a Roth 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.
This includes 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.
Other than nondeductible contributions, amounts in the IRA are taxed when
distributed from the IRA. Distributions before 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, also referred to as SEP-IRAs, for
their employees using IRAs. Employer contributions that may be made to such
plans are larger than the amounts that may be contributed to regular IRAs, and
may be deductible to the employer. SEP-IRAs are subject to certain Code
requirements regarding participation and amounts of contributions.
The contract may also be used with rollover Roth IRAs and contributory Roth
IRAs. Code Section 408(a) permits eligible individuals to contribute to an
individual retirement program known as a Roth IRA on a non-deductible basis. A
contributory Roth IRA is a contract to which initial and subsequent purchase
payments are subject to limitations imposed by the Code. In addition,
distributions from a Section 408 IRA may be converted to a Roth IRA.
Distributions from a Roth IRA generally are not taxed, except that, once total
distributions exceed contributions to the Roth IRA, income tax and a 10%
penalty tax may apply to distributions 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 any Roth IRA of the individual.
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:
. elective contributions made in years beginning after December 31, 1988;
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. earnings on those contributions; or
. 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.
The death benefit could be characterized as an incidental death benefit, the
amount of which is limited in any Code Section 403(b) annuity contract. Because
the death benefit may exceed this limitation, employers using the contract in
connection with such plan should consult their tax adviser.
Restrictions under Qualified Contracts
Other restrictions may apply to the election, commencement, or distribution of
benefits 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 the in the past that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
investment in the contract under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive, that is, effective before the
date of the change. You should consult a tax adviser with respect to
legislative developments and their effect on the contract.
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax consequences
is not exhaustive and special rules are provided with respect to other tax
situations not discussed in this prospectus. Further, the federal income tax
consequences discussed herein reflect our understanding of current law and the
law may change. Federal gift and estate 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.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable account.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets
or to the variable account.
LEGAL MATTERS
The organization of Transamerica, its authority to issue the contracts and the
validity of the form of the contracts have been passed upon by James W.
Dederer, general counsel of Transamerica.
ACCOUNTANTS AND FINANCIAL STATEMENTS
The unaudited consolidated financial statements of Transamerica for the six
months ended June 30, 2000 appear in the Statement of Additional Information.
The statutory-basis financial statements of Transamerica at December 31, 1999
and 1998, and for each of the three years in the period ended December 31,
1999, and the financial statements of Separate Account VA-2L at December 31,
1999 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 appearing in the Statement
of Additional Information. The financial statements audited by Ernst & Young
LLP have been included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
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<PAGE>
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 before 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 to, and do not
intend to, hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement with the Securities and
Exchange Commission under the Securities Act of 1933 relating to the contract
offered by this prospectus. This prospectus has been filed as a part of the
registration statement and does not contain all of the information set forth in
the registration statement and exhibits thereto. Reference is hereby made to
such Registration Statement and exhibits for further information relating to
Transamerica and the contract.
Statements contained in this prospectus, as to the content of the contract and
other legal instruments, are summaries. For a complete statement of the terms
thereof, reference is made to the instruments filed as exhibits to the
registration statement. The registration statement and the exhibits thereto may
be inspected and copied at the office of the SEC, located at 450 Fifth Street,
N.W., Washington, D.C.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
THE CONTRACT
DOLLAR COST AVERAGING
SPECIAL DOLLAR COST AVERAGING OPTION
NET INVESTMENT FACTOR
ANNUITY PERIOD
GENERAL PROVISIONS
CALCULATION OF YIELDS AND TOTAL RETURNS
HISTORICAL PERFORMANCE DATA
FEDERAL TAX MATTERS
DISTRIBUTION OF THE CONTRACT
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
TRANSAMERICA
STATE REGULATION
RECORDS AND REPORTS
FINANCIAL STATEMENTS
APPENDIX
</TABLE>
47
<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, which is 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 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).
48
<PAGE>
Appendix B
CONDENSED FINANCIAL 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, 1999. The variable accumulation unit values and the number
of variable accumulation units outstanding for each sub-account for the periods
shown are as follows:
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.
<TABLE>
<CAPTION>
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value Units Outstanding
Sub-account Beginning of Period at End of Period at End of Period
----------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
Appreciation*(/2/)
1999................... $35.36 $38.862415 8,513,807.354
1998................... $27.532 $35.36 8,121,246.029
1997................... $21.802 $27.532 6,447,159.634
1996................... $17.610 $21.802 3,665,146.389
1995................... $13.373 $17.610 2,077,029.504
1994................... $13.160 $13.373 919,622.615
1993................... $12.500 $13.160 237,733.021
---------------------------------------------------------------------------------
Balanced*(/6/)
1999................... $14.16 $15.101489 4,426,908.448
1998................... $11.738 $14.16 2,280,501.753
1997................... $10.000 $11.738 647,855.304
---------------------------------------------------------------------------------
Disciplined Stock*(/5/)
1999................... $19.09 $22.295427 5,856,978.740
1998................... $15.272 $19.09 4,753,022.290
1997................... $11.776 $15.272 2,278,146.352
1996................... $10.00 $11.776 618,809.191
---------------------------------------------------------------------------------
Growth and Income*(/4/)
1999................... $29.23 $33.694444 6,548,394.692
1998................... $26.509 $29.23 7,270,897.396
1997................... $23.131 $26.509 7,480,387.355
1996................... $19.426 $23.131 6,332,649.215
1995................... $12.167 $19.426 2,565,038.589
1994................... $12.177 $12.167 4,300.380
---------------------------------------------------------------------------------
International
Equity*(/4/)
1999................... $15.89 $25.037701 2,296,712.753
1998................... $15.422 $15.89 2,456,885.911
1997................... $14.267 $15.422 2,176,230.247
1996................... $12.964 $14.267 1,480,395.223
1995................... $12.240 $12.964 530,374.642
1994................... $12.247 $12.240 8,552.073
---------------------------------------------------------------------------------
International
Value*(/5/)
1999................... $11.78 $14.846150 1,432,408.023
1998................... $10.982 $11.78 1,380,692.935
1997................... $10.244 $10.982 1,047,389.002
1996................... $ 10.00 $10.244 230,868.491
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value Units Outstanding
Sub-account Beginning of Period at End of Period at End of Period
----------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
Limited Term High
Income*(/6/)
1999................... $10.73 $10.421888 5,300,351.762
1998................... $10.852 $10.73 6,458,312.119
1997................... $10.000 $10.852 2,424,231.798
---------------------------------------------------------------------------------
Money Market(/1/)
1999................... $1.22 $1.258459 64,761,299.670
1998................... $1.175 $1.22 53,939,642.196
1997................... $1.132 $1.175 42,660,950.364
1996................... $1.093 $1.132 38,983,053.941
1995................... $1.048 $1.093 31,807,563.947
1994................... $1.018 $1.048 23,559,789.795
1993................... $1.021 $1.018 2,678,280.492
---------------------------------------------------------------------------------
Quality Bond*(/1/)
1999................... $15.88 $15.683297 5,010,813.856
1998................... $15.260 $15.88 5,030,446.431
1997................... $14.142 $15.260 4,020,220.452
1996................... $13.908 $14.142 3,072,774.847
1995................... $11.710 $13.908 2,052,313.888
1994................... $12.445 $11.710 931,527.691
1993................... $12.310 $12.445 86,752.856
---------------------------------------------------------------------------------
Small Cap*(/1/)
1999................... $64.44 $78.255479 2,096,729.991
1998................... $67.668 $64.44 2,615,765.058
1997................... $58.773 $67.668 2,954,842.907
1996................... $51.121 $58.773 2,736,720.675
1995................... $40.064 $51.121 2,155,879.198
1994................... $37.702 $40.064 1,250,237.625
1993................... $39.620 $37.702 138,557.449
---------------------------------------------------------------------------------
Small Company
Stock*(/5/)
1999................... $11.99 $13.083267 1,665,730.260
1998................... $12.935 $11.99 2,111,028.689
1997................... $10.772 $12.935 1,604,089.554
1996................... $10.00 $10.772 543,949.419
---------------------------------------------------------------------------------
Special Value*(/1/)
1999................... $16.19 $17.122305 2,347,756.875
1998................... $14.185 $16.19 2,764,173.241
1997................... $11.682 $14.185 2,649,561.005
1996................... $12.292 $11.682 1,232,530.711
1995................... $12.496 $12.292 1,288,429.555
1994................... $12.861 $12.496 1,486,438.137
1993................... $12.797 $12.861 167,686.797
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value Units Outstanding
Subaccount Beginning of Period at End of Period at End of Period
---------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
Stock Index*(/1/)
1999................... $44.42 $52.827945 5,113,716.960
1998................... $35.128 $44.42 4,443,711.383
1997................... $26.791 $35.128 3,357,236.245
1996................... $22.172 $26.791 2,030,280.057
1995................... $16.437 $22.172 977,271.816
1994................... $16.521 $16.437 348,937.285
1993................... $15.310 $16.521 93,536.733
---------------------------------------------------------------------------------
Socially Responsible
Growth*(/3/)
1999................... $34.30 $43.995552 2,399,067.265
1998................... $26.879 $34.30 1,744,708.001
1997................... $21.221 $26.879 1,335,814.063
1996................... $17.752 $21.221 708,680.320
1995................... $13.377 $17.752 295,077.936
1994................... $13.364 $13.377 135,018.350
1993................... $12.490 $13.364 26,089.826
---------------------------------------------------------------------------------
Core Value*(/7/)
1999................... $9.29 $10.966574 618,554.557
1998................... $10.00 $9.29 95,759.521
---------------------------------------------------------------------------------
European Equity*(/9/)
1999................... $10.00 $12.824421 71,170.963
---------------------------------------------------------------------------------
Founders Growth*(/8/)
1999................... $10.00 $12.632215 209,797.215
---------------------------------------------------------------------------------
Founders International
Equity*(/9/)
1999................... $10.00 $25.037701 2,296,712.753
---------------------------------------------------------------------------------
Founders Passport*(/8/)
1999................... $10.00 $16.144478 230,853.270
---------------------------------------------------------------------------------
MidCap Stock*(/7/)
1999................... $9.63 $10,528777 677,575.571
1998................... $10.00 $9.63 467,292.833
---------------------------------------------------------------------------------
Technology Growth*(/9/)
1999................... $10.00 $15.383368 2,898,342.133
---------------------------------------------------------------------------------
Transamerica VIF
Growth(/7/)
1999................... $11.35 $15,422192 2,963,758.863
1998................... $10.00 $11.35 1,634,054.907
</TABLE>
(1) Sub-Account inception January 4, 1993.
(6) Sub-Account inception May 1,
(2) Sub-Account inception April 5, 1993. 1997.
(7) Sub-Account inception May 1,
1998.
(3) Sub-Account inception October 7, 1993.
(4) Sub-Account inception December 15, 1994.
(5) Sub-Account inception May 1, 1996. (8) Sub-Account inception May 3,
1999.
(9) Sub-Account inception October 1,
1999.
* The figures shown reflect information for the Initial Class Shares.
The Initial Class Shares of the Core Bond Sub-account, Emerging Leaders Sub-
account, Emerging Markets Sub-account, Founders Discovery Sub-account and Japan
Sub-account had not commenced operations as of December 31, 1999, therefore
comparable information is not available.
51
<PAGE>
The Service Class Shares of the Appreciation Sub-account, Balanced Sub-account,
Disciplined Stock Sub-account, Growth and Income Sub-account, International
Equity Sub-account, International Value Sub-account, Limited Term High Income
Sub-account, Quality Bond Sub-account, Small Cap Sub-account, Small Company
Stock Sub-account, Special Value Sub-account, Dreyfus Stock Index Fund Sub-
account, The Dreyfus Socially Responsible Growth Fund, Inc. Sub-account, Core
Bond Sub-account, Core Value Sub-account, Emerging Leaders Sub-account,
Emerging Markets Sub-account, European Equity Sub-account, Founders Discovery
Sub-account, Founders Growth Sub-account, Founders International Equity Sub-
account, Founders Passport Sub-account, Japan Sub-account, MidCap Stock Sub-
account, and Technology Growth Sub-account were not available as of December
31, 1999, therefore comparable information for the Service Class Shares is not
available.
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.
52
<PAGE>
Appendix C
DEFINITIONS
Account: The account established and maintained under the contract to which
your 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 the contract has been issued,
except upon the annuitant's death before the annuity date if a contingent
annuitant has previously been named. In the case of a qualified contract used
to fund an IRA, Roth 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 or owners; 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. Monthly annuity payments will start the first day of the month
immediately following the annuity date. Unless the annuity date is changed as
allowed by the contract, 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 amount applied as a single purchase payment to
provide an annuity under the annuity form and payment options available under
the contract. The annuity purchase amount is equal to the account value, less
any interest adjustment, less any applicable contingent deferred sales load,
and less any applicable premium taxes. In determining the annuity purchase
amount, Transamerica will waive the contingent deferred sales load if the
annuity form 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
the account value, less any interest adjustment, less the account fee, less any
applicable contingent deferred sales load, less any rider fee, and less
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. A contingent annuitant may be
designated only if the owner is not also the annuitant. The contingent
annuitant may be changed at any time by the owner while the annuitant is living
and before the annuity date.
Contingent Deferred Sales Load or Surrender Charge: A charge equal to a
percentage of premiums withdrawn from the certificate that are less than seven
years old. See Contingent Deferred Sales Load/Surrender Charge for the specific
percentages.
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 first
53
<PAGE>
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.
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 the company and are
distinguishable from those allocated to a separate account of the company.
Fixed Accumulated Value: The total dollar amount of all guarantee amounts held
under the fixed account for the contract before 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: An amount 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.
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 that does not receive special tax treatment
under the Code.
Owner or Joint Owners: The person or persons who, while living, control all
rights and benefits under the contract. Joint owners own the contract equally
with the 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 provision. Joint owners must
be husband and wife as of the contract date (except in Pennsylvania). Qualified
contracts may not 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 us.
Qualified Contract: A contract issued in connection with a retirement plan or
program that qualified for special tax treatment under Section 401(a), 403(b),
408 or 408A of the Code.
54
<PAGE>
Receipt: Receipt and acceptance by us at our service center.
Service Center: Transamerica's Annuity Service Center, at 4333 Edgewood Road
N.E., Cedar Rapids, IA 52499-0001 and at telephone (877) 717-8861.
Source Account: A sub-account of the variable account or 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 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. 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 before the annuity date. The variable accumulated value before 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 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)
reductions for the annual account fee deducted on the last business day of each
contract year; plus or minus (f) amounts transferred to or from the fixed
account; less (g) any applicable transfer fees; and less (h) withdrawals from
the sub-accounts.
Variable Accumulation Unit: A unit of measure used to determine the account
value before 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, full surrenders, and systematic
withdrawals that are paid in cash to the owner, or to any person or persons
specified by the owner.
Written Notice or Written Request: A notice or request in writing by the owner
to our service center. Such a request must contain original signatures; no
carbons or photocopies will be accepted. We reserve the right to accept a
facsimile copy.
55
<PAGE>
Appendix D
Transamerica Occidental Life Insurance Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the owner, in accordance
with the requirements of the Internal Revenue Service (IRS). This Disclosure
Statement contains information about opening and maintaining an Individual
Retirement Account or Annuity (IRA), and summarizes some of the financial and
tax consequences of establishing an IRA.
Part I of this Disclosure Statement discusses Traditional IRAs, while Part II
addresses Roth IRAs. Because the tax consequences of the two categories of IRAs
differ significantly, it is important that you review the correct part of this
Disclosure Statement to learn about your particular IRA. This Disclosure
Statement does not discuss Education IRAs or SIMPLE-IRAs, except as necessary
in the context of discussing other types of IRAs.
Your Transamerica Life Insurance and Annuity Company's Individual Retirement
Annuity, also referred to as a Transamerica Life IRA Contract has been approved
as to form by the IRS. In addition, we are using an IRA and a Roth IRA
Endorsement based on the IRS-approved text. Please note that IRS approval
applies only to the form of the contract and does not represent a determination
of the merits of such IRA contract.
It may be necessary for us to amend your Transamerica Life IRA or Roth IRA
Contract in order for us to obtain or maintain IRS approval of its tax
qualification. In addition, laws and regulations adopted in the future may
require changes to your contract in order to preserve its status as an IRA. We
will send you a copy of any such amendment.
No contribution to a Transamerica Life IRA will be accepted under a SIMPLE plan
established by any employer pursuant to Internal Revenue Code Section 408(p).
No transfer or rollover of funds attributable to contributions made by an
employer to your SIMPLE IRA under the employer's SIMPLE plan may be transferred
or rolled over to your Transamerica Life IRA before the expiration of the two
year period beginning on the date you first participated in the employer's
SIMPLE plan. In addition, depending on the annuity contract you purchased,
contributory IRAs may or may not be available.
This Disclosure Statement includes the non-technical explanation of some of the
changes made by the Tax Reform Act of 1986 applicable to IRAs and more recent
changes made by the Small Business Job Protection Act of 1996, the Health
Insurance Portability and Accountability Act of 1996, the Tax Relief Act of
1997 and the IRS Restructuring and Reform Act of 1998.
The information provided applies to contributions made and distributions
received after December 31, 1986, and reflects the relevant provisions of the
Code as in effect on January 1, 1999. This Disclosure Statement is not intended
to constitute tax advice, and you should consult a tax professional if you have
questions about your own circumstances.
Revocation of Your IRA or Roth IRA
You have the right to revoke your Traditional IRA or Roth IRA issued by us
during the seven calendar day period following its establishment. The
establishment of your Traditional IRA or Roth IRA contract will be the contract
effective date. This seven-day calendar period may or may not coincide with the
free look period of your contract.
In order to revoke your Traditional IRA or Roth IRA, you must notify us in
writing and you must mail or deliver your revocation to us postage prepaid, at:
401 North Tryon Street, Charlotte, NC 28202. The date of the postmark, or the
date of certification or registration if sent by certified or registered mail,
will be considered your revocation date. If you revoke your Traditional IRA or
Roth IRA during the seven-day period, an amount equal to your premium will be
returned to you without any adjustment.
Definitions
Code - Internal Revenue Code of 1986, as amended, and regulations issued
thereunder.
Contributions - Purchase payments paid to your contract.
Contract - The annuity policy, certificate or contract which you purchased.
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Compensation - For purposes of determining allowable contributions, the term
compensation includes all earned income, including net earnings from self-
employment and alimony or separate maintenance payments received under a decree
of divorce or separate maintenance and includable in your gross income, but
does not include deferred compensation or any amount received as a pension or
annuity.
Regular Contributions--In General
As is more fully discussed below, for 1998 and later years, the maximum total
amount that you may contribute for any tax year to your regular IRAs and your
regular Roth IRAs combined is $2,000, or if less, your compensation for that
year. Once you attain age 70 1/2, this limit is reduced to zero only for your
regular IRAs, not for your Roth IRAs, but the separate limit on Roth IRA
contributions can be reduced to zero for taxpayers with adjusted gross income,
also referred to as AGI, above certain levels, as described below in Part II,
Section 1. While your Roth IRA contributions are never deductible, your regular
IRA contributions are fully deductible, unless you, or your spouse, is an
active participant in some form of tax-qualified retirement plan for the tax
year. In the latter case, any deductible portion of your regular IRA
contributions for each year is subject to the limits that are described below
in Part I, Section 2, and any remaining regular IRA contributions for that year
must be reported to the IRS as nondeductible IRA contributions, along with your
Roth IRA contributions.
IRA PART I: TRADITIONAL IRAs
The rules that apply to a Traditional Individual Retirement Account or Annuity,
which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA" and which includes a regular or Spousal IRA and a rollover
IRA, generally also apply to IRAs under Simplified Employee Pension plans or
SEP-IRAs, unless specific rules for SEP-IRAs are stated.
1. Contributions
(a) Regular IRA. Regular IRA contributions must be in cash and are subject to
the limits described above. Such contributions are also subject to the minimum
amount under the Transamerica IRA contract. In addition, any of your regular
contributions to an IRA for a tax year must be made by the due date, not
including extensions, for your federal tax return for that tax year. See also
Part II, Section 4 below about recharacterizing IRA and Roth IRA contributions
by such date.
(b) Spousal IRA. If you and your spouse file a joint federal income tax return
for the taxable year and if your spouse's compensation, if any, includable in
gross income for the year is less than the compensation includable in your
gross income for the year, you and your spouse may each establish your own
separate regular IRA, and Roth IRA, and may make contributions to such IRAs for
your spouse that are not limited by your spouse's lower amount of compensation.
Instead, the limit for the total contribution to spousal IRAs that can be made
by you or your spouse for the tax year is:
1. $2,000; or
2. if less, the total combined compensation for both you and your spouse
reduced by any deductible IRA contributions and any Roth IRA contributions
for such year.
As with any regular IRA contributions, those for your spouse cannot be made for
any tax year in which your spouse has attained age 70 1/2, must be in cash, and
must be made by the due date, not including extensions, for your federal income
tax return for that tax year.
(c) Rollover IRA. Rollover contributions to a Traditional IRA are unlimited in
dollar amount. These can include rollover contributions of eligible
distributions received by you from another Traditional IRA or tax-qualified
retirement plan. Generally, any distribution from a tax-qualified retirement
plans, such as a pension or profit sharing plan, Code Section 401(k) plan, H.R.
10 or Keogh plan, or a Traditional IRA can be rolled over to a Traditional IRA
unless it is a required minimum distribution as discussed below in Part I,
Section 4(a) or it is part of a series of payments to be paid to you over your
life, life expectancy or a period of at least 10 years. In addition,
distributions of "after-tax" plan contributions, i.e., amounts which are not
subject to federal income tax when distributed from a tax-qualified retirement
plan, are not eligible to be rolled over to an IRA. If a distribution from a
tax-qualified plan or a Traditional IRA is paid to you
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and you want to roll over all or part of the eligible distributed amount to a
Transamerica Life Traditional IRA, the rollover must be accomplished within 60
days of the date you receive the amount to be rolled over. However, you may
roll over any amount from one Traditional IRA into another Traditional IRA only
once in any 365-day period.
A timely rollover of an eligible distributed amount that has been paid to you
directly will prevent its being taxable to you at the time of distribution;
that is, none of it will be includable in your gross income until you withdraw
some amount from your rollover IRA. However, any such distribution directly to
you from a tax-qualified retirement plan is generally subject to a mandatory
20% withholding tax.
By contrast, a direct transfer from a tax-qualified retirement plan to a
Traditional IRA is considered a "direct" rollover and is not subject to any
mandatory withholding tax, or other federal income tax, upon the direct
transfer. If you elect to make such a "direct" rollover from a tax-qualified
plan to a Transamerica Life Traditional IRA, the transferred amount will be
deposited directly into your rollover IRA.
Strict limitations apply to rollovers, and you should seek competent tax advice
in order to comply with all the rules governing rollovers.
(d) Direct Transfers from another Traditional IRA. You may make an initial or
subsequent contribution to your Transamerica Life Traditional IRA by directing
the fiduciary or issuer of any of your existing IRAs to make a direct transfer
of all or part of such IRAs in cash to your Transamerica Life Traditional IRA.
Such a direct transfer between Traditional IRAs is not considered a rollover ,
e.g., for purposes of the 1-year waiting period or withholding.
(e) Simplified Employee Pension Plan, or SEP-IRA. If an IRA is established that
meets the requirements of a SEP-IRA, generally your employer may contribute an
amount not to exceed the lesser of 15% of your includable compensation
($160,000 for 1999, adjusted for inflation thereafter) or $30,000, even after
you attain age 70 1/2. The amount of such contribution is not includable in
your income for federal income tax purposes. In the case of a SEP-IRA that has
a grandfathered qualifying form of salary reduction, referred to as a SARSEP,
that was established by an employer before 1997, generally any employee,
including a self-employed individual, who:
1. has worked for the employer for 3 of the last 5 preceding tax years;
2. is at least age 21; and
3. has received from the employer compensation of at least $400 for the current
tax year, adjusted for inflation after 1999.
is eligible to make a before tax salary reduction contribution to the SARSEP
for the current tax year of up to $10,000, adjusted for inflation after 1998,
subject to the overall limits for SEP-IRA contributions.
Your employer is not required to make a SEP-IRA contribution in any year nor
make the same percentage contribution each year. But if contributions are made,
they must be made to the SEP-IRA for all eligible employees and must not
discriminate in favor of highly compensated employees. If these rules are not
met, any SEP-IRA contributions by the employer could be treated as taxable to
the employees and could result in adverse tax consequences to the participating
employee. For further details about SARSEPs and SEP-IRAs, e.g., for computing
contribution limits for self-employed individuals, see IRS Publication 590, as
indicated below.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers to any
IRA must be made in accordance with the appropriate sections of the Code. It is
your full and sole responsibility to determine the tax deductibility of any
contribution to your Traditional IRA, and to make such contributions in
accordance with the Code. Transamerica does not provide tax advice, and assumes
no liability for the tax consequences of any contribution to your Transamerica
Life Traditional IRA.
2. Deductibility of Contributions for a Regular IRA
(a) General Rules. The deductible portion of the contributions made to the
regular IRAs for you, or your spouse, for a tax year depends on whether you, or
your spouse, is an "active participant" in some type of a tax-qualified
retirement plan for such year, as described in Section 2(b) immediately below.
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If you and your spouse file a joint return for a tax year and neither of you is
an active participant for such year, then the permissible contributions to the
regular IRAs for each of you are fully deductible up to $2,000 each, i.e., your
combined deductible IRA contribution limit for the tax year could be $4,000.
Similarly, if you are not married, or treated as such, for the tax year and you
are not an active participant for such year, the permissible contributions to
your regular IRAs for the tax year are fully deductible up to $2,000. For
instance, if you and your spouse file separate returns for the tax year and you
did not live together at any time during such tax year, then you are treated as
unmarried for such year, and if you were not an active participant for the tax
year, then your deductible limit for your regular IRA contribution is $2,000,
even if your spouse was an active participant for such year.
If you are an active participant for the tax year, then your $2,000 limit is
subject to a phase-out rule if your AGI for such year exceeds a Threshold
Level, depending on your tax filing status and the calendar year. If, however,
you are not an active participant for the tax year but your spouse is, then
your $2,000 limit is subject to the phase-out rule only if your AGI exceeds a
higher Threshold Level. See Part I, Section 2(c), below.
(b) Active Participant. You are an "active participant" for a year if you
participate in some type of tax-qualified retirement plan. For example, if you
participate in a qualified pension or profit sharing plan, a Code Section
401(k) plan, certain government plans, a tax-sheltered arrangement under Code
Section 403, a SIMPLE plan or a SEP-IRA plan, you are considered to be an
active participant. Your Form W-2 for the year should indicate your
participation status.
(c) Adjusted Gross Income, also referred to as AGI. If you are an active
participant, you must look at your AGI for the year, or if you and your spouse
file a joint tax return, you use your combined AGI, to determine whether you
can make a deductible IRA contribution for that taxable year. The instructions
for your tax return will show you how to calculate your AGI for this purpose.
If you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and you can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are an active participant for the tax year, then your Threshold Level
depends upon whether you are a married taxpayer filing a joint tax return, an
unmarried taxpayer, or a married taxpayer filing a separate tax return. If you
are a married taxpayer but file a separate tax return, the Threshold Level is
$0. If you are a married taxpayer filing a joint tax return, or an unmarried
taxpayer, your Threshold Level depends upon the taxable year, and can be
determined using the appropriate table below:
<TABLE>
<CAPTION>
Married Filing Jointly Unmarried
Taxable Threshold Taxable Threshold
Year Level Year Level
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $50,000 1998 $30,000
1999 $51,000 1999 $31,000
2000 $52,000 2000 $32,000
2001 $53,000 2001 $33,000
2002 $54,000 2002 $34,000
2003 $60,000 2003 $40,000
2004 $65,000 2004 $45,000
2005 $70,000 2005 and thereafter $50,000
2006 $75,000
2007 and thereafter $80,000
-----------------------------------------------------------------------------------
</TABLE>
Beginning in 1998, if you are not an active participant for the tax year but
your spouse is, and you are not treated as unmarried for filing purposes, then
your Threshold Level is $150,000.
If your AGI is less than $10,000 above your Threshold Level, or $20,000 for
married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007, you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000, even for Spousal IRAs. You can calculate your Deduction Limit as
follows:
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10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit 10,000
For taxable years beginning on or after January 1, 2007, married taxpayers
filing jointly should substitute 20,000 for 10,000 in the numerator and
denominator of the above equation.
You must round up any computation of the Deduction Limit to the next highest
$10 level, that is, to the next highest number which ends in zero. For example,
if the result is $1,525, you must round it up to $1,530. If the final result is
below $200 but above zero, your Deduction Limit is $200. Your Deduction Limit
cannot in any event exceed 100% of your compensation.
3. Nondeductible Contributions to Regular IRAs
The amounts of your regular IRA contributions which are not deductible will be
nondeductible contributions to such IRAs. You may also choose to make a
nondeductible contribution to your regular IRA, even if you could have deducted
part or all of the contribution. Interest or other earnings on your regular IRA
contributions, whether from deductible or nondeductible contributions, will not
be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA, you must report the amount
of the nondeductible contribution to the IRS as a part of your tax return for
the year, e.g., on Form 8606.
4. Distributions
(a) Required Minimum Distributions, or simply, RMD. Distributions from your
Traditional IRAs must be made or begin no later than April 1 of the calendar
year following the calendar year in which you attain age 70 1/2, the required
beginning date. You may take RMDs from any Traditional IRA you maintain, but
not from any Roth IRA, as long as:
a) distributions begin when required;
b) distributions are made at least once a year; and
c) the amount to be distributed is not less than the minimum required under
current federal tax law.
If you own more than one Traditional IRA, you can choose whether to take your
RMD from one Traditional IRA or a combination of your Traditional IRAs. A
distribution may be made at once in a lump sum, as qualifying partial
withdrawals or as qualifying settlement option payments. Qualifying partial
withdrawals and settlement option payments must be made in equal or
substantially equal amounts over:
a) your life or the joint lives of you and your beneficiary; or
b) a period not exceeding your life expectancy, as redetermined annually under
IRS tables in the income tax regulations, or the joint life expectancy of
you and your beneficiary, as redetermined annually, if that beneficiary is
your spouse.
Also, special rules may apply if your designated beneficiary, other than your
spouse, is more than ten years younger than you.
If qualifying settlement option payments start before the April 1 following the
year you turn age 70 1/2, then the annuity date of such settlement option
payments will be treated as the required beginning date for purposes of the RMD
provisions, above, and the death benefit provisions, below.
If you die before the entire interest in your Traditional IRAs is distributed
to you, but after your required beginning date, the entire interest in your
Traditional IRAs must be distributed to your beneficiaries at least as rapidly
as under the method in effect at your death. If you die before your required
beginning date and if you have a designated beneficiary, distributions to your
designated beneficiary can be made in substantially equal installments over the
life or life expectancy of the designated beneficiary, beginning by December 31
of the calendar year that is one year after the year of your death. Otherwise,
if you die before your required beginning date and your surviving spouse is not
your designated beneficiary, distributions must be completed by December 31 of
the calendar year that is five years after the year of your death.
If your designated beneficiary is your surviving spouse, and you die before
your required beginning date, your surviving spouse can become the new
owner/annuitant and can continue the Transamerica Life Traditional IRA on the
same basis as before your death. If your spouse elects to continue the
contract, an amount equal to the excess, if any, of the Death Benefit over the
account value will then
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be added to the account value. This amount will be added only once, at the time
of such election. Furthermore, all future contingent deferred sales loads will
be waived. If your surviving spouse does not wish to continue the contract as
his or her IRA, he or she may elect to receive the death benefit in the form of
qualifying settlement option payments in order to avoid the 5-year rule. Such
payments must be made in substantially equal amounts over your spouse's life or
a period not extending beyond his or her life expectancy. Your surviving spouse
must elect this option and begin receiving payments no later than the later of
the following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached the required
beginning date if you had not died.
Either you or, if applicable, your beneficiary, is responsible for assuring
that the RMD is taken in a timely manner and that the correct amount is
distributed.
(b) Taxation of IRA Distributions. Because nondeductible Traditional IRA
contributions are made using income which has already been taxed, that is, they
are not deductible contributions, the portion of the Traditional IRA
distributions consisting of nondeductible contributions will not be taxed again
when received by you. If you make any nondeductible contributions to your
Traditional IRAs, each distribution from any of your Traditional IRAs will
consist of a nontaxable portion, return of nondeductible contributions, and a
taxable portion, return of deductible contributions, if any, and earnings.
Thus, if you receive a distribution from any of your Traditional IRAs and you
previously made deductible and nondeductible contributions to such IRAs, you
may not take a Traditional IRA distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
Remaining nondeductible contributions
Divided by
Year-end total adjusted Traditional IRA balances
Multiplied by
Total distributions for the year
Equals:
Nontaxable distributions for the year
To figure the year-end total adjusted Traditional IRA balance, you must treat
all of your Traditional IRAs as a single Traditional IRA. This includes all
regular IRAs, as well as SEP-IRAs, SIMPLE IRAs and Rollover IRAs, but not Roth
IRAs. You also add back to your year-end total Traditional IRA balances,
specifically the distributions taken during the year from your Traditional
IRAs. Please refer to IRS Publication 590, Individual Retirement Arrangements
for instructions, including worksheets, that can assist you in these
calculations. Transamerica Life Insurance and Annuity Company will report all
distributions from your Transamerica Traditional IRA to the IRS as fully
taxable income to you.
Even if you withdraw all of the assets in your Traditional IRAs in a lump sum,
you will not be entitled to use any form of lump sum treatment or income
averaging to reduce the federal income tax on your distribution. Also, no
portion of your distribution qualifies as a capital gain. Moreover, any
distribution made before you reach age 59 1/2, may be subject to a 10% penalty
tax on early distributions, as indicated below.
(c) Withholding. Unless you elect not to have withholding apply, federal income
tax will be withheld from your Traditional IRA distributions. If you receive
distributions under a settlement option, tax will be withheld in the same
manner as taxes withheld on wages, calculated as if you were married and claim
three withholding allowances. If you are receiving any other type of
distribution, tax will be withheld in the amount of 10% of the distribution. If
payments are delivered to foreign countries, federal income tax will generally
be withheld at a 10% rate unless you certify to Transamerica that you are not a
U. S. citizen residing abroad or a tax avoidance expatriate as defined in Code
Section 877. Such certification may result in mandatory withholding of federal
income taxes at a different rate.
5. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year the total regular
IRA contributions you
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made to your Traditional IRAs and your Roth IRAs, other than rollovers or
transfers, exceed the maximum allowable deductible and nondeductible
contributions for that year, the excess contribution amount will be subject to
a nondeductible 6% excise penalty tax. Such penalty tax cannot exceed 6% of the
value of your IRAs at the end of such year.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return, including
extensions, for the taxable year in which you made the excess contribution, the
excess contribution will not be subject to the 6% penalty tax. The amount of
the excess contribution withdrawn will not be considered an early distribution,
nor otherwise be includable in your gross income if you have not taken a
deduction for the excess amount.
However, the earnings withdrawn will be taxable income to you and may be
subject to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as regular IRA contributions in the following year to the extent that
the excess, when aggregated with your regular IRA contributions, if any, for
the subsequent year, does not exceed the maximum allowable deductible and
nondeductible amount for that year. The 6% excise tax will be imposed on excess
contributions in each subsequent year they are neither returned to you nor
applied as permissible regular IRA contributions for such year.
(b) Early Distributions. Since the purpose of an IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain
age 59 1/2 constitutes an early distribution subject to a 10% penalty tax
unless the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary, as determined from
IRS tables in the income tax regulations.
Also, the 10% penalty tax will not apply if distributions are used to pay for
medical expenses in excess of 7.5% of your AGI or if distributions are used to
pay for health insurance premiums for you, your spouse and/or your dependents
if you are an unemployed individual who is receiving unemployment compensation
under federal or state programs for at least 12 consecutive weeks. Effective
for distributions made in 1998 or later, the 10% penalty tax also will not
apply to an early distribution made to pay for certain qualifying first-time
homebuyer expenses of you or certain family members, or for certain qualifying
higher education expenses for you or certain family members.
First-time homebuyer expenses must be paid within 120 days of the distribution
from the IRA and include up to $10,000 of the costs of acquiring, constructing,
or reconstructing a principal residence, including any usual or reasonable
settlement, financing or other closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution. The
amount of an early distribution, excluding any nondeductible contribution
included therein, is includable in your gross income and may be subject to the
10% penalty tax unless you transfer it to another IRA as a qualifying rollover
contribution.
(c) Failure To Satisfy RMD. If the RMD rules described above in Part I, Section
4(a) apply to you and if the amount distributed during a calendar year is less
than the minimum amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the excess of the amount required to be distributed
over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Traditional IRA, or any interference with the
independent status of such IRA, the Traditional IRA will lose its tax exemption
and be treated as having been distributed to you. The value of the entire
Traditional IRA, excluding any nondeductible contributions included therein,
will be includable in your gross income; and, if at the time of the prohibited
transaction you are under age 59 1/2, you may also be subject to the 10%
penalty tax on early distributions, as described above in Part I, Section 5(b).
If you borrow from or pledge your Traditional IRA, or your benefits under the
contract, as security for a loan, the portion borrowed or pledged as security
will cease to be tax-qualified, the value of that portion will be treated as
distributed to you, and you will have to include the value of the portion
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borrowed or pledged as security in your income that year for federal tax
purposes. You may also be subject to the 10% penalty tax on early
distributions.
(e) Overstatement or Understatement of Nondeductible Contributions. If you
overstate your nondeductible Traditional IRA contributions on your federal
income tax return, without reasonable cause, you may be subject to a reporting
penalty. Such a penalty also applies for failure to file any form required by
the IRS to report nondeductible contributions. These penalties are in addition
to any ordinary income or penalty taxes, interest, and penalties for which you
may be liable if you underreport income upon receiving a distribution from your
Traditional IRA. See Part I, Section 4(b) above for the tax treatment of such
distributions.
IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA in any
amount up to the contribution limits described in Part II, Section 3, below.
Such contributions are also subject to the minimum amount under the
Transamerica Life Roth IRA contract. Such contribution must be in cash. Your
contribution for a tax year must be made by the due date, not including
extensions, for your federal income tax return for that tax year. Unlike
Traditional IRAs, you may continue making Roth IRA contributions after reaching
age 70 1/2 to the extent that your AGI does not exceed the levels described
below.
(b) Spousal Roth IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation
includable in your gross income for the year, you and your spouse may each
establish your own individual Roth IRA and may make contributions to those Roth
IRAs in accordance with the rules and limits for contributions contained in the
Code, which are described in Part II, Section 3, below. Such contributions must
be in cash. Your contribution to a Spousal Roth IRA for a tax year must be made
by the due date, not including extensions, for your federal income tax return
for that tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth IRA within
60 days after receiving a distribution from an existing Roth IRA, subject to
certain limitations discussed in Part II, Section 3, below.
(d) Transfer Roth IRA. You may make an initial or subsequent contribution to
your Transamerica Life Roth IRA by directing a fiduciary or issuer of any of
your existing Roth IRAs to make a direct transfer of all or a portion of the
assets from such Roth IRAs to your Transamerica Life Roth IRA.
(e) Conversion Roth IRA. You may make contributions to a Conversion Roth IRA
within 60 days of receiving a distribution from an existing Traditional IRA or
by instructing the fiduciary or issuer of any of your existing Traditional IRAs
to make a direct transfer of all or a portion of the assets from such a
Traditional IRA to your Transamerica Life Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your AGI, not including the conversion amount, is greater than $100,000 for
the tax year, or if you are married and you and your spouse file separate tax
returns, you may not convert or transfer any amount from a Traditional IRA to a
Roth IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers or
conversions to a Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica Life
Insurance and Annuity Company does not provide tax advice, and assumes no
liability for the tax consequences of any contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions. However,
distributions from your Roth IRA are generally not subject to federal income
tax. See Part II, 4(b) below. This is unlike a Traditional IRA, which permits
deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs may not
exceed the lesser of 100% of your compensation or $2,000 for any calendar year,
subject to AGI phase-out rules described below in Section 3(a). Rollover,
transfer and conversion
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contributions, if properly made, do not count towards your maximum annual
contribution limit, nor do employer contributions to a SEP-IRA or SIMPLE IRA.
(a) Regular Roth IRAs. The maximum amount you may contribute to a regular Roth
IRA will depend on the amount of your AGI for the calendar year. Your maximum
$2,000 contribution limit begins to phase out when your AGI reaches $95,000 as
unmarried or $150,000 when married filing jointly. Under this phase out, your
maximum regular Roth IRA contributions generally will not be less than $200;
however, no contribution is allowed if your AGI exceeds $110,000 as unmarried
or $160,000 when married filing jointly. If you are married and you and your
spouse file separate tax returns, your maximum regular Roth IRA contribution
phases out between $0 and $10,000. If you are married but you and your spouse
lived apart for the entire taxable year and file separate federal income tax
returns, your maximum contribution is calculated as if you were not married.
You should consult your tax adviser to determine your maximum contribution.
You may make contributions to a regular Roth IRA after age 70 1/2, subject to
the phase-out rules. Regular Roth IRA contributions for a tax year should be
reported on your tax return for that year, specifically, on Form 8606.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's Spousal
Roth IRA may not exceed the lesser of:
1. 100% of both spouses' combined compensation minus any Roth IRA or deductible
Traditional IRA contribution for the spouse with the higher compensation for
the year; or
2. $2,000, as reduced by the phase-out rules described above for regular Roth
IRAs.
A maximum of $4,000 may be contributed to both spouses' Roth IRAs.
Contributions can be divided between the spouses' Roth IRAs as you and your
spouse wish, but no more than $2,000 in regular Roth IRA contributions can be
contributed to either individual's Roth IRA each year.
(c) Rollover Roth IRAs. There is no limit on the amounts that you may rollover
from one Roth IRA into another Roth IRA, including your Transamerica Life Roth
IRA. You may roll over a distribution from any single Roth IRA to another Roth
IRA only once in any 365-day period.
(d) Transfer Roth IRAs. There is no limit on amounts that you may transfer
directly from one Roth IRA into another Roth IRA, including your Transamerica
Life Roth IRA. Such a direct transfer does not constitute a rollover for
purposes of the 1-year waiting period.
(e) Conversion Roth IRAs. There is no limit on amounts that you may convert
from your Traditional IRA into your Transamerica Life Roth IRA if you are
eligible to open a Conversion Roth IRA as described in Part II, Section 1(e),
above. In the case of a conversion from a SIMPLE-IRA, the conversion may only
be done after the expiration of your 2-year participation period described in
Code Section 72(t)(6). However, the distribution proceeds from your Traditional
IRA are includable in your taxable income to the extent that they represent a
return of deductible contributions and earnings on any contributions. The
distribution proceeds from your Traditional IRA are not subject to the 10%
early distribution penalty tax, described below, if the distribution proceeds
are deposited to your Roth IRA within 60 days.
You can also make contributions to a Roth IRA by instructing the fiduciary or
issuer, custodian or trustee of your existing Traditional IRAs to transfer the
assets in your Traditional IRAs to the Roth IRA, which can be a successor to
your existing Traditional IRAs. The transfer will be treated as a distribution
from your Traditional IRAs, and that amount will be includable in your taxable
income to the extent that it represents a return of deductible contributions
and earnings on any contributions, but will not be subject to the 10% early
distribution penalty tax.
If you converted from a Traditional IRA to a Roth IRA during 1998, the income
reportable upon distribution from the Traditional IRA may be reportable
entirely for 1998 or reportable ratably over four years beginning in 1998.
4. Recharacterization of IRA Contributions
(a) Eligibility. By making a timely transfer and election, you generally can
treat a contribution made to one type of IRA as made to a different type of IRA
for a taxable year. For example, if you make contributions to a Roth IRA and
later discover that
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you are not eligible to make Roth IRA contributions, you may recharacterize all
or a portion of the contribution as a Traditional IRA contribution by the
filing due date, including extensions, for the applicable tax year.
You may not recharacterize amounts paid into a Traditional IRA that represented
tax-free rollovers or transfers, or employer contributions.
(b) Election. You may elect to recharacterize a contribution amount made to one
type of IRA by simply making a trustee-to-trustee transfer of such amount, plus
net income attributable to it, to a second type of IRA on or before the federal
income tax due date, including extensions, for the tax year for which the
contribution was initially made. After the recharacterization has been made,
you may not revoke or modify the election.
(c) Taxation of a Recharacterization. For federal income tax purposes, a
recharacterized contribution will be treated as having been contributed to the
transferee IRA, rather than to the transferor IRA, on the same date and for the
same tax year that the contribution was initially made to the transferor IRA. A
recharacterized transfer is not considered a rollover for purposes of the 1-
year waiting period.
The transfer of the contribution amount being recharacterized must include the
net income attributable to such amount. If such amount has experienced net
losses as of the time of the recharacterization transfer, the amount
transferred, the original contribution amount less any losses, will generally
constitute a transfer of the entire contribution amount. You must treat the
contribution amount as made to the transferee IRA on your federal income tax
return for the year to which the original contribution amount related.
For reconversions following a recharacterization, see Publication 590 and
Treasury Regulation Section 1.408A-5.
5. Distributions
(a) Required Minimum Distribution, or simply, RMD. Unlike a Traditional IRA,
there are no rules that require that any distribution be made to you from your
Roth IRA during your lifetime.
If you die before the entire value of your Roth IRA is distributed to you, the
balance of your Roth IRA must be distributed by December 31 of the calendar
year that is five years after your death. However, if you die and you have a
designated beneficiary, your beneficiary may elect to take distributions in the
form of qualifying settlement option payments in substantially equal
installments over the life or life expectancy of the designated beneficiary,
beginning by December 31 of the calendar year that is one year after your
death.
If your beneficiary is your surviving spouse, he or she can become the new
owner/annuitant and can continue the Transamerica Life Roth IRA on the same
basis as before your death. If your surviving spouse does not wish to continue
the Transamerica Life Roth IRA as his or her Roth IRA, he or she may elect to
receive the death benefit in the form of qualifying settlement option payments
in order to avoid the 5-year distribution requirement. Such payments must be
made in substantially equal amounts over your spouse's life or a period not
extending beyond his or her life expectancy. Your surviving spouse must elect
this option and begin receiving payments no later than the later of the
following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached age 70.
Your beneficiary is responsible for assuring that the RMD following your death
is taken in a timely manner and that the correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw from your
Roth IRA are generally tax-free. For federal income tax purposes, all of your
Roth IRAs are aggregated and Roth IRA distributions are treated as made first
from Roth IRA contributions and second from earnings. Distributions that are
treated as made from Roth IRA contributions are treated as made first from
regular Roth IRA contributions, which are always tax-free, and second from
conversion or rollover Roth IRA contributions on a first-in, first-out basis. A
distribution allocable to a particular conversion or rollover Roth IRA
contribution is treated as consisting first of the portion, if any, of the
conversion contribution that was previously includable in gross income by
reason of the conversion.
In any event, since the purpose of a Roth IRA is to accumulate funds for
retirement, your receipt or use of Roth IRA earnings before you attain age 59
1/2, or
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within 5 years of your first contribution to the Roth IRA, including a
contribution rolled over, transferred or converted from a Traditional IRA, will
generally be treated as an early distribution subject to regular income tax and
to the 10% penalty tax described below in Section 6(b).
No income tax will apply to earnings that are withdrawn before you attain age
59 1/2, but which are withdrawn five or more years after the first contribution
to the Roth IRA, including a rollover or transfer contribution or conversion
from a Traditional IRA, where the withdrawal is made:
a) upon your death or disability; or
b) to pay qualified first-time homebuyer expenses of you or certain family
members.
No portion of your Roth IRA distribution qualifies as a capital gain. There is
also a separate 5-year rule for the recapture of the 10% penalty tax that is
described below in Section 6(b) and that applies to any Roth IRA distribution
made before age 59 1/2 if any conversion or rollover contribution has been made
to any Roth IRA owned by the individual within the 5 most recent taxable years,
even if this current distribution from the Roth IRA is otherwise tax-free under
the rules described in this Subsection 5(b).
(c) Withholding. If the distribution from your Roth IRA is subject to federal
income tax, unless you elect not to have withholding apply, federal income tax
will be withheld from your Roth IRA distributions. If you receive distributions
under a settlement option, tax will be withheld in the same manner as taxes
withheld on wages, calculated as if you were married and claim three
withholding allowances. If you are receiving any other type of distribution,
tax will be withheld in the amount of 10% of the amount of the distribution. If
payments are delivered to foreign countries, federal income tax will generally
be withheld at a 10% rate unless you certify to Transamerica Life Insurance and
Annuity Company that you are not a U. S. citizen residing abroad or a "tax
avoidance expatriate" as defined in Code Section 877. Such certification may
result in mandatory withholding of federal income taxes at a different rate.
6. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year your total regular
Roth IRA contributions, other than rollovers, transfers or conversions, exceed
the maximum allowable contributions for that year, taking into account
Traditional IRA contributions, the excess contribution amount will be subject
to a nondeductible 6% excise penalty tax. Such penalty tax cannot exceed 6% of
the value of your Roth IRAs at the end of such year. However, if you withdraw
the excess contribution, plus any earnings on it, before the due date for
filing your federal income tax return, including extensions, for the taxable
year in which you made the excess contribution, the excess contribution will
not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as Roth IRA contributions in a later year to the extent that the
excess, when aggregated with your regular Roth IRA contributions, if any, for
the subsequent year, does not exceed the maximum allowable contribution for
that year. The 6% excise tax will be imposed on excess contributions in each
subsequent year they are neither returned to you nor applied as permissible
regular Roth IRA contributions for such year.
(a) Early Distributions. Since the purpose of a Roth IRA is to accumulate funds
for retirement, your receipt or use of any portion of your Roth IRA before you
attain age 59 1/2 constitutes an early distribution subject to the 10% penalty
tax on the earnings in your Roth IRA. This penalty tax will not apply if the
distribution occurs as a result of your death or disability or is part of a
series of substantially equal payments made over your life expectancy or the
joint life expectancies of you and your beneficiary, as determined from IRS
tables in the income tax regulations. Also, the 10% penalty tax will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI; or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at
least 12 consecutive weeks.
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The 10% penalty tax also will not apply to an early distribution made to pay
for certain qualifying first-time homebuyer expenses for you or certain family
members, or for certain qualifying higher education expenses for you or certain
family members. First-time homebuyer expenses must be paid within 120 days of
the distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including any
usual or reasonable settlement, financing or other closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution.
There is also a separate 5-year recapture rule for the 10% penalty tax in the
case of a Roth IRA distribution made before age 59 1/2 that is made within 5
years after a conversion or rollover contribution from a Traditional IRA. This
recapture rule exists because such a prior Roth IRA contribution avoided the
10% penalty tax when it was rolled over or converted from the Traditional IRA.
Under this 5-year recapture rule, any Roth IRA distribution made before age 59
1/2 that is attributable to any conversion or rollover contribution from a
Traditional IRA made within the previous 5 years to any of the individual's
Roth IRAs is generally subject to the 10% penalty tax, and its exceptions, to
the extent that such prior Roth IRA contribution was subject to ordinary tax
upon the conversion or rollover, even if the Roth IRA distribution is otherwise
tax-free.
Under the distribution ordering rules for a Roth IRA, all of an individual's
Roth IRAs and distributions therefrom are treated as made: first from regular
Roth IRA contributions; then from conversion or rollover Roth IRA contributions
on a first-in, first-out basis; and last from earnings. However, whenever any
Roth IRA distribution amount is attributable to any conversion or rollover
contribution made within the 5 most recent tax years, this distributed amount
is attributed first to the taxable portion of such prior contribution, for
purposes of determining the amount of this Roth IRA distribution that is
subject to the recapture of the 10% penalty tax, unless some exception to the
penalty tax applies to the current Roth IRA distribution, such as age 59 1/2,
disability or certain health, education or homebuyer expenses, as described
above in this Subsection 6(b).
(c) Failure to Satisfy RMDs Upon Death. If the RMD rules described above in
Part II, Section 4(a) apply to the beneficiary of your Roth IRA after your
death and if the amount distributed during a calendar year is less than the
minimum amount required to be distributed, your beneficiary will be subject to
a penalty tax equal to 50% of the excess of the amount required to be
distributed over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Roth IRA, or any interference with the independent
status of the Roth IRA, the Roth IRA will lose its tax exemption and be treated
as having been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and if at the time of
the prohibited transaction, you are under age 59 1/2 you may also be subject to
the 10% penalty tax on early distributions, as described above in Part II,
Section 5(b). If you borrow from or pledge your Roth IRA, or your benefits
under the contract, as a security for a loan, the portion borrowed or pledged
as security will cease to be tax-qualified, the value of that portion will be
treated as distributed to you, and you may be subject to the 10% penalty tax on
early distributions from a Roth IRA.
IRA PART III: OTHER INFORMATION
(1) Federal Estate and Gift Taxes
Any amount in or distributed from your Traditional and/or Roth IRAs upon your
death may be subject to federal estate tax, although certain credits and
deductions may be available. The exercise or non-exercise of an option that
would pay a survivor an annuity at or after your death should not be considered
a transfer for federal gift tax purposes.
(2) Tax Reporting
You must report contributions to, and distributions from, your Traditional IRA
and Roth IRA, including the year-end aggregate account balance of all
Traditional IRAs and Roth IRAs, on your federal income tax return for the year
specifically on IRS Form 8606. For Traditional IRAs, you must
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designate on the return how much of your annual contribution is deductible and
how much is nondeductible. You need not file IRS Form 5329 with your income tax
return for a particular year unless for that year you are subject to a penalty
tax because there has been an excess contribution to, an early distribution
from, or insufficient RMDs from your Traditional IRA or Roth IRA, as
applicable.
(3) Vesting
Your interest in your Traditional IRA or Roth IRA is nonforfeitable at all
times.
(4) Exclusive Benefit
Your interest in your Traditional IRA or Roth IRA is for the exclusive benefit
of you and your beneficiaries.
(5) IRS Publication 590
Additional information about your Traditional IRA or Roth IRA or about SEP-IRAs
and SIMPLE-IRAs can be obtained from any district office of the IRS or by
calling 1-800-TAX-FORM for a free copy of IRS Publication 590, Individual
Retirement Arrangements.
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THE DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE VARIABLE ANNUITY
Issued by
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Supplement Dated January 22, 2001
Prospectus dated January 22, 2001
For New Jersey residents, the optional guaranteed minimum income benefit is as
described in this supplement and not as described in the prospectus.
Guaranteed Minimum Income Benefit
The optional guaranteed minimum income benefit ("GMIB") rider assures you of a
minimum level of income in the future by guaranteeing you a minimum
annuitization value (discussed below). You may elect to purchase this benefit,
which provides a minimum amount you will have to apply to a GMIB payment
option. Furthermore, if you elect the guaranteed minimum payment option, you
will be guaranteed a minimum level of payments once you begin to receive them.
By electing this benefit, you can participate in the gains of the underlying
variable investment options you select while knowing that you are guaranteed a
minimum level of income in the future, regardless of the performance of the
underlying variable investment options.
You can annuitize under the GMIB (subject to the conditions described below)
at the greater of the account value or the minimum annuitization value
(subject to any applicable adjustment).
Minimum Annuitization Value. If you add the GMIB in the first contract year,
the minimum annuitization value on the rider date (i.e., the date the rider is
added to the contract) is the total purchase payments paid less any prior
withdrawals. If you add the GMIB after the first contract year, the minimum
annuitization value on the rider date is the account value.
After the rider date, the minimum annuitization value is equal to the greater
of:
. the greater of the minimum annuitization value on the Rider Date or the
largest account value on any rider anniversary, prior to the earlier of any
owner's or annuitant's 86th birthday, adjusted for any subsequent purchase
payments (less the sum of all subsequent withdrawals adjusted as described
below and any premium taxes); or
. the minimum annuitization value on the rider date, plus the sum of all
purchase payments received after the rider date, less withdrawals (adjusted
as described below) and premium taxes, plus interest thereon, equal to the
annual effective interest rate specified on page one of the rider, up to:
a) the rider anniversary prior to the earlier of any owner's or annuitant's
86th birthday; or
b) the date the sum of all purchase payments, (less the sum of all adjusted
withdrawals and premium taxes), together with credited interest, has
grown to two times the amount of all purchase payments, (less all
adjusted withdrawals and premium taxes) as a result of such interest
accumulation, if earlier.
Please note that if you annuitize using the GMIB on any date other than the
30-day period following a rider anniversary, there may be a downward
adjustment to your minimum annuitization value. However, if you annuitize
within the 30-day period following any rider anniversary, no adjustment will
be made. (See "Minimum Annuitization Value Adjustment" below.)
Withdrawals may reduce the minimum annuitization value on a basis greater than
dollar-for-dollar. (See the SAI for more information.)
The minimum annuitization value may only be used to annuitize using the GMIB
payment options and may not be used with any of the other annuity payment
options listed in the prospectus. The GMIB payment options are:
. Life Income--An election may be made for "No Period Certain" or "10 Years
Certain". In the event of the death of the annuitant prior to the end of
the chosen period certain, the remaining period certain payments will be
continued to the beneficiary.
. Joint and Full Survivor--An election may be made for "No Period Certain" or
"10 Years This Prospectus Supplement must be accompanied by the Prospectus
for
The Dreyfus/Transamerica Triple Advantage(R) Variable Annuity dated January
22, 2001
<PAGE>
Certain". Payments will be made as long as either the annuitant or joint
annuitant is living. In the event of the death of both the annuitant and
joint annuitant prior to the end of the chosen period certain, the remaining
period certain payments will be continued to the beneficiary.
Please note that if you annuitize using the GMIB before the 7th rider
anniversary, the first payment will be calculated with an annuity factor age
adjustment. (See "Annuity Factor Age Adjustment" below.)
Minimum Annuitization Value Adjustment. If you annuitize under the GMIB on any
---------------------------------------
date after a 30-day period following a rider anniversary, the minimum
annuitization value will be adjusted downward if your account value (plus any
purchase payments made and minus any amounts withdrawn from your account value
since the last rider anniversary) is less than the account value on the last
rider anniversary or Rider Date (plus any purchase payments made and minus any
amounts withdrawn from your account value since the last rider anniversary or
Rider Date).
The adjusted minimum annuitization value will equal:
. the account value on the date you annuitize; plus
. the minimum annuitization value on the most recent rider anniversary (or the
rider date for annuitizations within the first rider year); minus
. the account value on the most recent rider anniversary (or the rider date
for annuitizations within the first rider year).
The minimum annuitization value will not be adjusted if:
. you annuitize within 30 days following a rider anniversary; or
. your account value (plus any purchase payments made and minus any amounts
withdrawn from your account value since the last rider anniversary) is more
than the account value on last rider anniversary (or the rider date for
annuitizations within the first rider year).
Annuity Factor Age Adjustment. If you annuitize using the GMIB before the 7th
------------------------------
rider anniversary, the first payment will be calculated with an annuity factor
age adjustment resulting in lower payments than if an annuity factor age
adjustment was not used. (See the SAI for information concerning the
calculation of the initial payment.) The age adjustment shown in the table
below should be subtracted from your current age. The age adjustment is as
follows:
<TABLE>
<CAPTION>
Number of Years
Since the Age
Rider Date Adjustment
--------------- ----------
<S> <C>
0-1 7
1-2 6
2-3 5
3-4 4
5-6 2
6-7 1
7 0
</TABLE>
Please note that the minimum annuitization value is used solely to
calculate the GMIB annuity payments. The GMIB does not establish or
guarantee account value or guarantee performance of any investment option.
Because this benefit is based on conservative actuarial factors, the level
of lifetime income that it guarantees may be less than the level that would
be provided by application of the account value at otherwise applicable
adjusted annuity factors. Therefore, the GMIB should be regarded as a
safety net. The costs of annuitizing under the GMIB include the guaranteed
minimum payment fee (if the guaranteed minimum payment option is elected),
and also the lower payout levels inherent in the annuity tables used for
those minimum payouts (which may also include an annuity factor age
adjustment). These costs should be balanced against the benefits of a
minimum payout level.
Benefits and fees under the GMIB rider (the rider fee and the guaranteed
minimum payment fee) are guaranteed not to change after the rider is added.
However, all of these benefits and fees may change if you elect to upgrade the
minimum annuitization value.
Minimum Annuitization Value Upgrade. You can upgrade your minimum annuitization
------------------------------------
value to the account value at any time before your 88th birthday. For your
convenience, we will put the last date to upgrade on page one of the rider.
2
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If you upgrade:
. the current rider will terminate and a new one will be issued with its own
specified guaranteed benefits and fees; and
. the new rider's specified benefits and fees may not be as advantageous as
before.
It generally will not be to your advantage to upgrade unless your account value
exceeds your minimum annuitization value at that time.
Conditions of Exercise of the Guaranteed Minimum Income Benefit. You can
annuitize using the GMIB at any time. You cannot, however, annuitize using the
GMIB after your 95th birthday. For your convenience, we will put the last date
to annuitize using the GMIB on page one of the rider.
Note Carefully:
. If you annuitize at any time other than within a 30-day period following a
rider anniversary, there may be a negative adjustment to your minimum
annuitization value. (See "Minimum Annuitization Value Adjustment.")
. If you annuitize before the 7th rider anniversary there will be an annuity
factor age adjustment. (See "Annuity Factor Age Adjustment.")
Guaranteed Minimum Payment Option. If you choose the guaranteed minimum payment
option on the election date, annuity payments are guaranteed to never be less
than the initial payment. (See the SAI for information concerning the
calculation of the initial payment.) The payments will also be "stabilized" or
held constant during each year.
During the first year after annuitizing using the guaranteed minimum payment
option, each stabilized payment will equal the initial payment. On each
anniversary thereafter, the stabilized payment will increase or decrease
depending on the performance of the investment options you selected (but will
never be less than the initial payment), and then be held constant at that
amount for that year. The stabilized payment on each anniversary will equal the
greater of the initial payment or the payment supportable by the annuity units
in the selected investment options. (See the SAI for additional information
concerning stabilized payments.)
Guaranteed Minimum Income Benefit Rider Fee. A rider fee, currently 0.35% of
the minimum annuitization value on the contract anniversary, is charged
annually prior to annuitization. We will also charge this fee if you take a
complete withdrawal. The rider fee is deducted from each variable investment
option in proportion to the amount of account value in each subaccount.
Guaranteed Minimum Payment Option Fee. A guaranteed minimum payment option fee,
currently equal to an effective annual rate of 1.25% of the daily net asset
value in the separate account, is reflected in the amount of the variable
payments you receive if you annuitize under the GMIB rider and choose the
guaranteed minimum payment option. The guaranteed payment fee is included on
page one of the rider.
Termination. The GMIB will terminate upon the earliest of the following:
. the date we receive written notice from you requesting termination of the
GMIB;
. annuitization (you will still get guaranteed minimum stabilized payments if
you annuitize using the minimum annuitization value under the GMIB and you
select the guaranteed minimum payment option);
. upgrade of the minimum annuitization value (although we will issue a new
rider to you );
. termination of your contract; or
. 30 days after the last date to elect the benefit as shown on page 1 of the
rider.
3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
VARIABLE ANNUITY
SEPARATE ACCOUNT VA-2L
Issued By
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
The Statement of Additional Information expands upon subjects discussed in the
January 22, 2001 prospectus for the Dreyfus/Transamerica Triple Advantage(R)
Variable Annuity ("contract") issued by Transamerica Occidental Life Insurance
Company. The owner may obtain a copy of the prospectus by writing to:
Transamerica Occidental Life Insurance Company, Annuity Service Center, 4333
Edgewood Road N.E., Cedar Rapids, Iowa 52499-0001 or calling 877-717-8861.
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 January 22, 2001
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE CONTRACT.............................................................. 3
DOLLAR COST AVERAGING..................................................... 3
SPECIAL DOLLAR COST AVERAGING OPTION...................................... 3
NET INVESTMENT FACTOR..................................................... 3
ANNUITY PERIOD............................................................ 4
Variable Annuity Units and Payments..................................... 4
Variable Annuity Unit Value............................................. 4
Transfers After the Annuity Date........................................ 4
Guaranteed Minimum Income Benefit (GMIB)--Hypothetical Illustration..... 5
GENERAL PROVISIONS........................................................ 6
Adjusted Partial Withdrawals............................................ 6
IRS Required Distributions.............................................. 8
Non-Participating....................................................... 8
Misstatement of Age or Sex.............................................. 8
Proof of Existence and Age.............................................. 9
Assignment.............................................................. 9
Annuity Data............................................................ 9
Annual Report........................................................... 9
Incontestability........................................................ 9
Ownership............................................................... 9
Entire Contract......................................................... 9
Changes in the Contract................................................. 9
Protection of Benefits.................................................. 10
Delay of Payments and Transfers......................................... 10
Notices and Directions.................................................. 10
Sales in Special Situations............................................. 10
CALCULATION OF YIELDS AND TOTAL RETURNS................................... 11
Money Market Sub-Account Yield Calculation.............................. 11
Other Sub-Account Yield Calculations.................................... 11
Average Total Return Calculations....................................... 12
Adjusted Historical Performance Data.................................... 12
Other Performance Data.................................................. 13
HISTORICAL PERFORMANCE DATA............................................... 13
General Limitations..................................................... 13
Money Market Sub-Account Yields......................................... 13
Sub-Account Performance Figures Including Adjusted Historical
Performance............................................................ 13
Since Commencement of the Sub-Accounts.................................. 14
Since Commencement of the Portfolios.................................... 17
FEDERAL TAX MATTERS....................................................... 20
Taxation of Transamerica................................................ 20
Tax Status of the Contract.............................................. 20
DISTRIBUTION OF THE CONTRACT.............................................. 21
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS.................................... 22
TRANSAMERICA.............................................................. 22
General Information and History......................................... 22
STATE REGULATION.......................................................... 22
RECORDS AND REPORTS....................................................... 22
FINANCIAL STATEMENTS...................................................... 22
APPENDIX.................................................................. 23
Accumulation Transfer Formula........................................... 23
</TABLE>
2
<PAGE>
THE CONTRACT
As a supplement to the description in 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 you, as the owner, as to
the options available if termination of dollar cost averaging, either by you
or by us, results in the value of the receiving sub-account(s) to which
monthly transfers were made to be less than $500. You 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 us, is made by you before
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.
SPECIAL DOLLAR COST AVERAGING OPTION
(May not be available in all states. See contract for availability of the
fixed account options.)
When you apply for the contract, you may elect to allocate the entire initial
purchase payment to either the six or twelve month special Dollar Cost
Averaging account of the Fixed Account. The initial purchase payment will be
credited with interest at a guaranteed fixed rate. Amounts will then be
transferred from the special Dollar Cost Averaging account to the sub-accounts
and/or general account options pro rata on a monthly basis for six or twelve
months (depending on the option you select) in the allocations you specified
when you applied for the contract.
Amounts from the sub-accounts and/or general account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if
you request a transfer (other than a Dollar Cost Averaging transfer) or a
withdrawal from a special Dollar Cost Averaging account, any amounts remaining
in the special account will be transferred to the sub-account and/or general
account option according to your original allocation instructions. The special
Dollar Cost Averaging option will end and cannot be reelected.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor for a
valuation period, before the annuity date, is (a) divided by (b), minus (c)
minus (d).
Where (a) is
The net asset value per share held in the sub-account, as of the end of the
valuation period, plus or minus the per-share amount of any dividend or
capital gain distributions if the "ex-dividend" date occurs in the
valuation period, plus or minus a per-share charge or credit as we may
determine, as of the end of the valuation period, for taxes.
3
<PAGE>
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 portion of the
value to be applied to the sub-account multiplied by 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, you may transfer variable annuity units from one sub-
account to another, subject to certain limitations. (See "Transfers" in 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.
4
<PAGE>
Guaranteed Minimum Income Benefit (GMIB)--Hypothetical Illustration
The amounts shown below are hypothetical guaranteed minimum monthly payment
amounts under the guaranteed minimum income benefit rider for a $100,000
premium when annuity payments do not begin until the rider anniversary
indicated in the left-hand column. These figures assume the following:
. there were no subsequent purchase payments or withdrawals;
. there were no premium taxes;
. the $100,000 purchase payment is subject to the GMIB;
. the annuitant is (or both annuitants are) 60 years old when the rider is
issued;
. the annual growth rate is 5.0% (once established, an annual growth rate
will not change during the life of the GMIB rider); and
. there was no upgrade of the minimum annuitization value.
Six different annuity payment options are illustrated; a male annuitant, a
female annuitant and a joint and survivor annuity, each on a Life Only and a
Life with 10-Year Certain basis. The figures below, which are the amount of
the guaranteed fixed monthly payment, are based on an assumed investment
return of 3%. Subsequent payments are calculated using a 5% assumed investment
return. If you choose the guaranteed minimum payment option, subsequent
payments will never be less than the amount of the first payment. If you do
not choose the guaranteed minimum payment option, subsequent payments may be
less than the amount of the first payment.
Life Only = Life Annuity with No Period Certain Life 10 = Life Annuity with 10
Years Certain
<TABLE>
<CAPTION>
Rider
Anniversary
at Exercise
Date Male Female Joint & Survivor
------------------------------------------------------------------
Life Life Life
Life Only 10 Life Only 10 Life Only 10
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7 (age 67) $ 808 $ 774 $ 702 $ 688 $ 622 $ 621
------------------------------------------------------------------
15 $1,530 $1,364 $1,304 $1,226 $1,112 $1,100
------------------------------------------------------------------
20 (age 80) $1,902 $1,546 $1,620 $1,426 $1,338 $1,296
</TABLE>
This hypothetical illustration should not be deemed representative of past or
future performance of any underlying variable investment option.
Withdrawals will affect the minimum annuitization value as follows:
Withdrawals will reduce the minimum annuitization value on a pro-rata basis by
an amount equal to the minimum annuitization value multiplied by the
percentage reduction in the account value resulting from the withdrawal.
The amount of the first payment provided by the GMIB will be determined by
multiplying each $1,000 of minimum annuitization value (or account value if
greater) by the applicable annuity factor shown in Schedule I of the GMIB
rider. The applicable annuity factor depends upon the annuitant's (and joint
annuitant's if any) sex (or without regard to gender if required by law), age,
and the GMIB payment option selected and is based on a guaranteed interest
rate of 3% and the "1983 Table a" mortality table improved to the year 2000
with projection Scale G. Subsequent payments will be calculated as described
in the GMIB rider using a 5% assumed investment return. Subsequent payments
may fluctuate annually in accordance with the investment performance of the
annuity sub-accounts. However, if you choose the guaranteed minimum payment
option detailed in the GMIB rider, subsequent payments are guaranteed to never
be less than the initial payment. If you do not choose the guaranteed minimum
payment option, subsequent payments may be less than the initial payment.
Furthermore, if you elect the guaranteed minimum payment option, payments
throughout each policy year will be stabilized to remain level. The stabilized
payment on each subsequent contract anniversary after annuitization
5
<PAGE>
using the GMIB will equal the greater of the initial payment or the payment
supportable by the annuity units in the selected sub-accounts. If you do not
elect the guaranteed minimum payment option, subsequent payments will be equal
to the supportable payment and could fluctuate throughout each policy year.
The supportable payment is equal to the number of variable annuity units in
the selected sub-accounts multiplied by the variable annuity unit values in
those sub-accounts on the date the payment is made. The variable annuity unit
values used to calculate the supportable payment will assume a 5% assumed
investment return. Under the guaranteed minimum payment option, if the
supportable payment at any payment date during a contract year is greater than
the stabilized payment for that contract year, the excess will be used to
purchase additional annuity units. Conversely, if the supportable payment at
any payment date during a contract year is less than the stabilized payment
for the contract year, there will be a reduction in the number of annuity
units credited to the policy to fund the deficiency. In the case of a
reduction, you will not participate as fully in the future investment
performance of the sub-accounts you selected since fewer annuity units are
credited to your policy. Purchases and reductions will be allocated to each
sub-account on a proportionate basis. If you do not elect the guaranteed
minimum payment option, no annuity units will be purchased or redeemed.
Under the guaranteed minimum payment option, we bear the risk that we will
need to make payments if all annuity units have been used in an attempt to
maintain the stabilized payment at the initial payment level. In such event,
we will make all future payments equal to the initial payment. Once all the
annuity units have been used, the amount of your payment will not increase or
decrease and will not depend upon the performance of any sub-accounts. To
compensate us for this risk, a guaranteed minimum payment fee will be
deducted.
GENERAL PROVISIONS
Adjusted Partial Withdrawals
The amount of your Guaranteed Minimum Death Benefit is reduced due to a
partial withdrawal by an amount called the adjusted partial withdrawal. The
reduction amount depends on the relationship between your Guaranteed Minimum
Death Benefit and policy value. The adjusted partial withdrawal is equal to
(1) multiplied by (2), where
(1) is the Gross Partial Withdrawals, where gross partial withdrawal =
requested withdrawal plus interest plus any premium taxes plus
contingent deferred sales loads on (excess partial withdrawal plus
interest adjustment plus any premium taxes); and
(2) is the adjustment factor = current death benefit prior to the
withdrawal divided by the current account value prior to the
withdrawal.
6
<PAGE>
The following examples describe the effect of a withdrawal on the Guaranteed
Minimum Death Benefit and account value.
Example 1
(Assumed Facts for Example)
<TABLE>
----------------------------------------------------------------------------
<C> <S>
$75,000 Current Guaranteed Minimum Death Benefit (GMDB) before withdrawal
----------------------------------------------------------------------------
$50,000 Current account value before withdrawal
----------------------------------------------------------------------------
$75,000 Current death benefit (larger of policy value and GMDB)
----------------------------------------------------------------------------
6% Current contingent deferred sales load percentage
----------------------------------------------------------------------------
$15,000 Requested withdrawal
----------------------------------------------------------------------------
Withdrawal amount free of contingent deferred sales loads (assumes
$7,500 15% penalty free withdrawals)
----------------------------------------------------------------------------
Excess partial withdrawal (EPW): amount subject to contingent
$7,500 deferred sales loads
----------------------------------------------------------------------------
$100 Interest adjustment
----------------------------------------------------------------------------
$0 Premium taxes
----------------------------------------------------------------------------
Contingent deferred sales load on (EPW plus EIA plus premium
$456 taxes) = 0.06*(7,500 + 100 + 0)
----------------------------------------------------------------------------
Reduction in account value due to excess partial
$8,056 withdrawal = 7,500 + 100 + 0 + 456
----------------------------------------------------------------------------
$23,334 Adjusted partial withdrawal = (7,500 + 8,056)*75,000/50,000
----------------------------------------------------------------------------
$51,666 New GMDB (after withdrawal) = 75,000 - 23,334
----------------------------------------------------------------------------
$34,444 New account value (after withdrawal) = 50,000 - 15,556
</TABLE>
Summary:
Reduction in guaranteed minimum death benefit = $23,334
Reduction in account value = $15,556
Note, guaranteed minimum death benefit is reduced more than the account value
since the guaranteed minimum death benefit was greater than the account value
just prior to withdrawal.
7
<PAGE>
Example 2
(Assumed Facts for Example)
<TABLE>
----------------------------------------------------------------------------
<C> <S>
$50,000 Current Guaranteed Minimum Death Benefit (GMDB) before withdrawal
----------------------------------------------------------------------------
$75,000 Current account value before withdrawal
----------------------------------------------------------------------------
$75,000 Current death benefit (larger of policy value and GMDB)
----------------------------------------------------------------------------
6% Current contingent deferred sales load percentage
----------------------------------------------------------------------------
$15,000 Requested withdrawal
----------------------------------------------------------------------------
$11,125 Withdrawal amount free of contingent deferred sales loads (assumes
15% penalty free withdrawals)
----------------------------------------------------------------------------
Excess partial withdrawal (EPW): amount subject to contingent
$3,750 deferred sales loads
----------------------------------------------------------------------------
$100 Interest adjustment
----------------------------------------------------------------------------
$0 Premium taxes
----------------------------------------------------------------------------
Contingent deferred sales load on (EPW plus EIA plus premium
$231 taxes) = 0.06*(3,750 + 100 + 0)
----------------------------------------------------------------------------
Reduction in account value due to excess partial
$4,081 withdrawal = 3,750 + 100 + 0 + 231
----------------------------------------------------------------------------
$15,331 Adjusted partial withdrawal = (11,250 + 4,081)*75,000/75,000
----------------------------------------------------------------------------
$34,669 New GMDB (after withdrawal) = 50,000 - 15,331
----------------------------------------------------------------------------
$59,669 New account value (after withdrawal) = 75,000 - 15,331
</TABLE>
Summary:
Reduction in guaranteed minimum death benefit = $15,331
Reduction in account value = $15,331
Note, guaranteed minimum death benefit and account value are reduced by the
same amount since the policy value was higher than the guaranteed minimum
death benefit just prior to withdrawal.
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" in the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the contract
will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated in the application, 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 us as a result of any such misstatement may
be respectively charged against or credited to the annuity payment or payments
to be made after the correction so as to adjust for such overpayment or
underpayment.
8
<PAGE>
Proof of Existence and Age
Before making any payment under the contract, we may require proof of the
existence and/or proof of the age of the annuitant or any other measuring
life, or any other information deemed necessary in order to provide benefits
under the contract.
Assignment
No assignment of a contract will be binding on us unless made in writing and
given to us at our service center. We are not responsible for the adequacy of
any assignment. Your rights and the interest of any annuitant or non-
irrevocable beneficiary will be subject to the rights of any assignee of
record.
Annuity Data
We will not be liable for obligations which depend on receiving information
from a payee or measuring life until such information is received in a
satisfactory form.
Annual Report
At least once each contract year prior to the annuity date, you 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 you, as the owner(s) will be entitled to the rights granted by the
contract, or allowed by us 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
We have 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 and
any riders, constitutes the entire contract. All statements made by you are
considered representations and not warranties. We 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. You have all rights and benefits under the individual certificate
issued under the group contract.
Changes in the Contract
Only two of our authorized officers, 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.
We will not be bound by any promise or representation made by any other
persons.
We may not change or amend the individual contract or the group contract or
individual certificates thereunder, except as expressly provided therein,
without your consent. However, we may change or amend the individual contract
or the group contract or individual certificates thereunder if such change or
amendment is necessary for the individual contract or the group contract or
individual certificates thereunder to comply with any state or federal law,
rule or regulation.
9
<PAGE>
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 and Transfers
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 we may 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.
We may delay payment of any withdrawal from the fixed account for a period of
not more than six months after we receive the request for such withdrawal. If
we delay payment for more than 30 days, we will pay interest on the withdrawal
amount up to the date of payment. (See "Cash Withdrawals" in the prospectus.)
Notices and Directions
We will not be bound by any authorization, direction, election or notice which
is not in writing, in a form and manner acceptable to us, and received at our
service center.
Any written notice we are required to send to you will be satisfied by our
mailing of any such required written notice, by first-class mail, to your last
known address as shown on our records.
Sales in Special Situations
We may sell the contracts in special situations that are expected to involve
reduced expenses for us. These instances may include:
1. sales in certain group arrangements, such as employee savings plans;
2. sales to current or former officers, directors, employees and their
families, of Transamerica and its affiliates;
3. sales to officers, directors, employees and their families, of the
portfolios' investment advisers and their affiliates; or
4. sales to officers, directors, employees and sales agents, including
registered representatives and their families, or broker-dealers and other
financial institutions that have sales agreements with us to sell the
contracts.
10
<PAGE>
In such 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; 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 the account value will not
unfairly discriminate against any contract owner. These reductions in fees or
charges or credits to the account value are generally taxable and treated as
purchase payments for purposes of income tax and any possible premium tax.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, we are required to
compute the Money Market Sub-Account's current annualized yield for a seven-
day period in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the Money Market Series or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of
securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market Sub-
Account 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.
The Commission also permits us to disclose the effective yield of the Money
Market Sub-Account for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Portfolio, the types and quality of portfolio securities held by
the Money Market Portfolio, 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
We 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
11
<PAGE>
Where:
<TABLE>
<C> <C> <S>
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.
</TABLE>
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. The contingent deferred sales load ranges 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.
Average Total Return Calculations
We may from time to time also disclose average annual total returns for one or
more of the sub-accounts for various periods of time. Average annual total
return quotations are computed by finding the average annual compounded rates
of return over one, five and ten year periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
P{1 + Tn} = 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.
Adjusted Historical Performance Data
We may also disclose adjusted historical 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 adjusted historical performance data may be disclosed on both an
average annual total return and a cumulative total return basis. Moreover, it
may be disclosed assuming that the contract is not surrendered (i.e., with no
deduction for the contingent deferred sales load) and assuming that the
contract is surrendered at the end of the applicable period (i.e., reflecting
a deduction for any applicable contingent deferred sales load).
12
<PAGE>
Other Performance Data
We may from time to time also disclose average annual total returns in a non-
standard format in conjunction with the standard described above. The non-
standard format will be identical to the standard format except that the
contingent deferred sales load percentage will be assumed to be 0%.
We may from time to time also disclose cumulative total returns in conjunction
with the standard format described above. The cumulative returns will be
calculated using the following formula assuming that the contingent deferred
sales load percentage will be 0%.
CTR = {ERV/P} -- 1
Where:
CTR= the cumulative total return net of sub-account recurring charges for the
period.
ERV= ending redeemable value of a hypothetical $1,000 payment at the beginning
of the one, five, or ten-year period at the end of the one, five, or
ten-year period (or fractional portion 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.
HISTORICAL 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, we have relied on the data provided by the funds. While we have
no reason to doubt the accuracy of the figures provided by the funds, we have
not verified those figures.
Money Market Sub-Account Yields
The annualized yield for the Money Market Sub-Account for the seven-day period
ending December 31, 1999 was 3.84%. The effective yield for the Money Market
Sub-Account for the seven-day period ending December 31, 1999 was 3.92%.
Sub-Account Performance Figures Including Adjusted Historical Performance
The charts below show historical performance data for the sub-accounts. Charts
1 through 3 show performance since the commencement of the sub-accounts.
Charts 4 through 6 include, for certain sub-accounts, adjusted historical
performance 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.
13
<PAGE>
Since Commencement of the Sub-Accounts
The dates to the right of the sub-account names indicate the date of
commencement of operation of the sub-accounts.
1. Average annual total returns for periods since inception of the 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% but do not reflect premium
taxes or the optional GMIB rider which if reflected would reduce the figures.
<TABLE>
<CAPTION>
Inception
SUB-ACCOUNT of the
(Sub-account Inception 1 Year Ended 3 Year Ended 5 Year Ended Sub-account
Date) 12/31/99 12/31/99 12/31/99 to 12/31/99
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciation
(4/5/93)(/1/)(/2/) 3.85% 20.04% 23.41% 18.19%
-------------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 0.77% N/A N/A 15.16%
-------------------------------------------------------------------------------
Disciplined Stock
(5/1/96)(/2/) 10.74% 22.55% N/A 23.59%
-------------------------------------------------------------------------------
Growth and Income
(12/15/94)(/2/) 9.20% 11.98% 22.12% 22.01%
-------------------------------------------------------------------------------
International Equity
(12/15/94)(/2/) 51.49% 15.01% 19.39% 14.92%
-------------------------------------------------------------------------------
International Value
(5/1/96)(/2/) 19.98% 11.78% N/A 10.26%
-------------------------------------------------------------------------------
Limited Term High Income
(4/30/97)(/2/) (8.37%) N/A N/A (0.26%)
-------------------------------------------------------------------------------
Money Market (1/4/93) (2.32%) 1.93% 2.94% 3.04%
-------------------------------------------------------------------------------
Quality Bond
(1/4/93)(/2/) (6.69%) 1.86% 5.36% 5.00%
-------------------------------------------------------------------------------
Small Cap (1/4/93)(/2/) 15.37% 8.55% 14.07% 19.18%
-------------------------------------------------------------------------------
Small Company Stock
(5/1/96)(/2/) 3.06% 5.14% N/A 6.39%
-------------------------------------------------------------------------------
Special Value
(1/4/93)(/2/) (0.03%) 12.22% 5.93% 7.52%
-------------------------------------------------------------------------------
Stock Index (1/4/93)(/2/) 12.86% 24.27% 25.94% 19.19%
-------------------------------------------------------------------------------
Socially Responsible
Growth (10/7/93)(/2/) 22.21% 26.42% 26.63% 22.19%
-------------------------------------------------------------------------------
Core Bond (5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 12.00% N/A N/A 2.10%
-------------------------------------------------------------------------------
Emerging Leaders
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Emerging Markets
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
European Equity
(10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Discovery
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Growth
(5/3/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders International
Equity (10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Passport
(5/3/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Japan (5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
MidCap Stock
(5/1/98)(/2/) 3.26% N/A N/A (0.35%)
-------------------------------------------------------------------------------
Technology Growth
(10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Transamerica VIF Growth
(5/1/98)(/3/) 32.19% N/A N/A 27.85%
</TABLE>
14
<PAGE>
2. Average annual total returns for period since inception of the 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 and the
administration charge of $30 per annum adjusted for average account size but
do not reflect the maximum contingent deferred sales load of 6% or the
optional GMIB rider which if reflected would reduce the figures. Performance
data with no contingent deferred sales load deduction will only be disclosed
if the performance data for the required periods with the contingent deferred
sales load deduction is also disclosed.
<TABLE>
<CAPTION>
Inception
SUB-ACCOUNT of the
(Sub-account Inception 1 Year Ended 3 Year Ended 5 Year Ended Sub-account
Date) 12/31/99 12/31/99 12/31/99 to 12/31/99
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciation
(4/5/93)(/1/)(/2/) 9.84% 21.19% 23.76% 18.31%
-------------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 6.56% N/A N/A 16.65%
-------------------------------------------------------------------------------
Disciplined Stock
(5/1/96)(/2/) 16.74% 23.65% N/A 24.37%
-------------------------------------------------------------------------------
Growth and Income
(12/15/94)(/2/) 15.20% 13.29% 22.47% 22.36%
-------------------------------------------------------------------------------
International Equity
(12/15/94)(/2/) 57.49% 20.55% 15.46% 15.37%
-------------------------------------------------------------------------------
International Value
(5/1/96)(/2/) 25.98% 13.09% N/A 11.31%
-------------------------------------------------------------------------------
Limited Term High Income
(4/30/97)(/2/) (2.97%) N/A N/A 1.51%
-------------------------------------------------------------------------------
Money Market (1/4/93) 3.27% 3.51% 3.64% 3.27%
-------------------------------------------------------------------------------
Quality Bond
(1/4/93)(/2/) (1.29%) 3.44% 6.00% 5.22%
-------------------------------------------------------------------------------
Small Cap (1/4/93)(/2/) 21.37% 9.94% 14.54% 19.28%
-------------------------------------------------------------------------------
Small Company Stock
(5/1/96)(/2/) 9.00% 6.63% N/A 7.54%
-------------------------------------------------------------------------------
Special Value
(1/4/93)(/2/) 5.72% 13.53% 6.55% 7.71%
-------------------------------------------------------------------------------
Stock Index (1/4/93)(/2/) 18.86% 25.34% 26.26% 19.29%
-------------------------------------------------------------------------------
Socially Responsible
Growth (10/7/93)(/2/) 28.21% 27.45% 26.94% 22.31%
-------------------------------------------------------------------------------
Core Bond (5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 18.00% N/A N/A 5.64%
-------------------------------------------------------------------------------
Emerging Leaders
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Emerging Markets
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
European Equity
(10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Discovery
(5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Growth
(5/3/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders International
Equity (10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Founders Passport
(5/3/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Japan (5/1/2000)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
MidCap Stock
(5/1/98)(/2/) 9.21% N/A N/A 3.08%
-------------------------------------------------------------------------------
Technology Growth
(10/1/99)(/2/) N/A N/A N/A N/A
-------------------------------------------------------------------------------
Transamerica VIF Growth
(5/1/98)(/3/) 35.88% N/A N/A 29.65%
</TABLE>
15
<PAGE>
3. Cumulative total returns for periods since inception of the sub-accounts
are as follows. These figures include mortality and expenses charges deducted
at 1.25%, the administrative expenses charge of 0.15% per annum and the
administration charge of $30 per annum adjusted for average account size but
do not reflect the maximum contingent deferred sales load of 6%, or the
optional GMIB rider, which if reflected would reduce the figures. Performance
data with no contingent deferred sales load deduction will only be disclosed
if performance data for the required periods with the contingent deferred
sales load deduction is also disclosed.
<TABLE>
<CAPTION>
Inception of
SUB-ACCOUNT 1 Year Ended Sub-account
(Sub-account Inception Date) 12/31/99 to 12/31/99
-------------------------------------------------------------------------
<S> <C> <C>
Appreciation (4/5/93)(/1/)(/2/) 9.84% 211.08%
-------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 6.56% 50.85%
-------------------------------------------------------------------------
Disciplined Stock (5/1/96)(/2/) 16.74% 122.64%
-------------------------------------------------------------------------
Growth and Income (12/15/94)(/2/) 15.20% 177.11%
-------------------------------------------------------------------------
International Equity (12/15/94)(/2/) 57.49% 105.86%
-------------------------------------------------------------------------
International Value (5/1/96)(/2/) 25.98% 48.18%
-------------------------------------------------------------------------
Limited Term High Income (4/30/97)(/2/) (2.97%) 4.08%
-------------------------------------------------------------------------
Money Market (1/4/93) 3.27% 25.29%
-------------------------------------------------------------------------
Quality Bond (1/4/93)(/2/) (1.29%) 42.75%
-------------------------------------------------------------------------
Small Cap (1/4/93)(/2/) 21.37% 243.45%
-------------------------------------------------------------------------
Small Company Stock (5/1/96)(/2/) 9.00% 30.58%
-------------------------------------------------------------------------
Special Value (1/4/93)(/2/) 5.72% 68.17%
-------------------------------------------------------------------------
Stock Index (1/4/93)(/2/) 18.86% 243.69%
-------------------------------------------------------------------------
Socially Responsible Growth (10/7/93)(/2/) 28.21% 251.31%
-------------------------------------------------------------------------
Core Bond (5/1/2000)(/2/) N/A N/A
-------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 18.00% 9.59%
-------------------------------------------------------------------------
Emerging Leaders (5/1/2000)(/2/) N/A N/A
-------------------------------------------------------------------------
Emerging Markets (5/1/2000)(/2/) N/A N/A
-------------------------------------------------------------------------
European Equity (10/1/99)(/2/) N/A 28.24%
-------------------------------------------------------------------------
Founders Discovery (5/1/2000)(/2/) N/A N/A
-------------------------------------------------------------------------
Founders Growth (5/3/99)(/2/) N/A 26.32%
-------------------------------------------------------------------------
Founders International Equity (10/1/99)(/2/) N/A 38.95%
-------------------------------------------------------------------------
Founders Passport (5/3/99)(/2/) N/A 61.45%
-------------------------------------------------------------------------
Japan (5/1/2000)(/2/) N/A N/A
-------------------------------------------------------------------------
MidCap Stock (5/1/98)(/2/) 9.21% 5.20%
-------------------------------------------------------------------------
Technology Growth (10/1/99)(/2/) N/A 53.83%
-------------------------------------------------------------------------
Transamerica VIF Growth (5/1/98)(/3/) 35.88% 54.22%
</TABLE>
16
<PAGE>
Since Commencement of the Portfolios
The dates to the right of the sub-account names indicate the date of
commencement of operation of the Portfolios.
4. Average annual total returns for periods since inception of the portfolio,
including adjusted historical performance 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% but do not reflect the optional GMIB rider which if reflected would
reduce the figures.
<TABLE>
<CAPTION>
Inception of the
PORTFOLIO Corresponding
(Corresponding Portfolio 1 Year Ended 3 Year Ended 5 Year Ended Portfolio to
Inception Date) 12/31/99 12/31/99 12/31/99 12/31/99
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciation
(4/5/93)(/1/)(/2/) 3.85% 20.04% 23.41% 18.19%
------------------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 0.77% N/A N/A 15.16%
------------------------------------------------------------------------------------
Disciplined Stock
(5/1/96)(/2/) 10.74% 22.55% N/A 23.59%
------------------------------------------------------------------------------------
Growth and Income
(5/2/94)(/2/) 9.20% 11.98% 22.12% 19.28%
------------------------------------------------------------------------------------
International Equity
(5/2/94)(/2/) 51.49% 15.01% 19.39% 12.97%
------------------------------------------------------------------------------------
International Value
(5/1/96)(/2/) 19.98% 11.78% N/A 10.26%
------------------------------------------------------------------------------------
Limited Term High Income
(4/30/97)(/2/) (8.37%) N/A N/A (0.26%)
------------------------------------------------------------------------------------
Money Market (8/31/90) (2.32%) 1.93% 2.94% 3.43%
------------------------------------------------------------------------------------
Quality Bond
(8/31/90)(/2/) (6.69%) 1.86% 5.36% 6.55%
------------------------------------------------------------------------------------
Small Cap (8/31/90)(/2/) 15.37% 8.55% 14.07% 33.76%
------------------------------------------------------------------------------------
Small Company Stock
(5/1/96)(/2/) 3.06% 5.14% N/A 6.39%
------------------------------------------------------------------------------------
Special Value
(8/31/90)(/2/) (0.03%) 12.22% 5.93% 6.81%
------------------------------------------------------------------------------------
Stock Index
(9/29/89)(/2/) 12.86% 24.27% 25.94% 15.78%
------------------------------------------------------------------------------------
Socially Responsible
(10/7/93)(/2/) 22.21% 26.42% 26.63% 22.19%
------------------------------------------------------------------------------------
Core Bond (N/A)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 12.00% N/A N/A 2.10%
------------------------------------------------------------------------------------
Emerging Leaders
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Emerging Markets
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
European Equity
(4/30/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Founders Discovery
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Founders Growth
(9/30/98)(/2/) 30.95% N/A N/A 51.12%
------------------------------------------------------------------------------------
Founders International
Equity (9/30/98)(/2/) 52.41% N/A N/A 56.66%
------------------------------------------------------------------------------------
Founders Passport
(9/30/98)(/2/) 67.56% N/A N/A 70.05%
------------------------------------------------------------------------------------
Japan (12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
MidCap Stock
(5/1/98)(/2/) 3.26% N/A N/A (0.35%)
------------------------------------------------------------------------------------
Technology Growth
(8/31/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69)(/3/) 32.19% 38.24% 44.99% 27.47%
</TABLE>
17
<PAGE>
5. Average annual total returns for periods since inception of the portfolio
including adjusted historical performance are as follows. These figures
include mortality and expenses charges deducted at 1.25%, the administrative
expenses charge of 0.15% per annum and 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. Performance data with no contingent deferred sales load deduction
will only be disclosed if the performance data for the required periods with
no contingent deferred sales load deduction is also disclosed.
<TABLE>
<CAPTION>
Inception of the
PORTFOLIO Corresponding
(Corresponding Portfolio 1 Year Ended 3 Year Ended 5 Year Ended Portfolio to
Inception Date) 12/31/99 12/31/99 12/31/99 12/31/99
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciation
(4/5/93)(/1/)(/2/) 9.84% 21.19% 23.76% 18.31%
------------------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 6.56% N/A N/A 16.65%
------------------------------------------------------------------------------------
Disciplined Stock
(5/1/96)(/2/) 16.74% 23.65% N/A 24.37%
------------------------------------------------------------------------------------
Growth and Income
(5/2/94)(/2/) 15.20% 13.29% 22.47% 19.59%
------------------------------------------------------------------------------------
International Equity
(5/2/94)(/2/) 57.49% 20.55% 15.46% 13.38%
------------------------------------------------------------------------------------
International Value
(5/1/96)(/2/) 25.98% 13.09% N/A 11.31%
------------------------------------------------------------------------------------
Limited Term High Income
(4/30/97)(/2/) (2.97%) N/A N/A 1.51%
------------------------------------------------------------------------------------
Money Market (8/31/90) 3.37% 3.51% 3.64% 3.43%
------------------------------------------------------------------------------------
Quality Bond
(8/31/90)(/2/) (1.29%) 3.44% 6.00% 6.55%
------------------------------------------------------------------------------------
Small Cap (8/31/90)(/2/) 21.37% 9.94% 14.54% 33.76%
------------------------------------------------------------------------------------
Small Company Stock
(5/1/96)(/2/) 9.00% 6.63% N/A 7.54%
------------------------------------------------------------------------------------
Special Value
(8/31/90)(/2/) 5.72% 13.53% 6.55% 6.82%
------------------------------------------------------------------------------------
Stock Index
(9/29/89)(/2/) 18.86% 25.34% 26.26% 15.78%
------------------------------------------------------------------------------------
Socially Responsible
(10/7/93)(/2/) 28.21% 27.45% 26.94% 22.31%
------------------------------------------------------------------------------------
Core Bond (N/A)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 18.00% N/A N/A 5.64%
------------------------------------------------------------------------------------
Emerging Leaders
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Emerging Markets
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
European Equity
(4/30/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Founders Discovery
(12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Founders Growth
(9/30/98)(/2/) 36.95% N/A N/A 55.50%
------------------------------------------------------------------------------------
Founders International
Equity (9/30/98)(/2/) 58.41% N/A N/A 61.00%
------------------------------------------------------------------------------------
Founders Passport
(9/30/98)(/2/) 73.56% N/A N/A 74.29%
------------------------------------------------------------------------------------
Japan (12/15/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
MidCap Stock
(5/1/98)(/2/) 9.21% N/A N/A 3.08%
------------------------------------------------------------------------------------
Technology Growth
(8/31/99)(/2/) N/A N/A N/A N/A
------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69)(/3/) 35.88% 39.80% 44.99% 27.47%
</TABLE>
18
<PAGE>
6. Cumulative total returns for periods since inception of the portfolio,
including hypothetical performance are as follows. These figures include
mortality and expenses charges deducted at 1.25%, the administrative expenses
charge of 0.15% per annum and 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.
Performance data with no contingent deferred sales load deduction will only be
disclosed if performance data for the required periods with no contingent
deferred sales load deduction is also disclosed.
<TABLE>
<CAPTION>
Inception of the
PORTFOLIO Corresponding
(Corresponding Portfolio 1 Year Ended Portfolio to
Inception Date) 12/31/99 12/31/99
-----------------------------------------------------------------------------
<S> <C> <C>
Appreciation (4/5/93)(/1/)(/2/) 9.84% 211.08%
-----------------------------------------------------------------------------
Balanced (5/1/97)(/2/) 6.56% 50.85%
-----------------------------------------------------------------------------
Disciplined Stock (5/1/96)(/2/) 16.74% 122.64%
-----------------------------------------------------------------------------
Growth and Income (5/2/94)(/2/) 15.20% 175.82%
-----------------------------------------------------------------------------
International Equity (5/2/94)(/2/) 57.49% 103.77%
-----------------------------------------------------------------------------
International Value (5/1/96)(/2/) 25.98% 48.18%
-----------------------------------------------------------------------------
Limited Term High Income (4/30/97)(/2/) (2.97%) 4.08%
-----------------------------------------------------------------------------
Money Market (8/31/90) 3.27% 37.07%
-----------------------------------------------------------------------------
Quality Bond (8/31/90)(/2/) (1.29%) 80.90%
-----------------------------------------------------------------------------
Small Cap (8/31/90)(/2/) 21.37% 33.78%
-----------------------------------------------------------------------------
Small Company Stock (5/1/96)(/2/) 9.00% 30.58%
-----------------------------------------------------------------------------
Special Value (8/31/90)(/2/) 5.72% 85.11%
-----------------------------------------------------------------------------
Stock Index (9/29/89)(/2/) 18.86% 349.74%
-----------------------------------------------------------------------------
Socially Responsible (10/7/93)(/2/) 28.21% 251.31%
-----------------------------------------------------------------------------
Core Bond (N/A)(/2/) N/A N/A
-----------------------------------------------------------------------------
Core Value (5/1/98)(/2/) 18.00% 9.59%
-----------------------------------------------------------------------------
Emerging Leaders (12/15/99)(/2/) N/A 7.50%
-----------------------------------------------------------------------------
Emerging Markets (12/15/99)(/2/) N/A 8.98%
-----------------------------------------------------------------------------
European Equity (4/30/99)(/2/) N/A 28.00%
-----------------------------------------------------------------------------
Founders Discovery (12/15/99)(/2/) N/A 11.06%
-----------------------------------------------------------------------------
Founders Growth (9/30/98)(/2/) 36.95% 73.64%
-----------------------------------------------------------------------------
Founders International Equity (9/30/98)(/2/) 58.41% 81.35%
-----------------------------------------------------------------------------
Founders Passport (9/30/98)(/2/) 73.56% 100.26%
-----------------------------------------------------------------------------
Japan (12/15/99)(/2/) N/A 2.66%
-----------------------------------------------------------------------------
MidCap Stock (5/1/98)(/2/) 9.21% 5.20%
-----------------------------------------------------------------------------
Technology Growth (8/31/99)(/2/) N/A 54.88%
-----------------------------------------------------------------------------
Transamerica VIF Growth (2/26/69)(/3/) 35.88% 1,032.80%
</TABLE>
(1) Formerly known as Capital Appreciation.
(2) The Service Class Shares were not available as of December 31, 1999,
therefore, the figures shown reflect performance for the Initial Class
Shares only. Performance for the Service Class Shares would be lower
because they are subject to a 12b-1 Fee.
(3) 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.
19
<PAGE>
FEDERAL TAX MATTERS
The Dreyfus/Transamerica Triple Advantage(R) 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), 408 or 408A 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 our 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 our 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 IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
Taxation of Transamerica
We are taxed as a life insurance company under Part I of Subchapter L of the
Code. Since the variable account is not an entity separate from Transamerica,
and its operations form a part of Transamerica, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains are automatically applied to
increase reserves under the contracts. Under existing federal income tax law,
we believe that the variable account investment income and realized net
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, we do not anticipate that we will incur any federal income tax
liability attributable to the variable account and, therefore, we do not
intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretations thereof result in our being taxed on
income or gains attributable to the variable account, then we may impose a
charge against the variable account (with respect to some or all contracts) in
order to set aside provisions to pay such taxes.
Tax Status of the Contract
Code Section 817(h) 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.
20
<PAGE>
For example, the owner has additional flexibility in allocating premium
payments and account values. These differences could result in an owner being
treated as the owner of a pro rata portion of the assets of the variable
account. In addition, we do not know what standards will be set forth, if any,
in the regulations or rulings which the Treasury Department has stated it
expects to issue. We therefore reserve the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
In order to be treated as an annuity contract for federal income tax purposes,
Code Section 72(s) requires any non-qualified contract to provide that (a) if
any owner dies on or after the annuity date but 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 Code Section 72(s), although no regulations
interpreting these requirements have yet been issued. We intend 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 under a Distribution Agreement with Transamerica. TSSC may also
serve as principal underwriter and distributor of other contracts issued
through the variable account and certain other separate accounts of
Transamerica and any of its affiliates. TSSC is an indirect wholly owned
subsidiary of Transamerica Insurance Corporation. TSSC is registered with the
Commission as a broker/dealer and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). Transamerica pays TSSC for acting as the
principal underwriter under a distribution agreement.,
TSSC has entered into sales agreements with other broker/dealers to solicit
applications for the contracts through registered representatives who are
licensed to sell securities and variable insurance products. These agreements
provide that applications for the contracts may be solicited by registered
representatives of the broker/dealers appointed by Transamerica to sell its
variable life insurance and variable annuities. These broker/dealers are
registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
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.
21
<PAGE>
During fiscal year 1999 and 1998, $16,053,620.92 and $22,999,381,
respectively, in commissions was paid to TSSC as underwriter of the contracts;
no amounts were retained by TSSC. During fiscal year 1999 and 1998,
$1,093,584.85 and $1,737,090.86, respectively, in commissions were paid to TFR
as underwriter of the contracts; no amounts were 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
September 1, 1981.
Transamerica is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn, wholly-owned by Transamerica Corporation.
Transamerica Corporation was acquired by AEGON N.V. of The Netherlands on July
21, 1999. AEGON N.V., a holding company, conducts it business through
subsidiary companies engaged primarily in the insurance business.
STATE REGULATION
We are subject to the insurance laws and regulations of all the states where
we are licensed to operate. The availability of certain contract rights and
provisions depends on state approval and/or filing and review processes. Where
required by state law or regulation, the contract will be modified
accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be maintained
by us or by our service office. As presently required by the provisions of the
1940 Act and regulations promulgated thereunder which pertain to the variable
account, reports containing such information as may be required under the 1940
Act or by other applicable law or regulation will be sent to owners semi-
annually at their last known address of record.
FINANCIAL STATEMENTS
This Statement of Additional Information contains the financial statements of
the variable account as of and for the period ended December 31, 1999.
The statutory 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.
22
<PAGE>
APPENDIX
Annuity 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 payments will reflect the changes in variable
accumulation units in each variable sub-account as of the next variable
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.
23
<PAGE>
Transamerica Occidental Life Insurance Company
Balance Sheet - Statutory Basis
As of September 30, 2000
(In Thousands)(Unaudited)
<TABLE>
<S> <C>
Admitted Assets
Cash and invested assets:
Cash and short-term investments $ 303,125
Bonds 14,316,158
Stocks:
Preferred 58,219
Common, at market 1,047,585
Unaffiliated entities, at market 1,269,382
Mortgage loans on real estate 868,473
Home office properties, at cost less accumulated
depreciation 92,085
Investment real estate 4,810
Policy loans 417,268
Other invested assets 264,337
------------
Total cash and invested assets 18,641,442
Premiums deferred and uncollected 338,592
Transfers from separate accounts 160,076
Accrued investment income 233,897
Federal income tax recoverable 10,682
Other assets 554,127
Separate account assets 4,094,426
------------
Total admitted assets $24,033,242
============
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Balance Sheet - Statutory Basis
As of September 30, 2000
(In Thousands)(Unaudited)
<TABLE>
<S> <C>
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 7,633,326
Annuity 2,143,404
Accident and health 57,435
Policy and contract claim reserves 447,011
Other policyholders' funds 83,188
Remittances and items not allocated 82,677
Asset valuation reserve 600,553
Interest maintenance reserve 35,164
Funds held under coinsurance 2,259,598
Funding agreements 3,855,433
Commissions and expense allowances payable
on reinsurance assumed 91,961
Payable to affiliate 52,643
Borrowed money 250,602
Payable for securities 219,563
Other liabilities 466,862
Separate account liabilities 3,932,361
-----------
Total liabilities 22,211,781
Capital and surplus:
Common stock, $12.50 par value, 4,000,000 shares
authorized, 2,206,933 issued and outstanding 27,587
Paid-in surplus 509,600
Unassigned surplus 1,284,274
-----------
Total capital and surplus 1,821,461
-----------
Total liabilities and capital and surplus $24,033,242
===========
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Statement of Operations - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
<TABLE>
<S> <C>
Revenues:
Premiums and other considerations, net of reinsurance
Life $ 1,790,238
Annuity 481,700
Net investment income 807,120
Amortization of interest maintenance reserve (1,570)
Commissions and expense allowances on
reinsurance ceded 194,186
Income from fees associated with investment management,
administration and contract guarantees for separate accounts 14,421
Other income 66,128
------------
3,352,223
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health 743,518
Surrender benefits 886,543
Other benefits 631,837
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 4,855,604
Annuity (4,533,724)
Accident and health (46,878)
Other (101,169)
------------
2,435,731
Insurance expenses:
Commissions 506,457
General insurance expenses 240,231
Taxes, licenses and fees 33,712
Transfer to separate accounts 200,807
Other 9,162
------------
990,369
------------
3,426,100
------------
Loss from operations before federal income
tax expense and net realized capital gains on
investments (73,877)
Federal income tax expense (736)
------------
Loss from operations before net realized
capital gains on investments (73,141)
Net realized capital gains on investments
(net of related federal income taxes and
amounts transferred to interest maintenance
reserve) 367,735
------------
Net income $ 294,594
============
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Statement of Changes in Capital and Surplus - Statutory Basis
(In Thousands)(Unaudited)
<TABLE>
<CAPTION>
Total
Capital
Common Paid-in Unassigned and
Stock Surplus Surplus Surplus
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 2000 $ 27,587 $ 509,600 $ 1,426,737 $ 1,963,924
Net income 0 0 294,594 294,594
Change in non-admitted assets 0 0 55,605 55,605
Change in net realized capital gains 0 0 (288,376) (288,376)
Change in asset valuation reserve 0 0 (21,595) (21,595)
Dividend to stockholder 0 0 (135,000) (135,000)
Other adjustments 0 0 (47,691) (47,691)
-----------------------------------------------------------------
Balance at September 30, 2000 $ 27,587 $ 509,600 $ 1,284,274 $ 1,821,461
=================================================================
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Statement of Cash Flow - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
<TABLE>
<S> <C>
Operating Activities
Premiums and other considerations, net of reinsurance $ 7,633,076
Net investment income 798,092
Life and accident and health claims (644,026)
Surrender benefits to policyholders (4,585,301)
Other benefits to policyholders (390,247)
Commissions, other expenses and other taxes (842,087)
Federal income taxes, excluding tax on capital gains 150,353
Other, net (6,982)
Net transfers to separate accounts (197,904)
-----------
Net cash provided by operating activities 1,914,974
Investing Activities
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 4,423,060
Common stocks 1,292,711
Mortgage loans on real estate 10,782
Other (150,587)
-----------
5,575,966
Cost of investments acquired:
Bonds and preferred stocks 5,933,547
Common stocks 1,015,243
Policy loans 7,734
Mortgage loans on real estate 492,939
Real estate 387
Other 105,010
-----------
7,554,860
-----------
Net cash used in investing activities (1,978,894)
-----------
Financing Activities
Dividends to stockholders (135,000)
Borrowed money 250,602
Other, net 118,989
-----------
Net cash provided by financing activities 234,591
Increase in cash and short-term investments 170,671
Cash and short-term investments at beginning of year 132,454
-----------
Cash and short-term investments at end of year $ 303,125
===========
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
1. Basis of Presentation
The accompanying unaudited statutory basis financial statements have been
prepared in accordance with statutory accounting principles for interim
financial information and the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the accompanying
statutory basis financial statements and notes thereto for the year ended
December 31, 1999.
<PAGE>
FINANCIAL STATEMENTS - STATUTORY BASIS
Transamerica Occidental Life Insurance Company
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Transamerica Occidental Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
Contents
Report of Independent Auditors................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis..............................................3
Statements of Operations - Statutory Basis....................................5
Statements of Changes in Capital and Surplus - Statutory Basis................6
Statements of Cash Flow - Statutory Basis.....................................7
Notes to Financial Statements - Statutory Basis...............................9
Statutory Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis...........................................................39
Supplementary Insurance Information - Statutory Basis........................40
Reinsurance - Statutory Basis................................................42
<PAGE>
Report Of Independent Auditors
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Occidental Life Insurance Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flow for each of the three years in the period ended
December 31, 1999. Our audits also included the accompanying statutory-basis
financial statement schedules required by Article 7 of Regulation S-X. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the California Department of Insurance, which practices differ from
accounting principles generally accepted in the United States. The variances
between such practices and accounting principles generally accepted in the
United States also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of Transamerica Occidental Life Insurance Company at
December 31, 1999 and 1998, or the results of its operations or its cash flows
for each of the three years in the period December 31, 1999.
1
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flow for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices prescribed or
permitted by the California Department of Insurance. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
March 31, 2000
2
<PAGE>
Transamerica Occidental Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
December 31
1999 1998
---------------------------------
Admitted assets
Cash and invested assets:
Bonds $ 12,820,804 $ 12,135,178
Preferred stocks - unaffiliated 77,231 40,941
Preferred stocks - subsidiaries 58,219 56,860
Common stocks - unaffiliated 1,270,039 773,490
Common stocks - subsidiaries 984,400 965,485
Mortgage loans on real estate 385,590 387,038
Real estate 101,195 102,748
Policy loans 409,534 410,628
Cash and short-term investments 132,454 513,557
Other investments 218,997 194,264
---------------------------------
Total cash and invested assets 16,458,463 15,580,189
Federal income tax receivable 160,075 -
Accrued investment income 226,823 210,932
Deferred and uncollected premiums 227,722 (807,951)
Reinsurance receivable 249,225 1,201,639
Other admitted assets 245,696 255,744
Separate account assets 4,229,395 3,443,277
---------------------------------
Total admitted assets $ 21,797,399 $ 19,883,830
=================================
3
<PAGE>
<TABLE>
<CAPTION>
December 31
1999 1998
-------------------------------
<S> <C> <C>
Liabilities and capital and surplus
Liabilities:
Reserves for future policy benefits $ 9,695,196 $ 9,428,282
Policy and contract claims payable 296,789 156,147
Supplementary contracts without life contingencies 208,349 215,548
Funding agreements 2,228,261 1,927,054
Other policy liabilities 114,442 115,361
Funds held under coinsurance 2,274,229 2,123,810
Asset valuation reserve 578,958 400,616
Interest maintenance reserve 58,721 61,514
Other liabilities 310,404 285,030
Separate account liabilities 4,068,126 3,326,306
-------------------------------
Total liabilities 19,833,475 18,039,668
Capital and surplus:
Common Stock ($12.50 par value):
Authorized - 4,000,000 shares
Issued and outstanding - 2,206,933 shares 27,587 27,587
Contributed surplus 509,600 372,538
Unassigned surplus 1,426,737 1,444,037
-------------------------------
Total capital and surplus 1,963,924 1,844,162
-------------------------------
Total liabilities and capital and surplus $21,797,399 $19,883,830
===============================
</TABLE>
See accompanying notes.
4
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations $ 1,368,016 $ 1,608,525 $ 1,715,745
Fund deposits 351,170 363,889 395,162
Considerations for supplementary contracts without life
contingencies 212,513 259,660 240,065
Net investment income 1,125,042 1,078,543 1,028,054
Commissions and expense allowances on reinsurance ceded
469,910 471,943 283,794
Other 550,544 900,281 228,649
-------------------------------------------------
4,077,195 4,682,841 3,891,469
Benefits and expenses:
Benefits paid or provided for:
Death benefits 392,276 595,585 432,019
Annuity benefits 582,542 570,424 754,609
Disability benefits 10,199 36,590 139,278
Surrender benefits and other fund withdrawals 694,766 616,224 429,449
Increase (decrease) in reserves 266,814 (447,419) (631,054)
Payments on supplementary contracts 231,717 243,383 235,594
Endowments 2,397 2,504 2,000
Other 112,059 102,093 96,546
-------------------------------------------------
2,292,770 1,719,384 1,458,441
Expenses:
Commissions and expense allowances 691,802 728,533 554,979
Reinsurance reserve transfer - 671,651 792,425
Other operating expenses 857,912 1,300,821 758,855
Net transfers to separate accounts 50,572 200,243 152,998
-------------------------------------------------
1,600,286 2,901,248 2,259,257
-------------------------------------------------
3,893,056 4,620,632 3,717,698
-------------------------------------------------
Gain from operations before dividends to policyholders,
federal income tax expense (benefit) and net realized
capital gains (losses) 184,139 62,209 173,771
Dividends to policyholders 9,294 8,206 9,453
-------------------------------------------------
Gain from operations before federal income tax expense
(benefit) and net realized capital gains (losses) 174,845 54,003 164,318
Federal income tax expense (benefit) 30,330 (70,408) 58,514
-------------------------------------------------
Gain from operations before net realized capital gains
(losses) 144,515 124,411 105,804
Net realized capital gains (losses) 17,515 76,071 (9,332)
-------------------------------------------------
Net income $ 162,030 $ 200,482 $ 96,472
=================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $ 1,844,162 $ 1,556,228 $ 1,249,045
Net income 162,030 200,482 96,472
Increase in net unrealized capital gains 119,420 261,540 246,829
Increase in non-admitted assets and
related items (2,824) (45,392) (41,778)
(Decrease) increase in liability for reinsurance in
unauthorized companies (4,646) (3,137) 1,038
Increase in asset valuation reserve (178,342) (39,153) (66,577)
Increase in surplus in separate account
statement 16,637 32,572 29,459
Contributed capital 137,062 3,800 127,194
Prior year adjustments (14,710) (21,276) (47,998)
Dividends paid to parent (79,000) (80,000) (61,311)
Change in benefit reserve valuation basis - - (7,782)
Increase (decrease) as a result of
reinsurance (35,865) (21,502) 31,637
--------------------------------------------------
Capital and surplus at end of year $ 1,963,924 $ 1,844,162 $ 1,556,228
==================================================
</TABLE>
See accompanying notes.
6
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and annuity considerations $ 319,552 $ 2,642,142 $ 1,612,975
Fund deposits 351,170 363,889 395,162
Other policy proceeds and considerations 212,546 259,627 240,280
Allowances and reserve adjustments received on
reinsurance ceded 1,861,584 93,368 249,623
Investment income received 1,088,846 1,068,856 996,628
Other income received 141,247 194,037 274,793
Life and accident and health claims paid (266,727) (661,006) (487,861)
Surrender benefits and other fund
withdrawals paid (695,777) (618,854) (442,793)
Annuity and other benefits paid (962,151) (948,840) (1,046,532)
Commissions, other expenses and taxes
paid (1,027,317) (950,827) (777,851)
Dividends paid to policyholders (9,136) (8,102) (10,101)
Federal income taxes received (paid) (146,945) 15,764 (12,411)
Reinsurance reserve transfers and other (618,898) (1,891,421) (1,552,528)
---------------------------------------------------
Net cash provided by (used in) operating
activities 247,994 (441,367) (560,616)
Investing activities
Proceeds from investments sold, matured
or repaid:
Bonds 2,993,985 3,938,693 3,525,839
Stocks 220,666 488,559 138,284
Mortgage loans 11,248 37,335 34,216
Real estate 3,050 20,300 3,660
Other invested assets 200 3,984 8,580
Miscellaneous proceeds 407 (25,830) 7,140
---------------------------------------------------
Total investment proceeds 3,229,556 4,463,041 3,717,719
Taxes paid on capital gains - - (7,481)
---------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 3,229,556 4,463,041 3,710,238
</TABLE>
7
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Cost of investments acquired:
Bonds $(3,656,035) $(4,225,623) $(4,103,637)
Stocks (611,404) (331,131) (311,708)
Mortgage loans (9,800) (121,139) (40,000)
Real estate (5,064) (7,030) (2,765)
Other invested assets (35,204) (36,752) (2,031)
Miscellaneous applications (93,194) - -
---------------------------------------------------
Total cost of investments acquired (4,410,701) (4,721,675) (4,460,141)
Net decrease (increase) in policy loans 1,094 (3,174) (7,996)
---------------------------------------------------
Net cost of investments acquired (4,409,607) (4,724,849) (4,468,137)
---------------------------------------------------
Net cash used in investing activities (1,180,051) (261,808) (757,899)
Financing and miscellaneous activities:
Other cash provided:
Capital and surplus paid-in 137,062 3,800 127,194
Other sources 562,978 1,485,965 1,558,615
---------------------------------------------------
Total other cash provided 700,040 1,489,765 1,685,809
Other cash provided (applied):
Dividends paid to shareholders (79,000) (80,000) (61,311)
Other applications, net (70,086) (347,482) (162,103)
---------------------------------------------------
Total other cash provided (applied) (149,086) (427,482) (223,414)
---------------------------------------------------
Net cash provided by financing and
miscellaneous activities 550,954 1,062,283 1,462,395
---------------------------------------------------
Net (decrease) increase in cash and short-
term investments (381,103) 359,108 143,880
Cash and short-term investments:
Beginning of year 513,557 154,449 10,569
---------------------------------------------------
End of year $ 132,454 $ 513,557 $ 154,449
===================================================
</TABLE>
See accompanying notes.
8
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Transamerica Occidental Life Insurance Company (the Company) is domiciled in
California. The Company is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. The Company has three wholly owned insurance subsidiaries:
Transamerica Life Insurance and Annuity Company (TALIAC), Transamerica Life
Insurance Company of Canada and Transamerica Life Insurance Company of New York.
TALIAC has one wholly owned insurance subsidiary, Transamerica Assurance
Company. During 1999, Transamerica Corporation was merged with an indirect
wholly owned subsidiary of AEGON N.V., a holding company organized under the
laws of the Netherlands.
Nature of Business
The Company engages in providing life insurance, pension and annuity products,
reinsurance, structured settlements and investment products which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States
and are distributed in 50 states (reinsurance is the only product distributed in
New York).
Basis of Presentation
Certain amounts reported in the accompanying financial statements are based on
management's best estimates and judgment, subject to the minimum requirements
imposed by regulatory authorities. Actual results could differ from those
estimates.
The accompanying financial statements have been prepared in conformity with
statutory accounting practices (SAP) prescribed or permitted by the California
Department of Insurance (the California Department), which vary in some respects
from accounting principles generally accepted in the United States (GAAP). The
more significant variances from GAAP are as follows:
The accounts and operations of the Company's subsidiaries are not
consolidated but are included in investments in common stocks at the
statutory net carrying value. Changes in the subsidiaries' net carrying
values are charged or credited directly to unassigned surplus.
9
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Basis of Presentation (continued)
Bonds, where permitted, are carried at amortized cost, rather than
segregating the portfolio into held-to-maturity (reported at amortized
cost), available-for-sale (reported at fair value) and trading (reported at
fair value) classifications.
The costs of acquiring new and renewal business, such as commissions and
underwriting and policy issue costs, are expensed when incurred rather than
deferred and amortized over the terms of the related policies.
Certain assets recognized under GAAP, principally agents' debit balances
and computer software, are "non-admitted" and excluded from the
accompanying financial statements under SAP and are charged directly to
unassigned surplus.
Reserves for future policy benefits generally are calculated based on
mortality and interest assumptions that are statutorily required rather
than using estimated expected experience or actual account balances. The
policy liabilities are reported net, rather than gross, of ceded amounts.
Revenues for interest-sensitive life policies and investment-type contracts
consist of the entire premium received and benefits represent the benefits
paid and the change in policy reserves. Under GAAP, premiums received in
excess of policy charges are not recognized as revenue and benefits
represent the excess of benefits paid over the policy account value and
interest credited to the account value.
An Interest Maintenance Reserve (IMR) is provided which defers certain
realized capital gains and losses attributable to changes in the general
level of interest rates. Such deferred gains or losses are amortized into
investment income over the remaining period to maturity based on groupings
of individual securities sold in five-year bands.
An Asset Valuation Reserve (AVR) is provided which reclassifies a portion
of surplus to liabilities. The AVR is calculated according to a specified
formula as prescribed by the National Association of Insurance
Commissioners (NAIC) and is intended to stabilize the Company's surplus
against possible fluctuations in the market values of bonds, equity
securities, mortgage loans, real estate, and other invested assets. Changes
in the required AVR balance are charged or credited directly to unassigned
surplus.
10
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Basis of Presentation (continued)
Deferred federal income taxes are not provided for differences between the
financial statement amounts and tax bases of assets and liabilities.
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
A liability for reinsurance balances has been provided for unsecured policy
reserves ceded to reinsurers unauthorized by license to assume such
business. Changes to those amounts are credited or charged directly to
unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible would be established through a charge to earnings.
Other significant accounting policies are as follows:
Investments
Investments are shown on the following bases:
Bonds - where permitted, at amortized cost; all others are carried at
values prescribed by the Securities Valuation Office of the NAIC (SVO);
premiums and discounts are amortized using the interest method. For
loan-backed bonds, the interest method including anticipated prepayments at
the date of purchase is used. Prepayment assumptions for loan-backed bonds
are estimated using broker dealer survey values and are based on the
current interest rate and economic environment. The retrospective
adjustment method is used to value all securities, except for interest-only
securities which are valued using the prospective method.
Preferred stocks - where permitted at cost, all others are carried at fair
value based on NAIC values.
11
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Investments (continued)
Common stocks - at fair value based on NAIC market values, except for
investments in subsidiaries which are at statutory net carrying values.
Mortgage loans on real estate - at the aggregate unpaid balances.
Real estate - at depreciated cost less encumbrances, except for properties
acquired in satisfaction of debt, which are carried at the lower of fair
value or cost, less encumbrances.
Policy loans - at the aggregate unpaid principal balances.
Other investments - primarily at the lower of cost or fair value.
Derivative instruments, included in other investments in the accompanying
balance sheet, are valued in accordance with the NAIC Accounting Practices
and Procedures manual and Purposes and Procedures manual of the SVO. All
derivative instruments are used for hedging purposes and valued on a basis
consistent with the hedged item.
The Company uses interest rate swaps, caps and floors, options and certain other
derivatives as part of its overall interest rate risk management strategy for
certain life insurance and annuity products. As the Company only uses
derivatives for hedging purposes, the Company values all derivative instruments
on a consistent basis as the hedged item. Upon termination, gains and losses on
those instruments are included in the carrying values of the underlying hedged
items and are amortized over the remaining lives of the hedged items as
adjustments to investment income or benefits from the hedged items. Any
unamortized gains or losses are recognized when the underlying hedged items are
sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
12
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Investments (continued)
Interest rate caps and floors are used to limit the effects of changing interest
rates on yields of variable rate or short-term assets or liabilities. The
initial cost of any such agreements is amortized to net investment income over
the life of the agreement. Periodic payments that are receivable as a result of
the agreements are accrued as an adjustment of interest income or benefits from
the hedged item.
Gains and losses on disposal of investments are recognized on the
specific-identification basis. Changes in the statutory fair values of stocks
and those bonds carried at values prescribed by the SVO, rather than amortized
cost, are reported as unrealized gains or losses directly in unassigned surplus
and, accordingly, have no effect on net income.
Short-term investments include investments with maturities of less than one year
at date of acquisition.
Separate Accounts
The Company administers segregated asset accounts for pension and other clients.
The assets of the separate accounts are not subject to liabilities arising out
of any business the Company may conduct and are reported at fair value.
Investment risks associated with fair value changes are primarily borne by the
clients. The liabilities of the separate accounts represent reserves established
to meet withdrawal and future benefit payment provisions of the contracts.
Policy Reserves and Contract Claims
Life, annuity, and accident and health benefit reserves are calculated based
upon published tables using such interest rate assumptions and valuation methods
that will provide, in the aggregate, reserves that meet the amounts required by
the California Department. The Company waives deduction of deferred fractional
premiums upon death of the insureds and returns any portion of the final premium
beyond the date of death. Additional reserves are established where the gross
premiums on any insurance in force are less than the net premiums according to
the standard valuation set by the California Department.
13
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Policy Reserves and Contract Claims (continued)
Contract claim liabilities include provisions for reported claims and claims
incurred but not reported, net of reinsurance ceded.
Premium Revenues
Premiums from life insurance policies are recognized as revenue when due, and
premiums from annuity contracts are recognized when received. Accident and
health premiums are earned pro rata over the terms of the policies.
Other Revenues
Other revenues consist primarily of profit sharing on reinsurance ceded and
reserve adjustments on ceded modified coinsurance transactions.
Reinsurance
Coinsurance premiums, commissions, expense reimbursements, and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies and the terms of the reinsurance contracts.
Gains associated with reinsurance of inforce blocks of business are included in
surplus rather than gain from operations. Premiums ceded and recoverable losses
have been reported as a reduction of premium income and benefits, respectively.
Prior Year Adjustments
Prior year adjustments charged directly to surplus in 1999 related primarily to
expenses incurred for sales practices litigation of $7 million (after tax) and a
suspense asset adjustment of $7 million (after tax).
Prior year adjustments in 1998 relate primarily to expenses incurred for sales
practices litigation of $8 million (after-tax) and a reserve valuation
adjustment of $13 million (after-tax) on single premium immediate annuities.
Prior year adjustments in 1997 relate primarily to expenses incurred for sales
practices litigation of $15 million (after-tax) and a reserve valuation
adjustment of $30 million (after-tax) on single premium immediate annuities.
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Reclassifications
Certain reclassifications of 1997 and 1998 amounts have been made to conform
with the 1999 presentation.
2. Fair Values of Financial Instruments
Fair values for bonds are based on market values prescribed by the SVO (NAIC
market values) rather than on actual or estimated market values. For bonds
without available NAIC market values, amortized costs are used as estimated fair
values. As of December 31, 1999 and 1998, the fair value of investments in bonds
includes $5,366 million and $5,215 million, respectively, of bonds that were
valued at amortized cost.
Fair values for preferred and common stocks are based on NAIC market values,
except for investment in subsidiaries which are at statutory net carrying
values.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
Fair values for derivative instruments are estimated using values obtained from
independent pricing services.
The carrying amounts of cash and short-term investments and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts, included in
reserves for future policy benefits and other policy liabilities, are estimated
using discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued.
15
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
2. Fair Values of Financial Instruments (continued)
The carrying values and fair values of financial instruments are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1999 1998
-----------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Bonds $ 12,820,804 $ 12,681,458 $ 12,135,178 $ 12,834,818
Preferred stocks 135,450 93,071 97,801 100,909
Common stocks 2,254,439 2,254,439 1,738,975 1,738,975
Mortgage loans on real estate 385,590 363,650 387,038 409,714
Policy loans 409,534 396,956 410,628 388,076
Floors, caps and swaptions 56,964 60,129 57,311 149,447
Cash on hand and on deposit 132,454 132,454 513,557 513,557
Accrued investment income 226,823 226,823 210,932 210,932
December 31
1999 1998
-----------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------------------------------------
Financial liabilities (liabilities for
investment-type contracts):
Single and flexible premium
deferred annuities $ 2,074,622 $ 1,881,238 $ 2,112,347 $ 1,927,980
Single premium immediate annuities
4,035,133 4,217,004 3,924,227 4,820,607
Other deposit contracts 2,219,143 2,222,305 1,917,574 1,915,954
Off-balance sheet assets (liabilities):
Exchange derivatives designated
as hedges that are in a:
Receivable position - 30,253 - 88,062
Payable position - (96,206) - (17,025)
</TABLE>
The Company enters into various interest-rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure.
16
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
2. Fair Values of Financial Instruments (continued)
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. Interest rate swap agreements are intended
primarily for asset and liability management. The differential to be paid or
received on those interest rate swap agreements that are designated as hedges of
financial assets is recorded on an accrual basis as a component of net
investment income. The differential to be paid or received on those interest
rate swap agreements that are designated as hedges of financial liabilities is
recorded on an accrual basis as a component of benefits paid or provided. While
the Company is not exposed to credit risk with respect to the notional amounts
of the interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1999, there were no unfunded
interest rate swap agreements.
Interest rate floor agreements generally provide for the receipt of payments in
the event the average interest rates during a settlement period fall below
specified levels under interest rate floor agreements. These agreements enable
the Company to transfer, modify, or reduce its interest rate risk and generally
require up front premium payments. The costs of interest rate floor agreements
are amortized over the contractual periods and resulting amortization expenses
are included in net investment income. The conditional receipts under these
agreements are recorded on an accrual basis as a component of net investment
income if designated as hedges of financial assets or as a component of benefits
paid or provided if designated as hedges of financial liabilities.
17
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
2. Fair Values of Financial Instruments (continued)
The information on derivative instruments is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
--------------------------------------------
<S> <C> <C> <C>
December 31, 1999
Interest rate swap agreements designated as
hedges of financial assets, where
the Company pays:
Fixed rate interest $ 296,133 6.46% $ 28,092
Floating rate interest 1,516,308 5.95 (90,055)
Floating rate interest based on one index and
receives floating rate interest on another
index 4,525 6.05 20
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 710,981 6.40 (4,394)
Floating rate interest based on one index and
receives floating rate interest on another
index 237,500 6.13 (260)
Interest rate floor agreements 400,000 - 3,065
Swaptions 6,500,000 6.64 25,211
Call options 31,999 - 31,853
</TABLE>
18
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
2. Fair Values of Financial Instruments (continued)
<TABLE>
<CAPTION>
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
-----------------------------------------------
<S> <C> <C> <C>
December 31, 1998
Interest rate swap agreements designated as
hedges of financial assets, where the
Company pays:
Fixed rate interest $ 44,950 5.95% $ 280
Fixed rate interest 212,488 5.01 (13,525)
Floating rate interest (1,495,000) 5.40 80,717
Floating rate interest based on one index and
receives floating rate interest on another
index 15,833 5.06 110
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 1,204,456 5.42 3,781
Floating rate interest based on one index and
receives floating rate interest on another
index 37,500 4.84 (339)
Interest rate floor agreements 400,000 - 21,705
Swaptions 6,500,000 5.19 101,754
Call options 30,710 - 25,988
</TABLE>
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of temporary cash investments, fixed maturities,
derivatives, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments with high credit quality financial
institutions. Concentration of credit risk with respect to investments in fixed
maturities and mortgage loans on real
19
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
2. Fair Values of Financial Instruments (continued)
estate is limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1999, the Company had no significant concentration of credit risk.
3. Investments
The carrying value and fair value of investments in debt securities are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 189,325 $ 11,396 $ 1,968 $ 198,753
Obligations of states and political
subdivisions 106,484 3,673 1,482 108,675
Foreign governments 50,820 353 3,328 47,845
Corporate securities 9,345,228 103,079 230,148 9,218,159
Public utilities 1,718,582 20,020 38,842 1,699,760
Mortgage and other asset-backed
securities 1,410,365 - 2,099 1,408,266
------------------------------------------------------------------
$12,820,804 $ 138,521 $ 277,867 $12,681,458
==================================================================
</TABLE>
20
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
3. Investments (continued)
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 148,427 $ 57,226 $ - $ 205,653
Obligations of states and political
subdivisions 123,255 11,752 - 135,007
Foreign governments 39,940 2,115 1,486 40,569
Corporate securities 8,430,358 476,428 22,687 8,884,099
Public utilities 2,206,740 176,863 571 2,383,032
Mortgage and other asset-backed
securities 1,186,458 - - 1,186,458
------------------------------------------------------------------
$12,135,178 $ 724,384 $ 24,744 $12,834,818
==================================================================
</TABLE>
Included in bonds is a $150 million note due from Transamerica Corporation at
December 31, 1998.
The carrying value and fair value of bonds at December 31, 1999, by contractual
maturity, are as follows (in thousands):
Carrying Fair
Value Value
---------------------------------
Due in one year or less $ 137,778 $ 138,280
Due after one year through five years 2,021,208 2,019,633
Due after five years through ten years 2,769,210 2,708,056
Due after ten years 6,482,243 6,407,223
Mortgage and other asset-backed securities 1,410,365 1,408,266
---------------------------------
$12,820,804 $12,681,458
=================================
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
21
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
3. Investments (continued)
The costs and fair values of preferred stocks and common stocks (unaffiliated
companies) are as follows (in thousands):
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------
December 31, 1999
Preferred stocks $ 77,231 $ 6,399 $ 41,182 $ 42,448
Common stocks 662,215 640,014 32,190 1,270,039
December 31, 1998
Preferred stocks $ 40,941 $ 3,506 $ 18 $ 44,429
Common stocks 299,048 483,421 8,979 773,490
The components of investment in real estate are as follows (in thousands):
Accumulated Carrying
Cost Depreciation Value
-----------------------------------------------
December 31, 1999
Properties occupied by the
Company $207,709 $111,331 $ 96,378
Other 7,450 2,633 4,817
-----------------------------------------------
$215,159 $113,964 $101,195
===============================================
December 31, 1998
Properties occupied by the
Company $202,933 $105,330 $ 97,603
Other 8,514 3,369 5,145
----------------------------------------------
$211,447 $108,699 $102,748
==============================================
22
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
3. Investments (continued)
The maximum and minimum lending rates for mortgage loans during 1999 were 8.48%
and 7.13%, respectively. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of any purchase money or insured or
guaranteed mortgages, was 80%. Fire insurance is carried in every case at least
equal to the excess of the loan over the maximum loan which would be permitted
by law on the land without the buildings.
Net investment income (expense) by major category of investments is summarized
as follows (in thousands):
Year ended December 31
1999 1998 1997
-----------------------------------------------
Bonds $ 989,340 $ 950,923 $ 934,229
Preferred stocks 5,078 1,312 790
Common stocks 53,192 53,000 43,938
Mortgage loans on real estate 28,314 28,713 25,031
Real estate 28,008 27,288 29,447
Policy loans 27,086 24,780 26,061
Cash and short-term investments 10,526 10,939 4,094
Other investments 16,343 17,198 (533)
-----------------------------------------------
1,157,887 1,114,153 1,063,057
Investment expense (32,845) (35,610) (35,003)
-----------------------------------------------
$ 1,125,042 $ 1,078,543 $ 1,028,054
===============================================
23
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
3. Investments (continued)
The realized gains and losses and other information related to investments are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Net gains (losses) on disposition of
investments in:
Bonds $ 2,993 $ 16,522 $ (27,875)
Preferred stocks (6,085) (2,405) (579)
Common stocks 41,011 164,984 9,792
Other (90,400) (7,021) (1,308)
-----------------------------------------------
(52,481) 172,080 (19,970)
Related income (taxes) recovery 71,941 (84,425) (7,480)
Transfer to the IMR (1,945) (11,584) 18,118
-----------------------------------------------
Net realized capital gains (losses) $ 17,515 $ 76,071 $ (9,332)
===============================================
</TABLE>
The other loss of $90.4 million in 1999 primarily results from the net pretax
loss incurred on an ineffective equity collar hedge (see Note 12.)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Proceeds from disposition of investment in
bonds $ 2,993,985 $ 3,938,693 $ 3,525,839
Gross gains on disposition of investment
in bonds 46,135 44,290 24,157
Gross losses on disposition of investment
in bonds (43,142) (27,768) (52,032)
Change in net unrealized gains (losses):
Bonds (5,756) (871) -
Preferred stocks 2,271 (2,741) 518
Common stocks 125,177 257,582 242,773
Real estate - - 3,727
Other (2,272) 7,570 (189)
-----------------------------------------------
$ 119,420 $ 261,540 $ 246,829
===============================================
</TABLE>
24
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
3. Investments (continued)
Change in net unrealized gains on common stocks in 1999, 1998 and 1997, includes
$(34) million, $156 million and $107 million, respectively, related to the
increase (decrease) in TALIAC's statutory capital and surplus for those years.
4. Reinsurance
The Company is involved in both the cession and assumption of reinsurance with
other companies, including affiliated companies. Risks are reinsured with other
companies to permit the recovery of a portion of the direct losses. These
reinsured risks are treated as though, to the extent of the reinsurance, they
are risks for which the Company is not liable.
Policy liabilities and accruals are reported in the accompanying financial
statements net of reinsurance ceded. The Company remains liable to the extent
the reinsuring companies do not meet their obligations under these reinsurance
treaties.
The following summarizes the effect of reinsurance transactions (in thousands):
<TABLE>
<CAPTION>
Ceded/Retroceded to Assumed from
----------------------------------------------------------------
Direct Affiliated Unaffiliated Affiliated Unaffiliated Net
Amount Companies Companies Companies Companies Amount
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1999:
Premium revenue $ 1,409,419 $ 112,947 $ 1,965,697 $ 157,197 $ 1,880,044 $ 1,368,016
=======================================================================================================
At December 31, 1999:
Life insurance in force $547,304,907 $ 4,881,384 $365,336,549 $ 17,212,668 $ 465,086 $194,764,728
=======================================================================================================
Reserves for future policy
benefits $ 14,241,446 $ 4,124,327 $ 3,056,908 $ 233,126 $ 2,401,859 $ 9,695,196
Policy and contract claims
payable 127,030 40,341 137,047 1,824 345,323 296,789
------------------------------------------------------------------------------------------------------
$ 14,368,476 $ 4,164,668 $ 3,193,955 $ 234,950 $ 2,747,182 $ 9,991,985
======================================================================================================
</TABLE>
25
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
4. Reinsurance (continued)
<TABLE>
<CAPTION>
Ceded/Retroceded to Assumed from
----------------------------------------------------------------
Direct Affiliated Unaffiliated Affiliated Unaffiliated Net
Amount Companies Companies Companies Companies Amount
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1998:
Premium revenue $ 1,401,733 $ 298,339 $ 2,193,006 $ 198,460 $ 2,499,677 $ 1,608,525
=====================================================================================================
At December 31, 1998:
Life insurance in force $190,331,317 $ 950,789 $307,374,066 $ 25,093,946 $282,821,689 $189,922,097
=====================================================================================================
Reserves for future policy
benefits $ 14,778,562 $ 4,978,700 $ 2,931,865 $ 136,208 $ 2,424,077 $ 9,428,282
Policy and contract claims
payable 121,330 45,187 316,533 11,018 385,519 156,147
-----------------------------------------------------------------------------------------------------
$ 14,899,892 $ 5,023,887 $ 3,248,398 $ 147,226 $ 2,809,596 $ 9,584,429
=====================================================================================================
Year ended
December 31, 1997:
Premium reserve $ 1,434,511 $ 245,606 $ 1,296,529 $ 75,853 $ 1,747,516 $ 1,715,745
=====================================================================================================
At December 31, 1997:
Life insurance in force $175,258,666 $ - $272,918,826 $ 26,199,512 $223,688,654 $152,228,006
=====================================================================================================
Reserves for future policy
benefits $ 15,117,147 $ 5,457,334 $ 2,731,647 $ 15,306 $ 2,922,166 $ 9,865,638
Policy and contract claims
payable 94,040 42,804 197,351 20,854 357,125 231,864
-----------------------------------------------------------------------------------------------------
$ 15,211,187 $ 5,500,138 $ 2,928,998 $ 36,160 $ 3,279,291 $ 10,097,502
=====================================================================================================
</TABLE>
26
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
4. Reinsurance (continued)
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other From Other Net
Amount Companies Companies Amount
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Benefits paid or provided $1,632,298 $1,499,809 $1,086,642 $1,219,131
=================================================================
Year ended December 31, 1998:
Benefits paid or provided $1,576,300 $1,147,899 $1,020,085 $1,448,486
=================================================================
Year ended December 31, 1997:
Benefits paid or provided $1,631,249 $ 955,287 $ 887,538 $1,563,500
=================================================================
</TABLE>
5. Income Taxes
The Company's taxable income or loss is included in the consolidated return of
Transamerica Corporation for the period ended July 21, 1999. The method of
allocation between the companies for the period ended July 21, 1999, is subject
to written agreement approved by the Board of Directors. Tax payments are made
to, or refunds received from, Transamerica Corporation in amounts which would
result from filing separate tax returns with federal taxing authorities, except
that tax benefits attributable to operating losses and other carryovers are
recognized currently since utilization of these benefits is assured by
Transamerica Corporation. The provision does not purport to represent a
proportionate share of the consolidated tax.
For the period beginning July 22, 1999, the Company will join in a consolidated
tax return with certain life affiliates: TALIAC, Transamerica Assurance Company
and Transamerica Life Insurance Company of New York. The method of allocation
between the companies for the period beginning July 22, 1999, will be subject to
written agreement to be approved by the Board of Directors. It is anticipated
that this agreement will require that tax payments are made to, or refunds are
received from, TOLIC, in amounts which would results from filing separate tax
returns with federal taxing authorities.
27
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
5. Income Taxes (continued)
Amounts due from Transamerica Corporation for federal income taxes are $160
million at December 31, 1999. Amounts due to Transamerica Corporation for
federal income taxes were $28.5 million at December 31, 1998, and are included
in accounts payable and other liabilities in the accompanying balance sheet.
Following is a reconciliation of federal income taxes computed at the statutory
rate with the income tax provision, excluding income taxes related to net
realized gains on investment transactions (in thousands):
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 61,196 $ 18,901 $ 57,511
Difference between statutory and tax
reserves (1,153) (3,463) 10,045
Deferred acquisition costs capitalized,
net of amortization 13,326 4,677 10,652
Reinsurance adjustments (14,442) (7,525) 12,900
Difference in statutory and tax bases
of investments (2,399) (10,990) (4,149)
Adjustment to prior year tax provision 24,640 (13,055) 4,689
Tax credits (16,000) (17,698) (11,127)
Nontaxable affiliate dividends (17,500) (17,500) (14,000)
Other (17,338) (23,755) (8,007)
---------------------------------------------
Provision (benefit) for income taxes $ 30,330 $(70,408) $ 58,514
=============================================
</TABLE>
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983, pursuant
to the Deficit Reduction Act of 1984. This amount would become subject to tax
when it exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1999, was $118 million.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $41.3
million. No income taxes have been provided on the policyholders' surplus
account since the conditions that would cause such taxes are remote.
28
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
6. Investments in Subsidiaries
The Company's investment in common stocks of its wholly owned subsidiaries with
carrying values, based on the statutory capital and surplus of the subsidiaries,
is summarized as follows (in thousands):
Carrying
Cost Value
--------------------------------------
At December 31, 1999:
TALIAC $ 238,418 $ 797,109
Other 206,041 187,291
--------------------------------------
$ 444,459 $ 984,400
======================================
At December 31, 1998:
TALIAC $ 237,448 $ 830,829
Others 179,891 134,656
--------------------------------------
$ 417,339 $ 965,485
======================================
The Company received a $50 million dividend in 1999 and 1998 from its wholly
owned subsidiary, TALIAC.
The Company's investment in preferred stocks of subsidiaries is substantially
all represented by an investment in Transamerica Life Insurance Company of
Canada.
Certain financial information with respect to TALIAC, the Company's principal
subsidiary, is as follows (in thousands):
December 31
1999 1998
-----------------------------------------
Cash and investments $14,046,255 $13,582,175
Other assets 6,339,057 4,783,063
-----------------------------------------
Total assets 20,385,312 18,365,238
Aggregate reserves 9,221,606 8,084,356
Other liabilities 10,366,597 9,450,053
-----------------------------------------
Total liabilities 19,588,203 17,534,409
-----------------------------------------
Total capital and surplus $ 797,109 $ 830,829
=========================================
29
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
7. Deferred and Uncollected Premiums
Components of deferred and uncollected premiums are as follows:
Gross Loading Net
-----------------------------------------------
December 31, 1999
Life and annuity:
Ordinary first-year business $ 8,630 $ - $ 8,630
Ordinary renewal business 183,107 36,000 147,107
Group life direct business 2,095 - 2,095
-----------------------------------------------
193,832 36,000 157,832
Accident and health 69,890 - 69,890
-----------------------------------------------
$ 263,722 $ 36,000 $ 227,722
===============================================
December 31, 1998
Life and annuity:
Ordinary first-year business $(828,090) $ 14,537 $(842,627)
Ordinary renewal business 9,900 8,929 971
Group life direct business 5,637 - 5,637
-----------------------------------------------
(812,553) 23,466 (836,019)
Accident and health 28,068 - 28,068
-----------------------------------------------
$(784,485) $ 23,466 $(807,951)
===============================================
The gross deferred and uncollected premiums balance at December 31, 1999, of
$263,722,000 is composed of $431,756,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $168,034,000.
The gross deferred and uncollected premiums balance at December 31, 1998, of
$(784,485,000) is composed of $379,199,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $(1,163,684,000).
30
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
8. Annuity Reserves and Deposit Liabilities
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------------------------------------
Amount Percent Amount Percent
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal - with
adjustment:
With market value adjustment $ 9,134 -% $ 2,955,445 21%
At book value less surrender charge 435,717 3 565,977 4
At market value 7,385,279 53 2,319,944 16
--------------------------------------------------------------
7,830,130 56 5,841,366 41
Subject to discretionary withdrawal -
without adjustment 1,748,102 13 1,839,270 13
Not subject to discretionary withdrawal
provision 4,417,004 31 6,710,422 46
--------------------------------------------------------------
Total annuity reserves and deposit
liabilities 13,995,236 100% 14,391,058 100%
=========== ===========
Less reinsurance (5,820,180) (6,736,704)
---------------- -----------------
Net annuity reserves and deposit liabilities $ 8,175,056* $ 7,654,354*
================ =================
</TABLE>
* Includes $3,364 million and $2,622 million of annuity reserves and deposit
liabilities reported in the separate account liability at December 31, 1999
and 1998, respectively. Funding agreement liabilities that are a part of the
separate account liabilities are excluded from the above amounts.
Included in other liabilities is $2,228 million and $1,927 million at December
31, 1999 and 1998, respectively, held pursuant to funding agreements. Funding
agreements are obligations that contain no mortality or morbidity risks.
31
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
9. Capital and Surplus
The Company is subject to the requirements of the NAIC approved Risk Based
Capital (RBC) rules and at December 31, 1999 and 1998, the Company met the RBC
requirement.
The amount of dividends which can be paid by the Company without prior approval
of the California Department is subject to restrictions related to statutory
surplus and gains from operations. The Company could pay $184 million in
dividends in 2000 without prior approval.
10. Pension Plan and Other Postretirement Benefits
Substantially all employees are covered by noncontributory defined benefit plans
sponsored by the Company and the Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates in which the Company also participates.
Pension benefits are based on the employee's compensation during the highest
paid 60 consecutive months during the 120 months before retirement. The general
policy is to fund current service costs currently and prior service costs over
periods ranging from 10 to 30 years. Assets of those plans are invested
principally in publicly traded stocks and bonds.
The Company's total pension costs were $0.8 million, $0.6 million and $0 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. The Company accounts for the costs of such
benefit programs under the accrual method and amortizes its transition
obligation for retirees and fully eligible or vested employees over 20 years.
Postretirement benefit costs charged to income was $3 million for each of the
years ended December 31, 1999, 1998 and 1997.
11. Assets on Deposit
At December 31, 1999 and 1998, $4 million and $4 million of the Company's assets
were on deposit with public officials in compliance with regulatory
requirements.
32
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
12. Related Party Transactions
The Company has various transactions with Transamerica Corporation and its
affiliated companies in the normal course of operations. These transactions
include the assumption and cession of reinsurance and the performance of certain
administrative and support services for affiliated companies. Such
reimbursements are recorded as a reduction of operating expenses.
Transactions with Transamerica Corporation and its affiliates also include
transactions related to pension plans, investments in a money market fund
managed by an affiliated company, and rental of computer services. Pension funds
administered by a subsidiary for affiliated companies amounted to $1.8 billion,
$1.6 billion and $1.3 billion at December 31, 1999, 1998 and 1997, respectively.
The investment in an affiliated money market fund was not material.
The Company had amounts due from affiliates of $41 million as of December 31,
1999, and $16 million as of December 31, 1998.
In March 1999, the Company entered into an equity collar (which expired December
17, 1999), with an unrelated party to hedge the price fluctuations of their
unaffiliated equity securities portfolio. In addition, Transamerica Corporation
agreed to protect the Company from any ineffectiveness in the hedge that would
expose the Company to loss net of tax benefit. As a result of the
ineffectiveness of the collar with the unrelated party and the payment that the
Company was required to make upon settlement, Transamerica Corporation made a
payment of $172 million to the Company in December 1999.
33
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
13. Leases
Rental expense for equipment and properties occupied by the Company was $17
million in 1999, $14 million in 1998, and $19 million in 1997. The following is
a schedule by years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1999 (in thousands):
Year ending December 31:
2000 $ 12,203
2001 9,998
2002 7,745
2003 6,728
2004 6,624
Later years 41,701
------------------
$ 84,999
==================
14. Litigation
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiff's counsel entered into a settlement which was approved on
June 26, 1997. The settlement required prompt notification to affected
policyholders. Administrative and policy benefit costs associated with the
settlement of $7 million, $8 million and $15 million after-tax have been
incurred in 1999, 1998 and 1997, respectively, and reflected in these statements
as prior period adjustments. Additional costs related to the settlement are not
expected to be material and will be incurred over a period of years. In the
opinion of the Company, any ultimate liability which might result from other
litigation would not have a materially adverse effect on the combined financial
position of the Company or the results of its operations.
15. Separate Accounts
Separate accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist primarily of fixed maturities
and equity securities and are carried at estimated fair value. The Company
provides a minimum guaranteed return to policyholders of certain separate
accounts. Certain other separate accounts do not have any minimum guarantees and
the investment risks associated with market value changes are borne entirely by
the policyholder.
34
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
15. Separate Accounts (continued)
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999, is as follows (in thousands):
<TABLE>
<CAPTION>
Separate Accounts with Guarantees
----------------------------------------------------
Nonindexed Nonindexed
Guarantee Guarantee Nonguaranteed
Less than or Greater than Separate
Indexed equal to 4% 4% Accounts Total
-------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Premiums, deposits and other
considerations $ - $ - $ - $ 254,076 $ 254,076
============== =============== =============== ============= =============
Reserves for separate accounts
with assets at:
Fair value $ - $ - $ - $3,364,426 $3,364,426
Amortized cost - - - - -
Other - - - 703,700 703,700
-------------- --------------- --------------- ------------- -------------
Total $ - $ - $ - $4,068,126 $4,068,126
============== =============== =============== ============= =============
Reserves for separate accounts
by withdrawal characteristics:
Subject to discretionary
withdrawal (with
adjustment):
With market value
adjustment $ - $ - $ - $ - $ -
At book value less
current surrender
charge of 5% or more
- - - - -
At market value 3,364,426 3,364,426
At book value without
adjustment and with
current surrender
charges less than 5% - - - - -
-------------- --------------- --------------- ------------- -------------
Subtotal - - - 3,364,426 3,364,426
Not subject to
discretionary withdrawal - - - - -
Other - - - 703,700 703,700
-------------- --------------- --------------- ------------- -------------
Total separate account liabilities $ - $ - $ - $4,068,126 $4,068,126
============== =============== =============== ============= =============
</TABLE>
35
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
15. Separate Accounts (continued)
A reconciliation of the amounts transferred to and from the separate accounts is
presented below (in thousands):
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Transfer as reported in the summary of
operations of the separate accounts statement:
Transfers to separate accounts $ 255,210 $ 352,298 $ 454,749
Transfers from separate accounts 217,729 173,152 240,381
---------------------------------------------
Net transfers to separate accounts 37,481 179,146 214,368
Reconciling adjustments:
Deposits (withdrawals) from separate
accounts 13,091 21,097 (61,370)
---------------------------------------------
Transfers as reported in the statements of
income
$ 50,572 $ 200,243 $ 152,998
=============================================
</TABLE>
16. Direct Premium Written by Managing General Agents/Third-Party
Administrators
The Company has the following direct premiums written through managing general
agents (in thousands):
<TABLE>
<CAPTION>
Types of Direct
Exclusive Business Authority Written
Contract Written Granted Premiums
----------------------------------------------------------------
<S> <C> <C> <C> <C>
National Benefit Resources No Specific and * $ 38
Aggregate
Excess of Loss
Insurance
R. E. Moulton Insurance Agency, Inc. No Specific and * 6,698
Aggregate
Excess of Loss
Insurance
</TABLE>
36
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
16. Direct Premium Written by Managing General Agents/Third-Party
Administrators (continued)
<TABLE>
<CAPTION>
Types of Direct
Exclusive Business Authority Written
Contract Written Granted Premiums
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediary Insurance Services, Inc. No Specific and * 2,969
Aggregate
Excess of Loss
Insurance
Excess Reinsurance Underwriters No Specific and * 12,536
Agency, Inc. Aggregate
Excess of Loss
Insurance
Risk Assessment Strategies No Specific and * 576
Aggregate
Excess of Loss
Insurance
North American Insurance Management Yes Occupational * 1,453
Accident -
Excess of Loss
Insurance
Health Reinsurance Management Partnership No Provider Excess * 25,173
Self Funding Systems No Specific and * 119
Aggregate
Excess of Loss
Insurance
</TABLE>
*Premium collection, underwriting and commission/claim payments authority
granted.
37
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
17. NAIC Codification
In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the state of California must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Department. The state
of California has stated affirmatively that it will adopt Codification effective
January 1, 2001. Management believes that the impact of Codification will not be
material to the Company's statutory-basis financial statements.
18. Year 2000 (Unaudited)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
38
<PAGE>
Statutory Basis
Financial Statement Schedules
<PAGE>
Transamerica Occidental Life Insurance Company
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis
(Dollars in thousands)
December 31, 1999
Schedule I
<TABLE>
<CAPTION>
Amount at
Which Shown
Market in the
Type of Investment Cost (1) Value Balance Sheet
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities
Bonds:
United States government and government
agencies and authorities $ 189,325 $ 198,753 $ 189,325
States, municipalities and political
subdivisions 106,484 108,675 106,484
Foreign governments 50,820 47,845 50,820
Public utilities 1,718,582 1,699,760 1,718,582
All other corporate bonds 9,345,228 9,218,159 9,345,228
Mortgage and other asset-backed securities
1,410,365 1,408,266 1,410,365
Redeemable preferred stock 66,841 30,448 66,371
-----------------------------------------------
Total fixed maturities 12,887,645 12,711,906 12,887,175
Equity securities
Common stocks:
Affiliated entities 444,459 984,400 984,400
Banks, trust and insurance 36,481 38,892 38,892
Industrial, miscellaneous and all other 625,734 1,231,147 1,231,147
Nonredeemable preferred stock 69,079 62,623 69,079
-----------------------------------------------
Total equity securities 1,175,753 2,317,062 2,323,518
Mortgage loans on real estate 385,590 363,650 385,590
Real estate 101,195 50,000 101,195
Policy loans 409,534 396,956 409,534
Other long-term investments 218,997 155,562 218,997
Cash and short-term investments 132,454 132,454 132,454
-----------------------------------------------
Total investments $15,311,168 $16,127,590 $16,458,463
===============================================
</TABLE>
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual discounts.
39
<PAGE>
Transamerica Occidental Life Insurance Company
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
December 31, 1999
Schedule III
Future Policy Policy and
Benefits and Unearned Contract
Expenses Premiums Liabilities
--------------------------------------------------------------------------------
Year ended December 31, 1999
Individual life $4,988,602 $ - $ 240,452
Individual health 42,065 28,046 33,481
Group life and health 31,586 2,616 32,963
Annuity 4,602,281 - (10,107)
-----------------------------------------------
9,664,534 30,662 296,789
Year ended December 31, 1998
Individual life 4,595,349 - 121,089
Individual health 26,439 41,669 (9,445)
Group life and health 12,953 3,675 47,840
Annuity 4,748,197 - (3,337)
-----------------------------------------------
9,382,938 45,344 156,147
Year ended December 31, 1997
Individual life 4,207,937 - 155,424
Individual health 27,254 31,297 2,606
Group life and health 16,964 2,124 51,052
Annuity 5,580,062 - 22,781
-----------------------------------------------
$9,832,217 $ 33,421 $ 231,863
===============================================
40
<PAGE>
Benefits,
Claims
Net Losses and Other
Premium Investment Settlement Operating Premiums
Revenue Income* Expenses Expenses* Written
--------------------------------------------------------------------------------
$ 891,749 $ 405,705 $ 909,143 $ 703,605 $ 1,178,607
(10,184) 2,770 (33,811) 35,665 80,328
158,775 10,967 134,414 124,689 65,217
327,676 705,600 1,283,024 736,327 85,267
--------------------------------------------------------------------------------
1,368,016 1,125,042 2,292,770 1,600,286 1,409,419
905,725 400,313 1,242,592 492,976 1,087,850
51,827 4,483 3,265 100,839 63,828
195,431 4,003 160,581 89,231 50,433
455,542 669,744 312,946 2,218,202 199,622
--------------------------------------------------------------------------------
1,608,525 1,078,543 1,719,384 2,901,248 1,401,733
761,853 370,027 933,474 383,255 1,042,734
23,988 6,216 19,252 49,460 56,861
236,688 5,074 200,224 123,772 111,314
693,216 646,737 305,491 1,702,770 223,602
--------------------------------------------------------------------------------
$ 1,715,745 $ 1,028,054 $ 1,458,441 $ 2,259,257 $ 1,434,511
================================================================================
*Allocations of net investment income and other operating expenses are based on
a number of assumptions of estimates, and the results would change if
different methods were applied.
<PAGE>
Transamerica Occidental Life Insurance Company
Reinsurance - Statutory Basis
(Dollars in thousands)
December 31, 1999
Schedule IV
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to From of Amount
Gross Other Other Net Assumed
Amount Companies Companies Amount to Net
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1999
Life insurance in force $ 547,304,907 $ 370,217,933 $ 17,677,754 $ 194,764,728 9%
Premiums:
Individual life $ 1,178,607 $ 1,220,329 $ 933,471 $ 891,749 105%
Individual health 80,328 97,296 6,784 (10,184) -%
Group life and health 65,217 247,870 341,428 158,775 215%
Annuity 85,267 513,149 755,558 327,676 231%
---------------------------------------------------------------------------------------------
$ 1,409,419 $ 2,078,644 $ 2,037,241 $ 1,368,016 149%
=============================================================================================
Year ended December 31,
1998
Life insurance in force $ 190,331,317 $ 308,297,855 $ 307,915,635 $ 189,922,097 162%
Premiums:
Individual life $ 1,087,850 $ 958,929 $ 776,803 $ 905,725 86%
Individual health 63,828 134,991 122,991 51,827 237%
Group life and health 50,433 268,973 413,971 195,431 212%
Annuity 199,622 1,128,452 1,384,372 455,542 304%
---------------------------------------------------------------------------------------------
$ 1,401,733 $ 2,491,345 $ 2,698,137 $ 1,608,525 168%
=============================================================================================
Year ended December 31,
1997
Life insurance in force $ 175,258,666 $ 272,918,826 $ 249,888,166 $ 152,228,006 164%
Premiums:
Individual life $ 1,042,734 $ 967,543 $ 686,662 $ 761,853 90%
Individual health 56,861 47,651 14,778 23,988 61%
Group life and health 111,314 274,270 399,644 236,688 169%
Annuity 223,602 252,671 722,285 693,216 104%
---------------------------------------------------------------------------------------------
$ 1,434,511 $ 1,542,135 $ 1,823,369 $ 1,715,745 106%
=============================================================================================
</TABLE>
<PAGE>
Audited Financial Statements
Separate Account VA-2L of
Transamerica Occidental
Life Insurance Company
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Audited Financial Statements
Year ended December 31, 1999
Contents
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors........................................... 1
Statement of Assets and Liabilities...................................... 2
Statement of Operations.................................................. 8
Statements of Changes in Net Assets...................................... 14
Notes to Financial Statements............................................ 24
</TABLE>
<PAGE>
Report of Independent Auditors
Unitholders of Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of Separate
Account VA-2L of Transamerica Occidental Life Insurance Company (comprised of
the Money Market, Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap,
Capital Appreciation, Stock Index Fund, Socially Responsible Fund, Growth and
Income, International Equity, International Value, Disciplined Stock, Small
Company Stock, Limited Term High Income, Balanced, Core Value, Mid-Cap, TAVIF
Growth, Founders Growth, Founders Passport, Founders International Equity,
European Equity and Technology Growth Sub-Accounts) as of December 31, 1999, the
related statement of operations for the year then ended, and the statements of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of Separate Account VA-2L's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of December 31,
1999, by correspondence with the fund managers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective sub-
accounts comprising Separate Account VA-2L of Transamerica Occidental Life
Insurance Company at December 31, 1999, the results of their operations for the
year then ended, and the changes in their net assets for each of the two years
in the period then ended in conformity with accounting principles generally
accepted in the United States.
March 24, 2000
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
Zero
Money Managed Coupon
Market Assets 2000
Sub-account Sub-account Sub-account
-----------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at fair value $ 75,682,213 $ 39,444,843 $ 19,449,264
Receivable for units sold 5,829,116 754,220 2,237
Due from Transamerica Life 149 - -
-----------------------------------------------------------------
Total assets 81,511,478 40,199,063 19,451,501
Liabilities
Payable for units redeemed - - -
Due to Transamerica Life - 54 44
-----------------------------------------------------------------
Total liabilities - 54 44
-----------------------------------------------------------------
Net assets $ 81,511,478 $ 40,199,009 $ 19,451,457
=================================================================
Accumulation units outstanding 64,761,299.670 2,347,756.874 1,153,903.664
=================================================================
Net asset value and redemption price per unit $ 1.258645 $ 17.122305 $ 16.857089
=================================================================
Investment sub-account information:
Number of mutual fund shares 75,682,213.160 2,694,319.932 1,598,131.825
Net asset value per share $ 1.00 $ 14.64 $ 12.17
Investment cost $ 75,682,213 $ 37,296,241 $ 19,741,299
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
Bond Cap Appreciation Index Fund Fund Income
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 78,574,729 $ 164,068,147 $ 330,901,131 $ 275,626,994 $ 105,625,039 $ 220,710,734
11,499 12,348 - - - -
- 116 - 82 51 109
-------------------------------------------------------------------------------------------------------------------------------
78,586,228 164,080,611 330,901,131 275,627,076 105,625,090 220,710,843
- - 34,016 5,479,922 76,805 66,326
145 - 1 - - -
-------------------------------------------------------------------------------------------------------------------------------
145 - 34,017 5,479,922 76,805 66,326
-------------------------------------------------------------------------------------------------------------------------------
$ 78,586,083 $ 164,080,611 $ 330,867,114 $ 270,147,154 $ 105,548,285 $ 220,644,517
===============================================================================================================================
5,010,813.856 2,096,729.990 8,513,807.353 5,113,716.960 2,399,067.265 6,548,394.692
===============================================================================================================================
$ 15.683297 $ 78.255480 $ 38.862415 $ 52.827944 $ 43.995551 $ 33.694444
===============================================================================================================================
7,215,310.326 2,473,140.601 8,299,501.660 7,168,452.387 2,703,481.944 8,662,116.755
$ 10.89 $ 66.34 $ 39.87 $ 38.45 $ 39.07 $ 25.48
$ 83,400,398 $ 135,538,276 $ 259,917,282 $ 212,103,023 $ 80,973,125 $ 185,229,621
</TABLE>
See accompanying notes.
3
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1999
<TABLE>
<CAPTION>
International International Disciplined
Equity Value Stock
Sub-account Sub-account Sub-account
------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at fair value $ 57,565,565 $ 21,268,918 $ 130,569,488
Receivable for units sold - - 14,309
Due from Transamerica Life 55 15 45
------------------------------------------------------------------
Total assets 57,565,620 21,268,933 130,583,842
Liabilities
Payable for units redeemed 61,227 3,189 -
Due to Transamerica Life - - -
------------------------------------------------------------------
Total liabilities 61,227 3,189 -
------------------------------------------------------------------
Net assets $ 57,504,393 $ 21,265,744 $ 130,583,842
==================================================================
Accumulation units outstanding 2,296,712.752 1,432,408.023 5,856,978.740
==================================================================
Net asset value and redemption price per unit $ 25.037695 $ 14.846150 $ 22.295427
==================================================================
Investment sub-account information:
Number of mutual fund shares 2,576,793.426 1,357,301.785 4,850,278.188
Net asset value per share $ 22.34 $ 15.67 $ 26.92
Investment cost $ 40,335,759 $ 19,466,854 $ 105,217,030
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Small
Company Limited Term Core TA VIF
Stock High Income Balanced Value Mid-Cap Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 21,789,443 $ 55,201,833 $ 66,850,415 $ 6,811,027 $ 7,133,253 $ 45,712,689
3,659 39,730 2,487 - 772 -
95 - 3 32 14 77
------------------------------------------------------------------------------------------------------------------------------
21,793,197 55,241,563 66,852,905 6,811,059 7,134,039 45,712,766
- - - 27,639 - 5,106
- 1,882 - - - -
------------------------------------------------------------------------------------------------------------------------------
- 1,882 - 27,639 - 5,106
------------------------------------------------------------------------------------------------------------------------------
$ 21,793,197 $ 55,239,681 $ 66,852,905 $ 6,783,420 $ 7,134,039 $ 45,707,660
==============================================================================================================================
1,665,730.260 5,300,351.761 4,426,908.447 618,554.556 677,575.570 2,963,758.862
==============================================================================================================================
$ 13.083269 $ 10.421890 $ 15.101488 $ 10.966567 $ 10.528772 $ 15.422193
==============================================================================================================================
1,305,538.838 5,287,531.898 4,172,934.799 487,546.702 530,747.997 1,717,876.349
$ 16.69 $ 10.44 $ 16.02 $ 13.97 $ 13.44 $ 26.61
$ 20,312,456 $ 62,282,561 $ 66,271,939 $ 6,575,653 $ 6,198,992 $ 36,592,321
</TABLE>
See accompanying notes.
5
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Assets and Liabilities (continued)
December 31, 1999
<TABLE>
<CAPTION>
Founders
Founders Founders International
Growth Passport Equity
Sub-account Sub-account Sub-account
-------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at fair value $ 2,655,869 $ 3,747,634 $ 715,769
Receivable for units sold - - -
Due from Transamerica Life 27 78 13
-------------------------------------------------------------
Total assets 2,655,896 3,747,712 715,782
Liabilities
Payable for units redeemed 5,693 20,707 1,918
Due to Transamerica Life - - -
-------------------------------------------------------------
Total liabilities 5,693 20,707 1,918
-------------------------------------------------------------
Net assets $ 2,650,203 $ 3,727,005 $ 713,864
=============================================================
Accumulation units outstanding 209,797.215 230,853.269 51,377.647
=============================================================
Net asset value and redemption price per unit $ 12.632212 $ 16.144476 $ 13.894447
=============================================================
Investment sub-account information:
Number of mutual fund shares 133,729.590 157,331.426 33,060.939
Net asset value per share $ 19.86 $ 23.82 $ 21.65
Investment cost $ 2,244,225 $ 3,204,370 $ 665,081
</TABLE>
See accompanying notes.
6
<PAGE>
European Technology
Equity Growth
Sub-account Sub-account
---------------------------------------
$ 913,944 $ 45,955,599
- -
8 40
---------------------------------------
913,952 45,955,639
1,228 1,369,377
- -
---------------------------------------
1,228 1,369,377
---------------------------------------
$ 912,724 $ 44,586,262
=======================================
71,170.962 2,898,342.133
=======================================
$ 12.824388 $ 15.383367
=======================================
57,264.716 2,362,755.754
$ 15.96 $ 19.45
$ 770,070 $ 36,570,938
7
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
Zero
Money Managed Coupon
Market Assets 2000
Sub-account Sub-account Sub-account
-----------------------------------------------------
<S> <C> <C> <C>
Investment income $3,533,934 $ 3,534,322 $1,071,638
Expenses
Mortality and expense risk charge 1,050,604 586,453 281,368
-----------------------------------------------------
Net investment income (loss) 2,483,330 2,947,869 790,270
Net realized and unrealized gain (loss) on investments:
Realized gain (loss) on investment transactions - 2,647,847 (24,203)
Unrealized appreciation (depreciation) of investments - (3,264,474) (512,997)
-----------------------------------------------------
Net gain (loss) on investments - (616,627) (537,200)
-----------------------------------------------------
Increase (decrease)in net assets resulting from operations $2,483,330 $ 2,331,242 $ 253,070
=====================================================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
Bond Cap Appreciation Index Fund Fund Income
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4,489,774 $ 115,875 $ 3,073,043 $ 4,837,877 $ 3,525,063 $ 8,002,316
1,117,371 2,171,310 4,437,802 3,287,055 1,107,336 2,939,668
---------------------------------------------------------------------------------------------------------------------------
3,372,403 (2,055,435) (1,364,759) 1,550,822 2,417,727 5,062,648
(791,238) 10,325,925 32,081,052 22,548,200 6,140,232 6,248,889
(3,818,511) 21,815,790 (1,161,477) 17,763,235 12,756,278 18,955,723
---------------------------------------------------------------------------------------------------------------------------
(4,609,749) 32,141,715 30,919,575 40,311,435 18,896,510 25,204,612
---------------------------------------------------------------------------------------------------------------------------
$ (1,237,346) $30,086,280 $29,554,816 $41,862,257 $21,314,237 $30,267,260
===========================================================================================================================
</TABLE>
See accompanying notes.
9
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
International International Disciplined
Equity Value Stock
Sub-account Sub-account Sub-account
-------------------------------------------------
<S> <C> <C> <C>
Investment income $ 1,978,807 $1,801,861 $ 1,265,390
Expenses
Mortality and expense risk charge 564,721 243,143 1,553,665
-------------------------------------------------
Net investment income (loss) 1,414,086 1,558,718 (288,275)
Net realized and unrealized gain (loss) on investments:
Realized gain (loss) on investment transactions 1,571,904 48,840 6,333,129
Unrealized appreciation (depreciation) of investments 17,848,660 2,618,078 11,962,884
-------------------------------------------------
Net gain (loss) on investments 19,420,564 2,666,918 18,296,013
-------------------------------------------------
Increase (decrease) in net assets resulting from operations $20,834,650 $4,225,636 $18,007,738
=================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Small Limited Term
Company High Core TA VIF
Stock Income Balanced Value Mid-Cap Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ - $ 6,868,093 $ 4,360,274 $ 29,720 $ 17,925 $ -
311,801 923,645 731,037 55,048 81,690 497,665
--------------------------------------------------------------------------------------------------------------------
(311,801) 5,944,448 3,629,237 (25,328) (63,765) (497,665)
(777,425) (6,230,826) 1,136,569 124,383 143,749 3,247,834
2,746,306 (1,447,293) (1,356,529) 192,119 577,349 8,036,026
--------------------------------------------------------------------------------------------------------------------
1,968,881 (7,678,119) (219,960) 316,502 721,098 11,283,860
--------------------------------------------------------------------------------------------------------------------
$ 1,657,080 $(1,733,671) $ 3,409,277 $291,174 $657,333 $10,786,195
====================================================================================================================
</TABLE>
See accompanying notes.
11
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statement of Operations (continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Founders
Founders Founders International
Growth Passport Equity
Sub-account Sub-account Sub-account
--------------------------------------------------
<S> <C> <C> <C>
Investment income $ 25,016 $ 227,149 $ 44,368
Expenses
Mortality and expense risk charge 13,441 7,711 1,652
--------------------------------------------------
Net investment income (loss) 11,575 219,438 42,716
Net realized and unrealized gain (loss) on investments:
Realized gain (loss) on investment transactions 145,727 36,124 109,776
Unrealized appreciation (depreciation) of investments 411,644 543,264 50,688
--------------------------------------------------
Net gain (loss) on investments 557,371 579,388 160,464
--------------------------------------------------
Increase (decrease) in net assets resulting from operations $ 568,946 $ 798,826 $ 203,180
==================================================
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
European Technology
Equity Growth
Sub-account Sub-account
---------------------------------
<S> <C>
$ 10,560 $ -
1,469 69,018
---------------------------------
9,091 (69,018)
1,965 489,824
143,874 9,384,660
---------------------------------
145,839 9,874,484
---------------------------------
$ 154,930 $9,805,466
=================================
</TABLE>
13
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statements of Changes in Net Assets
Year ended December 31, 1999
<TABLE>
<CAPTION>
Zero
Money Managed Coupon
Market Assets 2000
Sub-account Sub-account Sub-account
----------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ 2,483,330 $ 2,947,869 $ 790,270
Realized gain (loss) on investment transactions - 2,647,847 (24,203)
Unrealized (depreciation) appreciation of investments - (3,264,474) (512,997)
----------------------------------------------------
Increase (decrease) in net assets resulting from operations 2,483,330 2,331,242 253,070
Changes from accumulation unit transactions 13,337,523 (6,870,728) (1,828,530)
----------------------------------------------------
Total increase (decrease) in net assets 15,820,853 (4,539,486) (1,575,460)
Net assets at beginning of year 65,690,625 44,738,495 21,026,917
----------------------------------------------------
Net assets at end of year $81,511,478 $40,199,009 $19,451,457
====================================================
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
Bond Cap Appreciation Index Fund Fund Income
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3,372,403 $ (2,055,435) $ (1,364,759) $ 1,550,822 $ 2,417,727 $ 5,062,648
(791,238) 10,325,925 32,081,052 22,548,200 6,140,232 6,248,889
(3,818,511) 21,815,790 (1,161,477) 17,763,235 12,756,278 18,955,723
-----------------------------------------------------------------------------------------------------------------------
(1,237,346) 30,086,280 29,554,816 41,862,257 21,314,237 30,267,260
(35,843) (34,553,618) 14,173,130 30,911,141 24,398,014 (22,158,774)
-----------------------------------------------------------------------------------------------------------------------
(1,273,189) (4,467,338) 43,727,946 72,773,398 45,712,251 8,108,486
79,859,272 168,547,949 287,139,168 197,373,756 59,836,034 212,536,031
-----------------------------------------------------------------------------------------------------------------------
$ 78,586,083 $164,080,611 $330,867,114 $270,147,154 $105,548,285 $220,644,517
=======================================================================================================================
</TABLE>
See accompanying notes.
15
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statements of Changes in Net Assets (continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
International International Disciplined
Equity Value Stock
Sub-account Sub-account Sub-account
---------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ 1,414,086 $ 1,558,718 $ (288,275)
Realized gain (loss) on investment transactions 1,571,904 48,840 6,333,129
Unrealized appreciation (depreciation) of investments 17,848,660 2,618,078 11,962,884
---------------------------------------------------
Increase (decrease) in net assets resulting from 20,834,650 4,225,636 18,007,738
operations
Changes from accumulation unit transactions (2,372,324) 778,843 21,857,405
---------------------------------------------------
Total increase (decrease) in net assets 18,462,326 5,004,479 39,865,143
Net assets at beginning of year 39,042,067 16,261,265 90,718,699
---------------------------------------------------
Net assets at end of year $57,504,393 $21,265,744 $130,583,842
===================================================
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Small Limited Term
Company High Core TA VIF
Stock Income Balanced Value Mid-Cap Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ (311,801) $ 5,944,448 $ 3,629,237 $ (25,328) $ (63,765) $ (497,665)
(777,425) (6,230,826) 1,136,569 124,383 143,749 3,247,834
2,746,306 (1,447,293) (1,356,529) 192,119 577,349 8,036,026
------------------------------------------------------------------------------------------------------------------
1,657,080 (1,733,671) 3,409,277 291,174 657,333 10,786,195
(5,185,217) (12,343,387) 31,148,484 5,603,857 1,974,670 16,375,661
------------------------------------------------------------------------------------------------------------------
(3,528,137) (14,077,058) 34,557,761 5,895,031 2,632,003 27,161,856
25,321,334 69,316,739 32,295,144 888,389 4,502,036 18,545,804
------------------------------------------------------------------------------------------------------------------
$ 21,793,197 $ 55,239,681 $66,852,905 $6,783,420 $7,134,039 $45,707,660
==================================================================================================================
</TABLE>
See accompanying notes.
17
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statements of Changes in Net Assets (continued)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Founders
Founders Founders International
Growth Passport Equity
Sub-account Sub-account Sub-account
----------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ 11,575 $ 219,438 $ 42,716
Realized gain (loss) on investment transactions 145,727 36,124 109,776
Unrealized appreciation (depreciation) of investments 411,644 543,264 50,688
----------------------------------------------------------
Increase (decrease) in net assets resulting from operations 568,946 798,826 203,180
Changes from accumulation unit transactions 2,081,257 2,928,179 510,684
----------------------------------------------------------
Total increase (decrease) in net assets 2,650,203 3,727,005 713,864
Net assets at beginning of year - - -
----------------------------------------------------------
Net assets at end of year $2,650,203 $3,727,005 $713,864
==========================================================
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
European Technology
Equity Growth
Sub-account Sub-account
-------------------------------------
<S> <C>
$ 9,091 $ (69,018)
1,965 489,824
143,874 9,384,660
-------------------------------------
154,930 9,805,466
757,794 34,780,796
-------------------------------------
912,724 44,586,262
- -
-------------------------------------
$ 912,724 $44,586,262
=====================================
</TABLE>
See accompanying notes.
19
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statements of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Zero
Money Managed Coupon
Market Assets 2000
Sub-account Sub-account Sub-account
----------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ 2,249,962 $ (300,090) $ 833,850
Realized gain (loss) on investment transactions - 1,450,849 12,744
Unrealized (depreciation) appreciation of investments - 4,182,696 329,560
----------------------------------------------------------
Increase (decrease) in net assets resulting from operations 2,249,962 5,333,455 1,176,154
Changes from accumulation unit transactions 13,329,404 1,819,817 (1,406,450)
----------------------------------------------------------
Total increase (decrease) in net assets 15,579,366 7,153,272 (230,296)
Net assets at beginning of year 50,111,259 37,585,223 21,257,213
----------------------------------------------------------
Net assets at end of year $65,690,625 $44,738,495 $21,026,917
==========================================================
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Socially
Quality Small Capital Stock Responsible Growth and
Bond Cap Appreciation Index Fund Fund Income
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4,274,698 $ 847,380 $ (1,557,577) $ 2,490,817 $ 1,609,317 $ 2,849,360
525,863 11,570,695 19,922,208 11,278,570 2,813,333 4,834,113
(1,966,478) (23,355,836) 37,801,962 25,219,458 7,040,819 11,336,135
-----------------------------------------------------------------------------------------------------------------------
2,834,083 (10,937,761) 56,166,593 38,988,845 11,463,469 19,019,608
15,677,722 (20,461,935) 53,467,371 40,451,181 12,467,511 (4,781,367)
-----------------------------------------------------------------------------------------------------------------------
18,511,805 (31,399,696) 109,633,964 79,440,026 23,930,980 14,238,241
61,347,467 199,947,645 177,505,204 117,933,730 35,905,054 198,297,790
-----------------------------------------------------------------------------------------------------------------------
$ 79,859,272 $168,547,949 $ 287,139,168 $197,373,756 $59,836,034 $212,536,031
=======================================================================================================================
</TABLE>
See accompanying notes.
21
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Statements of Changes in Net Assets (continued)
Year ended December 31, 1998
<TABLE>
<CAPTION>
International International Disciplined
Equity Value Stock
Sub-account Sub-account Sub-account
------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ (150,871) $ 1,030,861 $ (143,379)
Realized gain (loss) on investment transactions 685,545 607,912 3,146,901
Unrealized appreciation (depreciation) of investments 177,915 (673,621) 10,667,924
------------------------------------------------------------
Increase (decrease) in net assets resulting from operations 712,589 965,152 13,671,446
Changes from accumulation unit transactions 4,768,717 3,793,037 42,254,185
------------------------------------------------------------
Total increase (decrease) in net assets 5,481,306 4,758,189 55,925,631
Net assets at beginning of year 33,560,761 11,503,076 34,793,068
------------------------------------------------------------
Net assets at end of year $39,042,067 $16,261,265 $90,718,699
============================================================
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Small Limited Term
Company High Core TA VIF
Stock Income Balanced Value Mid-Cap Growth
Sub-account Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ (210,936) $ 4,394,751 $ 2,065,094 $ 678 $ (14,276) $ 1,460,296
854,546 (960,194) 224,759 (4,095) (80,941) (322,061)
(2,793,046) (5,156,021) 2,034,493 43,255 356,911 1,084,341
-----------------------------------------------------------------------------------------------------------------
(2,149,436) (1,721,464) 4,324,346 39,838 261,694 2,222,576
6,721,573 44,730,747 20,366,431 849,551 4,240,342 16,323,228
-----------------------------------------------------------------------------------------------------------------
4,572,137 43,009,283 24,690,777 889,389 4,502,036 18,545,804
20,749,197 26,307,456 7,604,367 - - -
-----------------------------------------------------------------------------------------------------------------
$ 25,321,334 $69,316,739 $32,295,144 $889,389 $4,502,036 $18,545,804
=================================================================================================================
</TABLE>
See accompanying notes.
23
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements
December 31, 1999
1. Organization
Separate Account VA-2L of Transamerica Occidental Life Insurance Company
("Separate Account") was established by Transamerica Occidental Life Insurance
Company ("Transamerica Life") as a separate account under the laws of the State
of California on May 22, 1992. The Separate Account is registered with the
Securities and Exchange Commission (the Commission) under the Investment Company
Act of 1940 as a unit investment trust and is designed to provide annuity
benefits pursuant to deferred annuity contracts ("Contract") issued by
Transamerica Life. The Separate Account commenced operations when initial
deposits were received on March 31, 1993.
In accordance with the terms of the Contract, all payments allocated to the
Separate Account by contract owners must be allocated to purchase units of any
or all of the Separate Account's twenty-three sub-accounts, each of which
invests exclusively in a specific corresponding mutual fund portfolio. The
mutual fund portfolios consist of: twenty-one series in the Dreyfus Variable
Investment Fund (Variable Fund), The Dreyfus Stock Index Fund (Stock Index
Fund), The Dreyfus Socially Responsible Growth Fund (Socially Responsible Fund)
and The Transamerica VIF Growth Fund (TA VIF Fund) (together "the Funds"). The
Variable Fund's twenty-one series are: Money Market, Managed Assets, Zero
Coupon 2000, Quality Bond, Small Cap, Capital Appreciation, Growth and Income,
International Equity, International Value, Disciplined Stock, Small Company
Stock, Limited Term High Income, Balanced, Core value, Mid-Cap, Founders Growth,
Founders Passport, Founders International Equity, European Equity and Technology
Growth. The Funds are open-end management investment companies registered under
the Investment Company Act of 1940.
2. Significant Accounting Policies
The accompanying financial statements of the Separate Account have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known which could impact the amounts
reported and disclosed herein. The accounting principles followed and the
methods of applying those principles are presented below:
24
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Investment Valuation--Investments in the Funds' shares are carried at fair (net
asset) value. Realized investment gains or losses on investments are determined
on a specific identification basis which approximates average cost. Investment
transactions are accounted for on the date the order to buy or sell is executed
(trade date).
Investment Income--Investment income consists of dividend income (both ordinary
and capital gains) and is recognized on the ex-dividend date. All distributions
received are reinvested in the respective sub-accounts.
Federal Income Taxes--Operations of the Separate Account are part of, and will
be taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax law,
income from assets maintained in the Separate Account for the exclusive benefit
of participants is generally not subject to federal income tax.
3. Expenses and Charges
Mortality and expense risk charges are deducted from each sub-account of the
Separate Account on a daily basis which is equal, on an annual basis, to 1.25%
of the daily net asset value of the sub-account. This amount can never increase
and is paid to Transamerica Life. An administrative expense charge is also
deducted by Transamerica Life from each sub-account on a daily basis which is
equal, on an annual basis, to .15% of the daily net asset value of the sub-
account. This amount may change, but it is guaranteed not to exceed a maximum
effective annual rate of .25%.
The following charges are deducted from a contract holder's account by
Transamerica Life and not directly from the Separate Account. An annual contract
fee is deducted at the end of each contract year prior to the annuity date.
Currently, this charge is $30 (or 2% of the account value, if less). This
charge may change but is guaranteed not to exceed $60 (or 2% of the account
value, if less). After the annuity date this charge is referred to as the
Annuity Fee. The Annuity Fee is $30. In the event that a contract holder
withdraws all or a portion of the contract holder's account, a contingent
deferred sales load (CDSL) not exceeding 6% of premiums may be applied to the
amount of the contract value withdrawn to cover certain expenses relating to the
sale of contracts. The amount of the CDSL is based upon elapsed time since the
premium was received and disappears after the seventh year. During 1999, CDSL
amounted to $3,433,785.
25
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
4. Remuneration
The Separate Account pays no remuneration to directors, advisory boards or
officers or such other persons who may from time to time perform services for
the Separate Account.
5. Accumulation Units
The changes in accumulation units and amounts are as follows:
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality Small
Market Assets 2000 Bond Cap
Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
----------------------------
Accumulation Units:
Units sold 119,997,793.973 126,894.172 103,154.626 492,406.975 75,499.791
Units redeemed (29,432,028.223) (207,248.730) (179,092.606) (405,624.723) (266,777.856)
Units transferred (79,744,108.276) (336,061.809) (33,321.713) (106,414.827) (327,757.003)
-----------------------------------------------------------------------------
Net increase (decrease) 10,821,657.474 (416,416.367) (109,259.693) (19,632.575) (519,035.068)
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
Socially
Capital Stock Responsible Growth International
Appreciation Index Fund Fund and Income Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Units:
Units sold 947,397.832 555,179.702 366,118.144 354,961.558 132,099.983
Units redeemed (793,284.464) (392,078.206) (168,664.408) (657,416.644) (215,899.805)
Units transferred 238,447.956 506,904.081 456,905.528 (420,047.618) (76,373.337)
---------------------------------------------------------------------------
Net increase (decrease) 392,561.324 670,005.577 654,359.264 (722,502.704) (160,173.159)
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
Small Limited
International Disciplined Company Term High
Value Stock Stock Income Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Units:
Units sold 108,273.596 980,456.521 129,873.289 1,434,665.646 1,219,137.354
Units redeemed (132,001.999) (384,421.673) (166,733.439) (730,906.127) (277,151.180)
Units transferred 75,443.491 507,921.602 (408,438.279) (1,861,719.877) 1,204,420.520
------------------------------------------------------------------------------
Net increase (decrease) 51,715.088 1,103,956.450 (445,298.429) (1,157,960.358) 2,146,406.694
==============================================================================
</TABLE>
26
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Core TA VIF Founders Founders
Value Mid-Cap Growth Growth Passport
Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Units:
Units sold 160,949.527 163,544.217 487,820.109 88,017.939 36,530.272
Units redeemed (54,115.564) (36,039.004) (166,091.786) (9,353.999) (2,068.625)
Units transferred 415,961.072 82,777.524 1,007,975.632 131,133.275 196,391.622
-----------------------------------------------------------------------
Net increase (decrease) 522,795.035 210,282.737 1,329,703.955 209,797.215 230,853.269
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Founders
International European Technology
Equity Equity Growth
Sub-account Sub-account Sub-account
------------------------------------------------------
<S> <C> <C> <C>
Accumulation Units:
Units sold 27,719.565 29,758.201 519,493.486
Units redeemed (3.339) (504.929) (16,934.528)
Units transferred 23,661.421 41,917.690 2,395,783.175
------------------------------------------------------
Net increase (decrease) 51,377.647 71,170.962 2,898,342.133
======================================================
</TABLE>
27
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality Small
Market Assets 2000 Bond Cap
Sub-account Sub-account Sub-account Sub-account Sub-account
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
----------------------------
Amounts:
Sales $ 79,063,088 $ 2,093,710 $ 1,726,358 $ 8,998,773 $ 5,026,232
Redemptions (19,391,915) (3,419,533) (2,997,228) (7,412,821) (17,760,149)
Transfers (46,333,650) (5,544,905) (557,660) (1,621,795) (21,819,701)
-------------------------------------------------------------------------------------------
Net increase (decrease) $ 13,337,523 $(6,870,728) $(1,828,530) $ (35,843) $(34,553,618)
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Socially
Capital Stock Responsible Growth International
Appreciation Index Fund Fund and Income Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts:
Sales $ 34,205,085 $ 25,613,575 $13,650,843 $ 10,886,482 $ 1,956,531
Redemptions (28,640,938) (18,088,782) (6,288,711) (20,162,619) (3,197,542)
Transfers 8,608,983 23,386,348 17,035,882 (12,882,637) (1,131,313)
------------------------------------------------------------------------------------------
Net increase (decrease) $ 14,173,130 $ 30,911,141 $24,398,014 $(22,158,774) $(2,372,324)
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Small Limited Term
International Disciplined Company High
Value Stock Stock Income Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts:
Sales $ 1,630,628 $19,412,211 $ 1,512,292 $ 15,292,952 $17,692,025
Redemptions (1,987,983) (7,611,224) (1,941,505) (7,791,162) (4,021,996)
Transfers 1,136,198 10,056,418 (4,756,004) (19,845,177) 17,478,455
--------------------------------------------------------------------------------------
Net increase (decrease) $ 778,843 $21,857,405 $(5,185,217) $(12,343,387) $31,148,484
======================================================================================
</TABLE>
28
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Core TA VIF Founders Founders
Value Mid-Cap Growth Growth Passport
Sub-account Sub-account Sub-account Sub-account Sub-account
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts:
Sales $1,724,915 $1,535,770 $ 6,007,635 $ 873,166 $ 463,355
Redemptions (579,963) (338,426) (2,045,464) (92,794) (26,238)
Transfers 4,458,905 777,326 12,413,490 1,300,885 2,491,062
----------------------------------------------------------------------------------
Net increase (decrease) $5,603,857 $1,974,670 $16,375,661 $2,081,257 $2,928,179
==================================================================================
Founders
International European Technology
Equity Equity Growth
Sub-account Sub-account Sub-account
-----------------------------------------------
Amounts:
Sales $ 275,527 $ 316,851 $ 6,234,045
Redemptions (33) (5,376) (203,218)
Transfers 235,190 446,319 28,749,969
---------------------------------------------------
Net increase (decrease) $ 510,684 $ 757,794 $34,780,796
===================================================
</TABLE>
29
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality Small
Market Assets 2000 Bond Cap
Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
----------------------------
Accumulation Units:
Units sold 70,696,490.525 431,512.064 91,321.144 1,019,962.867 234,681.638
Units redeemed (9,761,252.122) (155,113.771) (158,857.779) (416,437.579) (213,727.639)
Units transferred (49,656,546.571) (161,786.057) (20,165.039) 406,700.691 (360,031.848)
-----------------------------------------------------------------------------
Net increase (decrease) 11,278,691.832 114,612.236 (87,701.674) 1,010,225.979 (339,077.849)
=============================================================================
<CAPTION>
Socially
Capital Stock Responsible Growth International
Appreciation Index Fund Fund and Income Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Units:
Units sold 1,308,881.635 819,174.264 342,022.489 1,425,664.086 267,800.374
Units redeemed (391,074.330) (227,663.429) (104,201.019) (864,288.213) (119,005.108)
Units transferred 756,279.090 (494,964.303) 171,072.468 (770,865.832) 131,860.398
-----------------------------------------------------------------------------
Net increase (decrease) 1,674,086.395 1,086,475.138 408,893.938 (209,489.959) 280,655.664
=============================================================================
<CAPTION>
Small Limited
International Disciplined Company Term High
Value Stock Stock Income Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulation Units:
Units sold 236,093.978 1,684,646.132 519,717.268 3,892,661.610 940,995.080
Units redeemed (74,812.187) (157,107.679) (90,325.699) (259,363.171) (59,307.949)
Units transferred 172,022.142 947,337.485 77,547.566 400,781.882 750,959.318
-----------------------------------------------------------------------------
Net increase (decrease) 333,303.933 2,474,875.938 506,939.135 4,034,080.321 1,632,646.449
=============================================================================
</TABLE>
30
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Core TA VIF
Value Mid-Cap Growth
Sub-account Sub-account Sub-account
---------------------------------------------------
<S> <C> <C> <C>
Accumulation Units:
Units sold 57,442.774 226,642.705 352,213.661
Units redeemed (370.559) (9,084.899) (8,530.642)
Units transferred 38,687.306 249,735.027 1,290,371.888
---------------------------------------------------
Net increase (decrease) 95,759.521 467,292.833 1,634,054.907
===================================================
</TABLE>
31
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality Small
Market Assets 2000 Bond Cap
Sub-account Sub-account Sub-account Sub-account Sub-account
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
----------------------------
Amounts:
Sales $ 83,519,319 $ 6,824,210 $ 1,464,615 $15,852,712 $ 14,214,475
Redemptions (11,532,099) (2,452,375) (2,548,032) (6,471,182) (12,937,358)
Transfers (58,657,816) (2,552,018) (323,033) 6,296,192 (21,739,052)
--------------------------------------------------------------------------------------
Net increase (decrease) $ 13,329,404 $ 1,819,817 $(1,406,450) $15,677,722 $(20,461,935)
======================================================================================
Socially
Capital Stock Responsible Growth International
Appreciation Index Fund Fund and Income Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
---------------------------------------------------------------------------------------
Amounts:
Sales $ 41,792,181 $30,494,466 $10,419,964 $32,732,420 $ 4,556,299
Redemptions (12,471,416) (8,481,089) (3,166,246) (19,858,704) (2,025,079)
Transfers 24,146,606 18,437,804 5,213,793 (17,655,083) 2,237,497
--------------------------------------------------------------------------------------
Net increase (decrease) $ 53,467,371 $40,451,181 $12,467,511 $(4,781,367) $ 4,768,717
======================================================================================
Small Limited Term
International Disciplined Company High
Value Stock Stock Income Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account
--------------------------------------------------------------------------------------
Amounts:
Sales $ 2,692,071 $28,776,566 $ 6,890,558 $43,168,005 $ 11,737,905
Redemptions (851,803) (2,690,995) (1,196,161) (2,876,293) (740,519)
Transfers 1,952,769 16,168,614 1,027,176 4,439,035 9,369,045
--------------------------------------------------------------------------------------
Net increase (decrease) $ 3,793,037 $42,254,185 $ 6,721,573 $44,730,747 $ 20,366,431
======================================================================================
</TABLE>
32
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
5. Accumulation Units (continued)
<TABLE>
<CAPTION>
Core TA VIF
Value Mid-Cap Growth
Sub-account Sub-account Sub-account
-----------------------------------------------
<S> <C> <C> <C>
Amounts:
Sales $509,397 $2,058,199 $ 3,518,372
Redemptions (3,286) (82,426) (85,132)
Transfers 343,440 2,264,569 12,889,988
----------------------------------------------
Net increase (decrease) $849,551 $4,240,342 $16,323,228
==============================================
</TABLE>
33
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
6. Investment Transactions
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Zero
Money Managed Coupon Quality Small
Market Assets 2000 Bond Cap
Sub-account Sub-account Sub-account Sub-account Sub-account
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $172,132,508 $ 7,921,419 $5,790,728 $27,109,193 $28,041,111
========================================================================================
Aggregate proceeds from sales $162,302,034 $12,612,148 $6,825,795 $23,823,265 $64,857,750
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Socially
Capital Stock Responsible Growth International
Appreciation Index Fund Fund and Income Equity
Sub-account Sub-account Sub-account Sub-account Sub-account
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $ 82,873,843 $89,096,058 $41,800,549 $31,000,075 $11,837,135
========================================================================================
Aggregate proceeds from sales $ 69,937,158 $51,216,130 $14,906,200 $47,897,993 $12,730,527
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
International Disciplined Small Company Limited Term
Value Stock Stock High Income Balanced
Sub-account Sub-account Sub-account Sub-account Sub-account
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $ 14,869,912 $43,992,128 $ 4,565,561 $33,086,609 $44,473,572
========================================================================================
Aggregate proceeds from sales $ 12,545,160 $22,328,965 $10,078,478 $39,608,695 $ 9,702,522
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Core TA VIF Founders Founders
Value Mid-Cap Growth Growth Passport
Sub-account Sub-account Sub-account Sub-account Sub-account
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases $ 8,772,931 $4,797,058 $33,502,647 $2,932,236 $3,527,923
============================================================================================
Aggregate proceeds from sales $ 3,167,652 $2,938,686 $17,669,017 $ 833,738 $ 359,677
============================================================================================
</TABLE>
34
<PAGE>
Separate Account VA-2L of
Transamerica Occidental Life Insurance Company
Notes to Financial Statements (continued)
6. Investment Transactions (continued)
The aggregate cost of purchases and the aggregate proceeds from the sales of
investments for the year ended December 31, 1999 were:
<TABLE>
<CAPTION>
Founders
International European Technology
Equity Equity Growth
Sub-account Sub-account Sub-account
------------------------------------------------------
<S> <C> <C> <C>
Aggregate purchases $ 1,186,081 $ 847,214 $ 37,803,685
======================================================
Aggregate proceeds from sales $ 630,776 $ 79,109 $ 1,722,571
======================================================
</TABLE>
35
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Parts A and B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Transamerica Occidental Life
Insurance Company ("Transamerica") authorizing establishment of the
Variable Account. (1)
(2) Not Applicable.
(3) (a) Master Agreement among Transamerica Occidental Life Insurance
Company, First Transamerica Life Insurance, Transamerica
Financial Resources, Inc., Dreyfus Service Corporation, and
Dreyfus Service Organization, Inc. (4)
(b) Principal Agency Agreement between Transamerica Occidental Life
Insurance Company and Dreyfus Service Organization, Inc. (4)
(c) Distribution Agreement between Transamerica Occidental Life
Insurance Company and Dreyfus Service Corporation. (4)
(d) Form of Sales Agreement among Dreyfus Service Corporation,
Dreyfus Service Organization, Inc., and Broker-Dealers. (4)
(e) Amendment Dated as of August 31, 1993, to Master Agreement among
Transamerica Occidental Life Insurance Company, First
Transamerica Life Insurance Company, Transamerica Financial
Resources, Inc., Dreyfus Service Corporation and Dreyfus Service
Organization, Inc. (6)
(f) Amendment Dated as of August 31, 1993 to Principal Agency
Agreement between Transamerica Occidental Life Insurance Company
and Dreyfus Service Organization, Inc. (6)
(g) Amendment Dated as of August 31, 1993 to Distribution Agreement
between Transamerica Occidental Life Insurance Company and
Dreyfus Service Corporation. (6)
(h) Distribution Agreement between Transamerica Occidental Life
Insurance Company and Transamerica Insurance Securities Sales
Corporation, dated as of August 24, 1994. (8)
(i) Sales Agreement among Transamerica Insurance Securities Sales
Corporation, Transamerica Occidental Life Insurance Company,
First Transamerica Life Insurance Company, Dreyfus Service
Corporation, and Dreyfus Service Organization, Inc., dated as of
August 24, 1994. (8)
(j) Services Agreement among Transamerica Occidental Life Insurance
Company, First Transamerica Life Insurance Company, Transamerica
Insurance Securities Sales Corporation, Dreyfus Service
Corporation, and Dreyfus Service Organization, Inc., dated as of
August 24, 1994. (8)
<PAGE>
(k) Services Agreement among Transamerica Occidental Life Insurance
Company, First Transamerica Life Insurance Company, Transamerica
Insurance Securities Sales Corporation, Dreyfus Service
Corporation, and Dreyfus Service Organization, Inc., dated as of
August 24, 1994. (8)
(l) Form of Sales Agreement between Transamerica Occidental Life
Insurance Company, Transamerica Life Insurance and Annuity
Company, First Transamerica Life Insurance Company and
Transamerica Securities Sales Corporation. (10)
(4) Group Contract Form, Certificate Form, Individual Contract Form and
Endorsements.
(a) Contract form and Endorsements. (5)
(i) Form of Flexible Purchase Payment Multi-Funded Deferred
Master Group Annuity Contract. (5)
(ii) Form of Automatic Payout Option Endorsement to Group
Contract. (5)
(iii) Form of Dollar Cost Averaging Option Endorsement to Group
Contract. (5)
(iv) Form of Systematic Withdrawal Option Endorsement to Group
Contract. (5)
(v) Form of Guaranteed Minimum Death Benefit Endorsement to
Group Contract. (5)
(vi) Form of Fixed Account Rider to Group Contract. (7)
(b) Certificate of Participation Form and Endorsements. (5)
(i) Form of Certificate of Participation. (5)
(ii) Form of IRA Endorsement to Certificate. (5)
(iii) Form of Dollar Cost Averaging Option Endorsement to
Certificate. (5)
(iv) Form of Systematic Withdrawal Option Endorsement to
Certificate. (5)
(v) Form of Automatic Payout Option Endorsement to
Certificate. (5)
(vi) Form of Benefit Distribution Endorsement to Certificate.
(5)
(vii) Form of Death Benefit Endorsement to Group Contract. (14)
(viii) Form of Individual Purchase Payment Endorsement. (14)
(ix) Form of Guaranteed Minimum Income Builder Rider. (14)
(c) Individual Contract Form and Endorsements. (6)
(i) Form of Flexible Purchase Payment Multi-Funded Deferred
Individual Annuity Contract. (6)
(ii) Form of IRA Endorsement to Individual Contract. (6)
(iii) Form of Benefit Distribution Endorsement. (6)
(iv) Form of Dollar Cost Averaging Option Endorsement to
Individual Contract. (6)
(v) Form of Systematic Withdrawal Option Endorsement to
Individual Contract. (6)
(vi) Form of Automatic Payout Option Endorsement to Individual
Contract. (6)
(vii) Form of Guaranteed Minimum Death Benefit Endorsement to
Individual Contract. (6)
(viii) Form of Fixed Account Rider to Individual Contract. (7)
(x) Form of Death Benefit Endorsement. (14)
(xi) Form of Initial Purchase Payment Endoresment. (14)
(xii) Form of Guaranteed Minimum Income Benefit Rider. (14)
(5) (a) Form of Application for and Acceptance of Group Annuity Contract.
(5)
(b) Form of Application for Enrollment under Group Annuity Contract.
(5)
(c) Form of Application for Individual Annuity Contract. (6)
<PAGE>
(6) (a) Restated Articles of Incorporation of Transamerica. (1)
(b) Restated By-Laws of Transamerica. (1)
(7) Not Applicable.
(8) (a) Participation Agreement between Transamerica Occidental Life
Insurance Company and Dreyfus Variable Investment Fund. (4)
(b) Participation Agreement between Transamerica Occidental Life
Insurance Company and Dreyfus Life and Annuity Index Fund,
Inc. (4)
(c) Participation Agreement between Transamerica Occidental Life
Insurance Company and The Dreyfus Socially Responsible
Growth Fund, Inc. (6)
(d) Administrative Services Agreement between Transamerica
Occidental Life Insurance Company and Vantage Computer
Systems, Inc. (4)
(e) Amendment Dated as of August 31, 1993 to Participation
Agreement between Transamerica Occidental Life Insurance
Company and Dreyfus Variable Investment Fund. (6)
(f) Amendment Dated as of August 31, 1993 to Participation
Agreement between Transamerica Occidental Life Insurance
Company and Dreyfus Life and Annuity Index Fund, Inc. (6)
(g) Amendment Dated as of August 24, 1994 to Participation
Agreement Dated as of March 3, 1993, As Amended, between
Transamerica Occidental Life Insurance Company and Dreyfus
Variable Investment Fund. (8)
(g)(1) Amendment dated ________ to Participation Agreement dated as
of March 3, 1993, As Amended, between Transamerica
Occidental Life Insurance Company and Dreyfus Variable
Investment Fund. (16)
(h) Amendment Dated as of August 24, 1994 to Participation
Agreement Dated as of August 31, 1993 between Transamerica
Occidental Life Insurance Company and Dreyfus Socially
Responsible Growth Fund, Inc. (8)
(i) Amendment Dated as of August 24, 1994 to Participation
Agreement Dated as of March 3, 1993, As Amended, between
Transamerica Occidental Life Insurance Company and Dreyfus
Stock Index Fund. (8)
(j) Participation Agreement dated ___________ between
Transamerica Variable Insurance Fund, Transamerica
Securities Sales Corporation and Transamerica Occidental
Life Insurance Company. (16)
(9) (a) Opinion and Consent of Counsel. (9)
(10) (a) Consent of Counsel. (11)
(b) Consent of Independent Auditors. (15)
(11) No financial statements are omitted from item 23.
(12) Not applicable.
<PAGE>
(13) Performance Data Calculations. (6)
(14) Not applicable.
(15) Powers of Attorney.
Frank Beardsley (12) Richard N. Latzer (15)
Thomas J. Cusak (11) Karen MacDonald (15)
James W. Dederer (15) Gary U. Rolle' (15)
Paul E. Rutledge III (15) T. Desmond Sugrue (11)
George A. Foegele (15) Nooruddin S. Veerjee (15)
David E. Gooding (15) Robert A. Watson (11)
Edgar H. Grubb (11) Frank C. Herringer (11)
Patrick S. Baird (15) Brenda K. Clancy (15)
Douglas C. Kolsrud (15) Craig D. Vermie (15)
(1) Filed with initial filing of this form N-4 Registration Statement, File No.
33-49998 (July 24, 1992).
(2) Incorporated by reference to Exhibit 7(c) of Post-Effective Amendment No.1
to the Registration Statement of Transamerica Occidental Life Insurance
Company's Separate Account VL on Form S-6, File No. 33-28107 (April 30,
1990)
(3) Incorporated by reference to Exhibit 7(d) of Post-Effective Amendment No. 2
to the Registration Statement of Transamerica Occidental Life Insurance
Company's Separate Account VL on Form S-6, File No. 33-28107 (April 30,
1991)
(4) Filed with Post-Effective Amendment No. 1 to this Form N-4 Registration
Statement, File No. 33-49998 (April 30, 1993).
(5) Filed with Post-Effective Amendment No. 3 to this Form N-4 Registration
Statement, File No. 33-49998 (March 8, 1994).
(6) Filed with Post-Effective Amendment No. 4 to this Form N-4 Registration
Statement, File No. 33-49998 (April 29, 1994).
(7) Filed with Post-Effective Amendment No. 5 to this Form N-4 Registration
Statement, File No. 33-49998 (March 1, 1995).
(8) Filed with Post-Effective Amendment No. 6 to this Form N-4 Registration
Statement File No. 33-49998 (April 28, 1995).
(9) Filed with Post-Effective Amendment No. 7 to this Form N-4 Registration
Statement File No. 33-49998 (April 26, 1996).
(10) Filed with Post-Effective Amendment No. 8 to this Form N-4 Registration
Statement File No. 33-49998 (April 28, 1997).
(11) Filed with Post-Effective Amendment No. 9 to this Form N-4 Registration
Statement file No. 33-49998 (April 28, 1998).
(12) Filed with Post-Effective Amendment No. 10 to this Form N-4 Registration
Statement file No. 33-49998 (February 26, 1999).
(13) Filed with Post-Effective Amendment No. 11 to this Form N-4 Registration
Statement file No. 33-49998 (April 28, 1999).
<PAGE>
(14) Filed with Post-Effective Amendment No. 13 to this Form N-4 Registration
Statement file No. 33-49998 (December 6, 1999).
(15) Filed with Post-Effective Amendment No. 14 to this Form N-4 Registration
Statement file No 33-49998 (April 28, 2000)
(16) To be filed by Amendment.
Item 25. List of Directors and Officers of the Depositor
Principal Positions and
Name Offices with Depositor
---- ----------------------
Patrick S. Baird Director
Paul E. Rutledge III Director, President - Reinsurance Division
Nooruddin S. Veerjee Director, President - Insurance Products Division
James W. Dederer Director, Executive Vice President
Larry N. Norman Executive Vice President
Brenda K. Clancy Director, Senior Vice President, Corporate
George A. Foegele Director, Senior Vice President
Douglas C. Kolsrud Director, Senior Vice President, Investment Division
Karen MacDonald Director, Senior Vice President, Acting Chief Financial
Officer and Corporate Actuary
Richard N. Latzer Director, Investment Officer
Gary U. Rolle' Director, Investment Officer
Craig D. Vermie Director, Vice President and Counsel, Corporate
David M. Goldstein Vice President and Deputy General Counsel
Frank A. Camp Vice President and Financial Markets Division
General Counsel
Item 26. Person Controlled by or under Common Control With the Depositor or
Registrant.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 51.16% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% AEGON N.V. Holding company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AEGON Netherland N.V. Netherlands 100% AEGON N.V. Holding company
AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding company
AEGON International N.V. Netherlands 100% AEGON N.V. Holding company
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Corporation Delaware 100% Voting Trust Holding company
Short Hills Management Company New Jersey 100% AEGON U.S. Holding company
Holding Corporation
CORPA Reinsurance Company New York 100% AEGON U.S. Holding company
Holding Corporation
AEGON Management Company Indiana 100% AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
Transamerica Holding Company Delaware 100% AEGON USA, Inc. Holding Company
AEGON Funding Corp. Delaware 100% Transamerica Issue debt
Holding Company securities-net
proceeds used to
make loans to
affiliates
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding
Company company
AUSA Life Insurance New York 82.33% First AUSA Life Insurance
Company, Inc. Insurance Company
17.67% Veterans Life
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and
hold the equity
interest of other entities
Great American Insurance Iowa 100% LIICA Marketing
Agency, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of
of Kentucky Services Group, Inc. structured settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of
Services Group, Inc. structured settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration
Assurance Co. of Ohio for affiliated mutual
fund
WRL Investment Florida 100% Western Reserve Life Registered investment
Management, Inc. Assurance Co. of Ohio advisor
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
And Subsidiaries Assurance Co. of Ohio
ISI Insurance Agency Alabama 100% ISI Insurance Agency, Inc. Insurance Agency
of Alabama, Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
ISI Insurance Agency Hawaii 100% ISI Insurance Insurance agency
of Hawaii, Inc. Agency, Inc.
ISI Insurance Agency New Mexico 100% ISI Insurance Insurance agency
New Mexico, Inc. Agency, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency
Assurance Co. of Ohio
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Monumental General Life Puerto Rico 51% First AUSA Life Insurance
Insurance Company of Insurance Company
Puerto Rico 49% Baldrich & Associates
of Puerto Rico
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management
Administrators, Inc. Insurance Group, Inc. srvcs. to unaffiliated
third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial
Consultant Services, Inc. Administrators, Inc. consulting services
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale
Marketing, Inc. Insurance Group, Inc. of mass marketed
insurance coverages
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Endeavor Management Company California 100% AUSA Holding Co. Investment
Management
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party
administrator
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial
counseling for
employees and agents
of affiliated companies
ADB Corporation Delaware 100% Money Services, Inc. Special purpose limited
Liability company
ORBA Insurance Services, Inc. California 10.56% Money Services, Inc. Insurance agency
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency
Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment
Services, Inc. advisor
InterSecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
Associated Mariner Financial Michigan 100% InterSecurities, Inc. Holding company/
Group, Inc. management services
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor
IDEX Mutual Funds Massachusetts Various Mutual fund
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment
Advisors, Inc. advisor
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and
Advisors, Inc. actuarial consulting
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
(De-registered)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
Weiner Agency, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment
services
AEGON USA Real Estate Delaware 100% AEGON USA Realty Real estate and
Services, Inc. Advisors, Inc. mortgage holding
company
QSC Holding, Inc. Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and
sales
LRA, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Realty Associates, Inc. Texas 100% Landauer Associates, Inc. Real estate counseling
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment
13.11% PFL Life Ins. Co. trust
4.86% Bankers United Life
Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples
Security Life
Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Real Estate Delaware 100% CGC Furniture and
Development Corporation equipment lessor
Commonwealth General. Kentucky 100% CGC Administrator of
Assignment Corporation structured settlements
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin.
services to ins. cos.
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. To
ins. cos.
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment
advisor (de-registered)
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Commonwealth General LLC Turks & 100% CGC Special-purpose
Caicos Islands subsidiary
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of
(EIN 23-1720755) management support
services
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose
Corporation Agency, Inc. subsidiary
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose
Agency, Inc. subsidiary
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose
Agency, Inc. subsidiary
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment
Agency, Inc. lessor
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose
Agency, Inc. subsidiary
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pension Life Insurance New Jersey 100% Academy Life Insurance company
Company of America Insurance Company
FED Financial, Inc. Delaware 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose
Insurance Agency, Inc. Group, Inc. subsidiary
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose
(EIN 23-2364438) Group, Inc. subsidiary
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose
subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
NCOAA Management Company Texas 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin.
Services, Inc. Group, Inc. services
Unicom Administrative Germany 100% Unicom Administrative Provider of admin.
Services, GmbH Services, Inc. services
Capital General Development Delaware 100% CGC Holding company
Corporation
Monumental Life Maryland 73.23% Capital General Insurance company
Insurance Company Development Company
26.77% First AUSA Life
Insurance Company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AEGON Special Markets Maryland 100% Monumental Life Marketing company
Group, Inc. Insurance Company
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20.0% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose
subsidiary
Coverna Direct Insurance Maryland 100% Peoples Benefit Insurance agency
Insurance Services, Inc. Life Insurance Company
Ammest Realty Corporation Texas 100% Monumental Life Special purpose
Insurance Company subsidiary
JMH Operating Company, Inc. Mississippi 100% Monumental Life Real estate holdings
Insurance Company
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Insurance Company
1.0% CGC
Transamerica Corporation Delaware 100% AEGON NV Major interest in
insurance and finance
Transamerica Pacific Insurance Hawaii 100% Transamerica Corp. Life insurance
Company, Ltd.
TREIC Enterprises, Inc. Delaware 100% Transamerica Corp. Investments
ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty
Ins.
Transamerica Management, Inc. Delaware 100% ARC Reinsurance Corp. Asset management
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty
Ins.
Pacific Cable Ltd. Bmda. 100% Pyramid Ins. Co., Ltd. Sold 25% of TC Cable,
Inc. stock in 1998
Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications
and data processing
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a
pool of high-yield
bonds
Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only-
Inactive
Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial &
Consumer Lending &
equip. leasing
TA Leasing Holding Co., Inc. Delaware 100% Transamerica Fin. Corp. Holding company
Trans Ocean Ltd. Delaware 100% TA Leasing Hldg Co. Inc. Holding company
Trans Ocean Container Corp. Delaware 100% Trans Ocean Ltd. Intermodal Leasing
("TOCC")
SpaceWise Inc. Delaware 100% TOCC Intermodal leasing
Trans Ocean Container
Finance Corp. Delaware 100% TOCC Intermodal leasing
Trans Ocean Leasing
Deutschland GmbH Germany 100% TOCC Intermodal leasing
Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing
Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing
Trans Ocean Regional
Corporate Holdings California 100% TOCC Holding company
Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services
intermodal equipment
Transamerica Leasing Holdings Delaware 100% Transamerica Leasing Inc. Holding Company
Inc. ("TLHI")
Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal Leasing
Greybox L.L.C. Delaware 100% TLHI Intermodal freight
container interchange
facilitation service
Transamerica Trailer France 100% Greybox L.L.C. Leasing
Leasing S.N.C.
Greybox Services Limited U.K. 100% TLHI Intermodal Leasing
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc. Leasing
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc. Leasing
Transamerica Distribution Delaware 100% TLHI Provided door-to-door
Services, Inc. services for the
domestic transportation
of temperature-sensitive
products
Transamerica Leasing Belg. 100% TLHI Leasing
Coordination Center
Transamerica Leasing do Braz. 100% TLHI Container Leasing
Brasil Ltda.
Transamerica Leasing GmbH Germany 100% TLHI Leasing
Transamerica Leasing Limited U.K. 100% TLHI Leasing
ICS Terminals (UK) Limited U.K. 100% Transamerica. Leasing
Leasing Limited
Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing
Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing
Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing
Transamerica Leasing S. Africa 100% TLHI Intermodal leasing
(Proprietary) Limited
Transamerica Tank Container Australia 100% TLHI The Australian
Leasing Pty. Limited ( domestic) leasing of
tank containers
Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings II, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Swetzerland 100% TLHI Leasing
Transamerica Trailer Leasing A/S Denmark 100% TLHI Leasing
Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing
Transamerica Trailer Leasing Belgium 100% TLHI Leasing
(Belgium) N.V.
Transamerica Trailer Leasing Netherlands 100% TLHI Leasing
(Netherlands) B.V.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Trailer Spain S.A. Spain 100% TLHI Leasing
Transamerica Transport Inc. New Jersey 100% TLHI Dormant
Transamerica Commercial Delaware 100% Transamerica Fin. Corp. Holding company for
Finance Corporation, I ("TCFCI") Commercial/consumer
finance subsidiaries
Transamerica Equipment Financial Delaware 100% TCFCI
Services Corporation
BWAC Credit Corporation Delaware 100% TCFCI
BWAC International Corporation Delaware 100% TCFCI
BWAC Twelve, Inc. Delaware 100% TCFCI Holding company for
premium finance
subsidiaries
TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing &
other services in the US
& elsewhere
Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Provides insurance
Corporation ("TIFC") premium financing in
the US with the
exception of CA and HI
Transamerica Insurance Finance Maryland 100% TIFC Provides Insurance
Company (Europe) premium financing in
California
Transamerica Insurance Finance California 100% TIFC Disability ins. &
Corporation, California holding co. for various
insurance subsidiaries
of Transamerica
Corporation
Transamerica Insurance Finance ON 100% TIFC Provides ins. premium
Corporation, Canada financing in Canada
Transamerica Business Credit Delaware 100% TCFCI Provides asset based
Corporation ("TBCC") lending, leasing &
equip. financing
Transamerica Mezzanine Delaware 100% TBCC Holds investments in
Financing, Inc. several joint
ventures/partnerships
Transamerica Business Advisory Grp. Delaware 100% TBCC
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Bay Capital Corporation Delaware 100% TBCC Special purpose
company for
the purchase of real
estate tax liens
Coast Funding Corporation Delaware 100% TBCC Special purpose
company for
the purchase of real
estate tax liens
Transamerica Small Business Delaware 100% TBCC
Capital, Inc. ("TSBC")
Emergent Business Capital Delaware 100% TSBC
Holdings, Inc.
Gulf Capital Corporation Delaware 100% TBCC Special purpose
company for
the purchase of real
estate tax liens
Direct Capital Equity Investment, Inc. Delaware 100% TBCC Small business loans
TA Air East, Corp Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air I, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air II, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air III, Corp. Delaware 100% TBCC special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air IV, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air V, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TA Air VI, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air VII, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest or
leases aircraft
TA Air VIII, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest or
leases aircraft
TA Air IX, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air X, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air XI, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air XII, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air XIII, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air XIV, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
TA Air XV, Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest
or leases aircraft
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TA Marine I Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest or
leases barges or ships
TA Marine II Corp. Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest or
leases barges or ships
TBC I, Inc. Delaware 100% TBCC Special purpose corp.
TBC II, Inc. Delaware 100% TBCC Special purpose corp.
TBC III, Inc. Delaware 100% TBCC Special purpose corp.
TBC IV, Inc. Delaware 100% TBCC Special purpose corp.
TBC V, Inc. Delaware 100% TBCC Special purpose corp.
TBC VI, Inc. Delaware 100% TBCC Special purpose corp.
TBC Tax I, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
TBC Tax II, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
TBC Tax III, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
TBC Tax IV, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
TBC Tax V, Inc. Delaware 100% TBCC Special purpose co. for
the purchase or real
estate tax lien
TBC Tax VI, Inc. Delaware 100% TBCC Special purpose co. for
the purchase or real
estate tax lien
TBC Tax VII, Inc. Delaware 100% TBCC Special purpose co. for
the purchase or real
estate tax lien
TBC Tax VIII, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TBC Tax IX, Inc. Delaware 100% TBCC Special purpose co. for
the purchase of real
estate tax lien
The Plain Company Delaware 100% TBCC Special purpose corp.
which hold an
ownership interest or
leases aircraft.
Transamerica Distribution Delaware 100% TCFCI Holding corp. for
Finance Corporation ("TDFC") inventory, comm.
Leasing, retail finance
comm. Recovery
service and accounts
Transamerica Accounts Holding Corp. Delaware 100% TDFC
Transamerica Commercial Delaware 100% TDFC Wholesale floor plan
Finance Corporation ("TCFC") for appliances,
electronics, computers,
office equip. and
marine equipment.
Transamerica Acquisition Canada 100% TCFC Holding company
Corporation, Canada
Transamerica Distribution Finance Delaware 100% TCFC
Corporation - Overseas, Inc.
("TDFCO")
TDF Mauritius Limited Mauritius 100% TDFCO Mauritius holding
company of our Indian
Joint Venture
Inventory Funding Trust Delaware 100% TCFC
Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust
TCF Asset Management Corporation Colorado 100% TCFC A depository for
foreclosed real and
personal property
Transamerica Joint Ventures, Inc. Delaware 100% TCFC To enter into general
partnerships for the
ownership of comm. &
finance business
Transamerica Inventory Delaware 100% TDFC Holding co. for
Finance Corporation ("TIFC") inventory finance
subsidiaries
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica GmbH, Inc. Delaware 100% TIFC Commercial lending in
Germany
Transamerica Fincieringsmaatschappij Netherlands 100% Trans. GmbH, Inc. Commercial lending in
B.V. Europe
BWAC Seventeen, Inc. Delaware 100% TIFC Holding co. for
principal Canadian
operation, Trans-
America Comm.
Finance Corp, Canada
Transamerica Commercial ON 100% BWAC Seventeen, Inc. Shell corp.- Dormant
Finance Canada, Limited
Transamerica Commercial Canada 100% BWAC Seventeen, Inc. Commercial finance
Finance Corporation, Canada
BWAC Twenty-One, Inc. Delaware 100% TIFC Holding co. for United
Kingdom operation,
Transamerica Comm.
Finance Limited
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Commercial lending in
Finance Limited ("TCFL") the United Kingdom.
Whirlpool Financial Corporation 100% TCFL Inactive commercial
Polska Spzoo finance Company in
Poland
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Holding Company
Holdings Limited
Transamerica Commercial Finance U.K. 100% Trans. Commercial
Limited Holdings Limited
Transamerica Commercial Finance France 100% BWAC Twenty-One Inc. Carries out factoring
France S.A. transactions in France
& abroad
Transamerica GmbH Inc. Delaware 100% BWAC Twenty-One Inc. Holding co. for
Transamerica
Financieringsmaatschappij
B.V.
Transamerica Retail Financial Delaware 100% TIFC Provides retail
Services Corporation ("TRFSC") financing
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Bank, NA Delaware 100% TRFSC Bank (Credit Cards)
Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance
Holding Company ("TCFHC") holding company
Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages
Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company
Receivables Company
Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages
Easy Yes Mortgage, Inc. Florida 100% Metropolitan Mtg. Co. No active
business/Name
holding only
Easy Yes Mortgage, Inc. Georgia 100% Metropolitan Mtg. Co. No active
business/Name
holding only
First Florida Appraisal Services, Inc. Georgia 100% Metropolitan Mtg. Co. Appraisal and
inspection services
First Georgia Appraisal Services, Inc. Georgia 100% First FL App. Srvc, Inc. Appraisal services
Freedom Tax Services, Inc. Florida 100% Metropolitan Mtg. Co. Property tax
information services
J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and
marketing services
J.J. & W. Realty Corporation Florida 100% Metropolitan Mtg. Co. To hold problem REO
properties
Liberty Mortgage Company of Florida 100% Metropolitan Mtg. Co. No active
Ft. Myers, Inc. business/Name
holding only
Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active
business/Name
holding only
Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active
business/Name
holding only
Transamerica Vendor Financial Srvc. Delaware 100% TDFC Provides commercial
lease
Transamerica Distribution Finance 100% TCFCI
Corporation de Mexico ("TDFCM")
TDF de Mexico Mexico 100% TDFCM
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Corporate Services 100% TDFCM
De Mexico
Transamerica Home Loan California 100% TFC Consumer mortgages
Transamerica Lending Company Delaware 100% TFC Consumer lending
Transamerica Financial Products, Inc. California 100% Transamerica Corp. Service investments
Transamerica Insurance Corporation California 100% Transamerica Corp. Provides insurance
of California ("TICC") premium financing in
California
Arbor Life Insurance Company Arizona 100% TICC Life insurance,
disability insurance
Plaza Insurance Sales Inc. California 100% TICC Casualty insurance
placement
Transamerica Advisors, Inc. California 100% TICC Retail sale of
investment advisory
services
Transamerica Annuity Services Corp. New Mexico 100% TICC Performs services
required for
structured settlements
Transamerica Financial Resources, Inc. Delaware 100% TICC Retail sale of securities
products
Financial Resources Insurance Texas 100% Transamerica Fin. Res. Retail sale of securities
Agency of Texas products
TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin. Res. Variable insurance
contract sales in state of
Ohio
Transamerica Financial Resources Alabama 100% Transamerica Fin. Res. Insurance agent &
Agency of Alabama, Inc. broker
Transamerica Financial Resources Ins. Massachusetts 100% Transamerica Fin. Res. Insurance agent &
Agency of Massachusetts, Inc. broker
Transamerica International Insurance Delaware 100% TICC Holding &
Services, Inc. ("TIIS") administering
foreign operations
Home Loans and Finance Ltd. U.K. 100% TIIS Inactive
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Occidental Life California 100% TICC Licensed in all forms of
Insurance Company ("TOLIC") life insurance, accident
and sickness insurance
NEF Investment Company California 100% TOLIC Real estate development
Transamerica Life Insurance and N. Carolina 100% TOLIC Writes life and pension
Annuity Company ("TLIAC") ins. originally
incorporated in CA
April 14, 1966
Transamerica Assurance Company Missouri 100% TLIAC Life and disability
insurance
Gemini Investments, Inc. Delaware 100% TLIAC Investment subsidiary
Transamerica Life Insurance Company Canada 100% TOLIC Sells individual life
of Canada insurance & investment
products in all
provinces and
territories of Canada
Transamerica Life Insurance Company New York 100% TOLIC Licensed in NY to
of New York market life insurance,
annuities and health
insurance
Transamerica South Park Delaware 100% TOLIC Provide market analysis
Resources, Inc. of certain undeveloped
land holdings held by
TOLIC
Transamerica Variable Insurance Maryland 100% TOLIC Mutual Fund
Fund, Inc.
USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator
Transamerica Products. Inc. California 100% TICC Parent co. of various
subsidiary corp. which
are formed to be co-
general partners of
proprietary limited
Transamerica Securities Sales Corp. Maryland 100% Transamerica Prod. Inc. Retail sale of the
variable life ins. and
variable annuity
products of the
Transamerica
life companies
Transamerica Service Company Delaware 100% Transamerica Prod. Inc. Passive loss tax service
for Lloyd's U.S. names
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Intellitech, Inc. Delaware 100% TICC Real estate information
and technology services
Transamerica International Delaware 100% TICC Investments
Holdings, Inc.
Transamerica Investment Services, Inc. Delaware 100% TICC Investment adviser
Transamerica Income Shares, Inc. Maryland 100% Trans. Invest. Srvc. Inc. Transamerica
investment services
Transamerica LP Holdings Corp. Delaware 100% TICC Limited partnership
investment (initial
limited partner of
Transamerica
Delaware, L.P.)
Transamerica Real Estate Tax Service N/A 100% TICC Real estate tax
(A Division of Transamerica Corp) reporting and
processing services
Transamerica Realty Services, Inc. Delaware 100% TICC Responsible for real
estate investments for
Transamerica
Bankers Mortgage Company of CA California 100% Transamerica Realty Srv. Holds bank account and
owns certain residual
investments in certain
French real estate
projects which are
managed special
purpose company for
the purchase of real
estate tax liens.
Pyramid Investment Corporation Delaware 100% Transamerica Realty Srv. Owns office buildings
in San Francisco and
other properties
The Gilwell Company California 100% Transamerica Realty Srv. Ground lessee of 517
Washington Street,
San Francisco
Transamerica Affordable Housing, Inc. California 100% Transamerica Realty Srv. Owns general
partnership interests in
low-income housing tax
credit partnerships
Transamerica Minerals Company California 100% Transamerica Realty Srv. Owner and lessor of oil
and gas properties
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Oakmont Corporation California 100% Transamerica Realty Srv. General partner in
Transamerica/Oakmont
Retirement Associates
Transamerica Senior Properties, Inc. Delaware 100% TICC Owns congregate care
and assisted living
retirement properties
Transamerica Senior Living, Inc. Delaware 100% Trans. Sr. Prop. Inc. Manages congregate
care and assisted living
retirement properties.
</TABLE>
Item 27. Number of Certificate Owners
As of December 31, 1999 there were 25,477 Owners of Contracts.
Item 28. Indemnification
Transamerica's Bylaws provide in Article V as follows:
Section 1. Right to Indemnification.
------------------------------------
Each person who was or is a party or is threatened to be made a party to or is
involved, even as a witness, in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation that
was predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expense, liability, and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided however, that except as to actions to enforce indemnification rights
----------------
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. [It is the Corporation's
intent that the bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the Corporation's Articles of Incorporation.]
Section 2. Authority to Advance Expenses.
-----------------------------------------
Expenses incurred by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by the
-------- -------
California General Corporation Law, as amended, such Expenses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article or otherwise. Expenses incurred by other Agents of the corporation
(or by the directors or officers not acting in their capacity as such, including
service with respect
<PAGE>
to employee benefit plans) may be advanced upon the receipt of a similar
undertaking, if required by law, and upon such other terms and conditions as the
Board of Directors deems appropriate. Any obligation to reimburse the
corporation for Expense advances shall be unsecured and no interest shall be
charged thereon.
Section 3. Right of Claimant to Bring Suit.
-------------------------------------------
If a claim under Section 1 or 2 of this Article is not paid in full by the
corporation within 30 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. The burden of proving such a defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
Section 4. Provisions Nonexclusive.
-----------------------------------
The rights conferred on any person by this Article shall not be exclusive of any
other rights that such person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
-------------------------------
The corporation may purchase and maintain insurance to protect itself and any
Agent against any Expense asserted against or incurred by such person, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article [provided that,
in cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the California
General Corporation Law, as amended].
Section 6. Survival of Rights.
------------------------------
The rights provided by this Article shall continue as to a person who has ceased
to be an Agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Section 7. Settlement of Claims.
--------------------------------
The corporation shall not be liable to indemnify any Agent under this Article
(a) for any amounts paid in settlement of any action or claim effected without
the corporation's written consent, which consent shall not be unreasonably
withheld; or (b) for any judicial award, if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
Section 8. Effect of Amendment
------------------------------
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
Section 9. Subrogation.
-----------------------
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the Agent, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring suit to enforce such rights.
<PAGE>
Section 10. No Duplication of Payments.
---------------------------------------
The corporation shall not be liable under this Article to make any payment in
connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling person of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Occidental Life Insurance Company are
covered under a Directors and Officers liability program which includes direct
coverage to directors and officers (Coverage A) and corporate reimbursement
(Coverage B) to reimburse the Company for indemnification of its directors and
officers. Such directors and officers are indemnified for loss arising from any
covered claim by reason of any Wrongful Act in their capacities as directors or
officers. In general, the term "loss" means any amount which the insureds are
legally obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
Item 29. Principal Underwriter
Transamerica Securities Sales Corporation (TSSC) and Transamerica Financial
Resources (TFR) are the co-underwriters of the Certificates and the Individual
Contracts as defined in the Investment Company Act of 1940. TSSC became
Principal Underwriter effective 8-24-94.
NAME AND PRINCIPAL POSITION AND OFFICES WITH
BUSINESS ADDRESS* TRANSAMERICA SECURITIES SALES CORPORATION
----------------------------------------------------------------------------
Nooruddin Veerjee Chairman of the Board and Director
Nicki Bair President and Director
Sandy Brown Senior Vice President, Treasurer and Director
Roy Chong-Kit Director
George Chuang Vice President and Chief Financial Officer
Chris Shaw Vice President and Chief Compliance Officer
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
NAME AND PRINCIPAL POSITION AND OFFICES WITH
BUSINESS ADDRESS* TRANSAMERICA FINANCIAL RESOURCES
----------------------------------------------------------------
Nooruddin S. Veerjee Chairman of the Board and Director
Sandra C. Brown Director, President and Chief Operating Officer
Nicki Bair Director
Kenneth Kilbane Director
William Tate Director
<PAGE>
Dan Trivers Vice President
Monica Suryapranata Acting Treasurer
Susan Vivino Assistant Secretary
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
The following table lists the amounts of commissions paid to the co-underwriters
during the last fiscal year.
Name of Net Underwriting
Principal Discounts & Compensation on Brokerage
Underwriter Commission Redemption Commissions Compensation
--------------------------------------------------------------------------------
TSSC -0- -0- $16,053,620.92 -0-
TFR -0- -0- $1,093,584.85 -0-
Transamerica Securities Sales Corporation, the principal underwriter, is also
the underwriter for: Transamerica Investors, Inc.; Transamerica Variable
Insurance Fund, Inc.; Transamerica Occidental Life Insurance Company's Separate
Accounts: VA-2L; VA-2NL; VUL-1; VUL-2; VUL-3 and VL; Transamerica Life Insurance
and Annuity Company's Separate Accounts VA-1; VA-6 and VA-7; and Transamerica
Life Insurance Company of New York VA-2LNY; VA-2NLNY; VA-5NLNY; and VA-6NY.
The Underwriter is wholly-owned by Transamerica Insurance Corporation of
California, a wholly-owned subsidiary of Transamerica Corporation, a subsidiary
of AEGON, N.V.
Item 30. Location and Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by Transamerica or the Service Office
at their administrative offices.
Item 31. Management Services
All management contracts are discussed in Parts A or B.
Items 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate or an Individual Contract offered by
the Prospectus, a space that an applicant can check to request a Statement
of Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to Transamerica at the address or
phone number listed in the Prospectus.
(d) Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88) regarding Sections 22(e), 27(c)(i) and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) policies, and that paragraphs numbered (1) through (4) of
that letter will be complied with.
<PAGE>
(e) Transamerica hereby represents that the fees and the charges deducted
under the Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by Transamerica.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
by the undersigned in the City of Los Angeles, State of California on this 20th
day of December, 2000.
SEPARATE ACCOUNT VA-2L
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
(DEPOSITOR)
/s/ Frank A. Camp
-------------------------
Frank A. Camp
Vice President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signatures Titles Date
---------- ------ ----
<S> <C> <C>
* Director ____________, 2000
------------------------
Patrick S. Baird
* Director ____________, 2000
------------------------
Paul E. Rutledge III
* Director and Acting Chief Financial Officer ____________, 2000
------------------------
Karen MacDonald
* Director ____________, 2000
------------------------
Nooruddin S. Veerjee
* Director ____________, 2000
------------------------
Brenda K. Clancy
* Director ____________, 2000
------------------------
James W. Dederer
* Director ____________, 2000
------------------------
George A. Foegele
* Director ____________, 2000
------------------------
Douglas C. Kolsrud
* Director ____________, 2000
------------------------
Richard N. Latzer
* Director ____________, 2000
------------------------
Gary U. Rolle'
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
* Director ___________, 2000
------------------------
Craig D. Vermie
/s/ Frank A. Camp Attorney -in-Fact pursuant to powers of December 20, 2000
------------------------
*By: Frank A. Camp attorney filed herewith, and in his own
capacity as Vice President.
</TABLE>
