EFFECTIVE MARCH 1, 1996
AMENDMENT TO MAY 1, 1995
PROSPECTUS FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE
A VARIABLE ANNUITY ISSUED BY
FIRST TRANSAMERICA
LIFE INSURANCE COMPANY
Beginning March 1, 1996, the Policies described in the above-identified
prospectus will be issued with enhancements previously not available. The
material terms of the Policies to be issued beginning March 1, 1996, which
differ from the Policies issued prior to March 1, and described in the May 1,
1996, prospectus are described below. The pages of the May 1, 1995, prospectus
which discuss these terms are identified below.
RIGHT TO CANCEL (pages 15 and 23)
The Owner has the right to examine the Policy for a limited period, known
as a "Free Look Period." The Owner can cancel the Policy by delivering or
mailing a written notice or by sending a telegram to (a) the agent through whom
the Policy was purchased or (b) the Service Center, before midnight of the tenth
day after receipt of the Policy. Notice given by mail and the return of the
Policy by mail, properly addressed and postage prepaid, will be deemed by
Transamerica to have been made on the date postmarked. Transamerica will refund
the Policy Value determined as of the date the notice is postmarked, plus the
difference between the Premiums paid, including any fees or other charges, and
the amount allocated to the Variable Account, within seven days after receipt of
such notice to cancel and the returned Policy.
OWNER/JOINT OWNERS (page 5)
Joint Owners need not be husband and wife. Joint Owners own the Policy
equally with the right of survivorship. Qualified Policies may not have Joint
Owners.
ALLOCATION OF PREMIUMS (page 24)
On non-IRA Policies, the Net Premium derived from the initial Premium will
be allocated directly to the Sub-Account(s) selected by the Owner. For IRAs, on
the Policy Date the Net Premium will be allocated to the Money Market
Sub-Account and will not be allocated to the Sub-Account(s) in accordance with
the allocation percentages selected by the Owner until 15 calendar days after
the Policy Date.
POLICY FEE (pages 9, 11-12 and 31)
The $30 Policy Fee will not be assessed for Policy Years in which the
Policy Value exceeds $50,000 on the last business day of the Policy Year or as
of the date the Policy is surrendered.
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CONTINGENT DEFERRED SALES LOAD (pages 9 and 30-31)
Any Premiums held by Transamerica for seven Policy Years and not previously
withdrawn may be withdrawn free of any Contingent Deferred Sales Load. In
addition, any portion of a free withdrawal amount may be withdrawn each year
after the first Policy Year without imposition of any Contingent Deferred Sales
Load. The free withdrawal amount is only available for the first withdrawal in
each Policy Year and is equal to the greater of (a) the accumulated earnings not
previously withdrawn or (b) 10% of the Premiums held a least one but less than
seven Policy Years prior to the day of withdrawal, not adjusted for any prior
withdrawals deemed to be made from such Premiums. Withdrawals will be made first
from earnings then from Premiums on a first in/first out basis. After the first
free withdrawal in a Policy Year, free withdrawals can be made only from
available earnings.
DEATH BENEFIT (pages 15 and 28)
If the Owner or Annuitant dies before the Annuity Date, a death benefit is
payable. If the deceased Owner or Annuitant, as applicable, had not attained
their 85th birthday the death benefit will be the greatest of (a) the Policy
Value, (b) all Premiums paid less all withdrawals and any applicable premium
taxes or (c) the greatest Policy Anniversary Value prior to the earliest of the
Annuitant's or Owner's 75th birthday increased by all Premiums paid since that
Policy Anniversary less any withdrawals and applicable premium taxes since that
Policy Anniversary. If the deceased Owner or Annuitant, as applicable, had
attained age 85, the death benefit will be equal to the Policy Value.
TRANSFERS (page 25 and 32)
Transamerica currently does not charge for transfers between Sub-Accounts.
However, Transamerica reserves that right to impose a fee of no more than $10 or
2% of the amount transferred for transfers in excess of 12 during a single
Policy Year. Up to 18 transfers may be made in any Policy Year.
ANNUITY PAYMENT (page 33)
Monthly Annuity Payments from the Variable Annuity Payment Option will be
subject to a minimum monthly annuity amount of $50 from each Sub-Account.
Policies sold prior to March 1, 1996, will be amended by endorsement
containing the applicable March 1, 1996, terms after the endorsement forms are
approved by the New York Insurance Department and when Transamerica can
administratively endorse the pre-March 1, 1996, Policies.
Triple Advantage Policies issued by FTL, Policy Form 3-501 11-194.
SSVP/S030196ny
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LOGO
PROSPECTUS FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE
A Variable Annuity Issued by
First Transamerica
Life Insurance Company
Including Fund Prospectuses for
DREYFUS VARIABLE INVESTMENT FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
May 1, 1995
<PAGE>
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE
VARIABLE ANNUITY
Issued by
FIRST TRANSAMERICA LIFE INSURANCE COMPANY 575 Fifth
Avenue, New York, New York, 10017, (212) 682-8740.
This Prospectus describes the Dreyfus/Transamerica Triple Advantage
Variable Annuity, a variable annuity policy ("Policy") issued by First
Transamerica Life Insurance Company ("Transamerica"). The Policy is designed to
aid individuals in long-term financial planning and for retirement or other
long-term purposes.
The Policy Value will accumulate on a variable basis in Transamerica
Separate Account VA-2LNY (the "Variable Account").
The Owner bears the entire investment risk under this Policy. There is
no guaranteed or minimum withdrawal value; the Cash Surrender Value or Annuity
Purchase Amount could be less than the Premiums invested in the Policy.
-------
This Prospectus sets forth the basic information that a prospective
investor should know before investing. A "Statement of Additional Information"
containing more detailed information about the Policy is available free by
writing Transamerica Occidental Life Insurance Company, Annuity Service Center,
P.O. Box 30757, Los Angeles, California 90030-0757 or by calling (800) 258-4261.
The Statement of Additional Information, which has the same date as this
Prospectus, as it may be supplemented from time to time, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
table of contents of the Statement of Additional Information is included at the
end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and retain it for future reference.
The date of this Prospectus is May 1, 1995
This Prospectus must be accompanied by current Prospectuses for Dreyfus Variable
Investment Fund, Dreyfus Stock Index Fund, and The Dreyfus Socially Responsible
Growth Fund, Inc.
- ----------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
NO DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON.
- ----------------------------------------------------------------------------
An investment in the Policy is not a deposit or obligation of, or guaranteed or
endorsed by, any bank, nor is the Contract federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investing in the Policy involves certain investment risks, including
possible loss of principal.
<PAGE>
The Policy provides for monthly Annuity Payments to be made by
Transamerica on a fixed or a variable or combination of a fixed and variable
basis for the life of the Annuitant or for some other period, beginning on the
first day of the month following the Annuity Date selected by the Owner. Prior
to the Annuity Date, the Owner can transfer amounts among the Sub-Accounts of
the Variable Account. Some prohibitions and restrictions apply. After the
Annuity Date, some transfers are permitted among the Sub-Accounts if the Owner
selects a Variable Annuity Payment Option. Before the Annuity Date, the Owner
can also elect to withdraw all or a portion of the Cash Surrender Value in
exchange for a cash payment from Transamerica; however, withdrawals may be
subject to a Contingent Deferred Sales Load, premium taxes, federal tax and/or a
tax penalty and, upon surrender, the annual Policy Fee will also be deducted.
The Variable Account is divided into Sub-Accounts. Each Sub-Account is
invested in shares of a specific Portfolio. Ten Portfolios are available for
investment under the Policies: Money Market, Managed Assets, Zero Coupon 2000,
Quality Bond, Small Cap , Capital Appreciation Growth and Income, and
International Equity Portfolios of Dreyfus Variable Investment Fund, Dreyfus
Stock Index Fund, and The Dreyfus Socially Responsible Growth Fund, Inc. Certain
fees and expenses are charged against the assets of each Portfolio. The Policy
Value and the amount of any Variable Annuity payments will vary to reflect the
investment performance of the Sub-Account(s) selected by the Owner and the
deduction of the Policy charges described under "Charges and Deductions" on page
30. For more information about the Funds, see "The Funds" on page 19 and the
accompanying Funds' prospectuses.
The Initial Premium for the Policy must be at least $5,000 and each
additional Premium must be at least $500, unless an automatic payment plan is
selected. The prior approval of Transamerica is required before it will accept
total Premiums for any Policy in excess of $1,000,000.
2
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.............................................................5
SUMMARY.................................................................8
CONDENSED FINANCIAL INFORMATION........................................16
PERFORMANCE DATA.......................................................17
FIRST TRANSAMERICA LIFE INSURANCE COMPANY AND THE VARIABLE
ACCOUNT............................................................. .19
First Transamerica Life Insurance Company.....................19
Published Ratings.............................................19
The Variable Account..........................................19
THE FUNDS..............................................................19
THE POLICY.............................................................23
Qualified Policies............................................23
POLICY APPLICATION AND PREMIUMS........................................23
Premiums......................................................23
Allocation of Premiums........................................24
POLICY VALUE...........................................................24
TRANSFERS..............................................................25
Before the Annuity Date.......................................25
Possible Restrictions.........................................25
Dollar Cost Averaging.........................................26
After the Annuity Date........................................26
CASH WITHDRAWALS.......................................................26
Withdrawals...................................................26
Systematic Withdrawal Option..................................27
Automatic Payout Option.......................................28
DEATH BENEFIT..........................................................28
Payment of Death Benefit......................................29
Designation of Beneficiaries..................................29
Death of Annuitant Prior to the Annuity Date..................29
Death of Owner Prior to the Annuity Date......................29
Death of Annuitant or Owner After the Annuity Date............29
CHARGES AND DEDUCTIONS.................................................30
Contingent Deferred Sales Load................................30
Administrative Charges........................................31
Mortality and Expense Risk Charge.............................31
Premium Taxes.................................................32
Transfer Fee..................................................32
Systematic Withdrawal Option..................................32
Taxes.........................................................32
Portfolio Expenses............................................32
Employee and Agent Purchases..................................32
ANNUITY PAYMENTS.......................................................33
Annuity Date..................................................33
Annuity Payment...............................................33
Election of Annuity Forms and Payment Options.................33
Annuity Payment Options.......................................34
Fixed Annuity Payment Option..................................34
Variable Annuity Payment Option...............................34
Annuity Forms.................................................34
Alternate Fixed Annuity Rates.................................36
FEDERAL TAX MATTERS....................................................36
DISTRIBUTION OF THE POLICY.............................................39
3
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LEGAL PROCEEDINGS...........................................................39
LEGAL MATTERS...............................................................40
ACCOUNTANTS.................................................................40
VOTING RIGHTS...............................................................40
AVAILABLE INFORMATION.......................................................40
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS.....................41
APPENDIX A.................................................................A-1
Example of Variable Accumulation Unit Value Calculations..........A-1
Example of Variable Annuity Unit Value Calculations...............A-1
Example of Variable Annuity Payment Calculations..................A-1
This Policy is available only in New York.
As of May 1, 1995, certain Sub-Accounts are not available for immediate
investment.
4
<PAGE>
DEFINITIONS
Active Sub-Account: A Sub-Account of the Variable Account in which the
Policy has current value. Annuitant: The person named on the
application whose life is used to determine the amount of monthly
Annuity Payments on the Annuity Date. Annuitant's Beneficiary: The
person or persons named by the Owner who may receive the death benefits
under the Policy if: (a) there is no named Contingent Annuitant and the
Annuitant dies before the Annuity Date; or (b) the Annuitant dies after
the Annuity Date under an Annuity Form containing a period certain
option. Annuity Date: The date on which the Annuity Purchase Amount
will be applied to provide an Annuity under the Annuity Form and
Payment Option selected by the Owner. Unless a different Annuity Date
is elected under the annuity provisions, the Annuity Date will be as
shown in the Policy. Annuity Payment: An amount paid by Transamerica at
regular intervals to the Annuitant and/or any other Payee. It may be on
a variable or fixed basis. Annuity Purchase Amount: The amount applied
as a single premium to provide an annuity under the Annuity Form and
Payment Options available under the Policy. The Annuity Purchase Amount
is equal to the Policy Value, 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.
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 Policy is surrendered on or before the
Annuity Date. The Cash Surrender Value is equal to the Policy Value,
less the Policy Fee, less any applicable Contingent Deferred Sales
Load, 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 Policy 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. Fixed Annuity: An annuity with predetermined
payment amounts. Funds: Dreyfus Variable Investment Fund, Dreyfus Stock
Index Fund and The Dreyfus Socially Responsible Growth Fund, Inc. in
which the Variable Account currently invests. Inactive Sub-Account: A
Sub-Account of the Variable Account in which the Policy has a zero
balance. Joint Owners: Must be husband and wife as of the Policy Date.
Net Investment Factor: An index that measures the investment
performance of a Sub-Account from one Valuation Period to the next. Net
Premium: A Premium reduced by any applicable premium tax (including
retaliatory premium taxes). Non-Qualified Policy: A Policy other than a
Qualified Policy. Owner: The person or persons who, while living,
control(s) all rights and benefits under the Policy. Owner's
Beneficiary: The person who becomes the Owner of the Policy if the
Owner dies. If the Policy 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.
5
<PAGE>
Policy Anniversary: The same month and day as the Policy Date in each
calendar year after the calendar year in which the Policy Date occurs.
Policy Date: The effective date of the Policy as shown on the Policy.
Policy Value: The total dollar amount of all Variable Accumulation
Units in each Sub-Account of the Variable Account credited under the
Policy prior to the Annuity Date. The Policy Value is equal to: (a) Net
Premiums; plus or minus (b) any increase or decrease in the value 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) the annual Policy Fees (taken at the end of
each Policy Year); less (f) any applicable Transfer Fees; and less (g)
any withdrawals from the Sub-Accounts. Policy Year: The 12-month period
from the Policy Date and ending with the day before the first Policy
Anniversary and each twelve month period thereafter. The first Policy
Year for any particular Net Premium is the Policy Year in which the
Premium is received by the Service Center. Portfolio: Dreyfus Stock
Index Fund, The Dreyfus Socially Responsible Growth Fund, Inc. or any
one of the Series of Dreyfus Variable Investment Fund underlying a
Sub-Account of the Variable Account. Proof of Death: May be: (a) a copy
of a certified death certificate; (b) a copy of a certified decree of a
court of competent jurisdiction as to the finding of death; (c) a
written statement by a medical doctor who attended the deceased; or (d)
any other proof satisfactory to Transamerica. Qualified Policy: A
Policy used in connection with an individual retirement annuity which
receives favorable federal income tax treatment under 408 of the Code.
Receipt: Receipt and acceptance by Transamerica at its Service Center.
Series: Any of the portfolios of Dreyfus Variable Investment Fund
available for investment by a Sub-Account under the Policy. Service
Center: Transamerica's Annuity Service Center, P.O. Box 30757, Los
Angeles, CA 90030-0757, Telephone (800) 258-4261. Socially Responsible
Fund: The Dreyfus Socially Responsible Growth Fund, Inc., a diversified
open-end management investment company. Stock Index Fund: Dreyfus Stock
Index Fund, a non-diversified open-end management investment company.
Sub-Account: A subdivision of the Variable Account investing solely in
shares of one of the Portfolios. Valuation Day: Any day the New York
Stock Exchange is open for trading and that is a regular business day
for our Service Center. Valuation occurs currently as of 4:00 p.m. ET
each Valuation Day. Valuation Period: The time interval between the
closing of the New York Stock Exchange on consecutive Valuation Days.
Variable Account: Separate Account VA-2LNY, a separate account
established and maintained by Transamerica for the investment of a
portion of its assets pursuant to Section 4240 of the New York
Insurance Law and Regulation 47 (part 50). The Variable Account
contains several Sub-Accounts to which all or portions of Net Premiums
and transfers may be allocated. Variable Accumulation Unit: A unit of
measure used to determine the Policy Value prior to the Annuity Date.
The value of a Variable Accumulation Unit varies with each Sub-Account.
Variable Annuity: An annuity with payments which vary as to dollar
amount in relation to the investment performance of specified
Sub-Accounts of the Variable Account. Variable Annuity Unit: A unit of
measure used to determine the amount of the second and each subsequent
payment under a Variable Annuity Payment Option. The value of a
Variable Annuity Unit varies with each Sub-Account.
6
<PAGE>
Variable Fund: Dreyfus Variable Investment Fund, an open-end management
investment company. Withdrawals: Refers to partial withdrawals, full
surrenders, and systematic withdrawals that are paid in cash to the
Owner. Written Notice (or Written Request): A notice or request in
writing by the Owner to Transamerica's Service Center. Such a request
must contain original signatures; no carbons or photocopies will be
accepted. Transamerica reserves the right to accept a facsimile copy.
7
<PAGE>
SUMMARY
The Policy
The Flexible Premium Multi-Funded Deferred Annuity Policy (the
Policy) described in this Prospectus is designed to aid individuals in long-term
financial planning and for retirement or other long-term purposes. The Policy
may be used in connection with a retirement plan which qualifies as a retirement
program under Section 408 of the code, or with non-qualified plans. The Policy
is issued by First Transamerica Life Insurance Company ("Transamerica"), a
wholly-owned subsidiary of Transamerica Occidental Life Insurance Company,
having its principal office at 575 Fifth Avenue, Thirty-Sixth Floor, New York,
New York, 10017, telephone (212) 682-8740.
The Policy provides that the Policy Value, after certain adjustments,
will be applied to an Annuity Form and Payment Option on a selected future date
(the "Annuity Date").
The Policy Value will depend on the investment experience of each
Sub-Account of the Variable Account selected by the Owner. All payments and
values provided under the Policy when based on the investment experience of the
Variable Account are variable and are not guaranteed as to dollar amount.
Therefore, prior to the Annuity Date the Owner bears the entire investment risk
under the Policy.
There is no guaranteed or minimum Cash Surrender Value, so the proceeds
of a surrender could be less than the total Premiums.
The Initial Premium for each Policy must be at least $5,000 and each
additional Premium must be at least $500 (unless an automatic payment plan is
selected). In no event, however, may the total of all Premiums under a Policy
exceed $1,000,000 without the prior approval of Transamerica.
An additional Net Premium allocated to an Inactive Sub-Account may not
be less than $1,000. (See "Policy Application and Premiums" page 23.)
The Variable Account
The Variable Account is a separate account (Separate Account VA-2LNY)
that is subdivided into Sub-Accounts. (See "The Variable Account" page 19.)
Assets of each Sub-Account are invested in a specified mutual fund Portfolio.
Each Sub-Account uses its assets to purchase, at their net asset value, shares
of a specific Series of Dreyfus Variable Investment Fund, or shares in Dreyfus
Stock Index Fund or in The Dreyfus Socially Responsible Growth Fund, Inc.
(together "The Funds"). Ten Portfolios are currently available for investment in
the Variable Account under the Policy: (1) Money Market; (2) Managed Assets; (3)
Zero Coupon 2000; (4) Quality Bond; (5) Small Cap; (6) Capital Appreciation; (7)
Growth and Income; and (8) International Equity, all of which are Series of
Dreyfus Variable Investment Fund; (9) the Stock Index Fund; and (10) the
Socially Responsible Fund. Each Portfolio has distinct investment objectives and
policies which are described in the accompanying prospectuses for the Funds.
(See "The Funds" page 19.)
The Funds pay their investment advisers and administrators certain fees
charged against the assets of each Portfolio. The Policy Value, if any, of a
Policy and the amount of any Variable Annuity Payments will vary to reflect the
investment performance of all of the Sub-Accounts selected by the Owner and the
deduction of the charges described under "Charges and Deductions" on page 30.
For more information about the Funds, see "The Funds" page 19 and the
accompanying Funds' prospectuses. Transfers Before the Annuity Date
Prior to the Annuity Date, the Owner may transfer values among the
Sub-Accounts of the Variable Account. Total transfers are limited to eighteen
during a Policy Year. See "Transfers" on page 25 for additional limitations
regarding transfers.
Transamerica currently does not impose a Transfer Fee, but it reserves
the right to charge a Transfer Fee for each transfer in excess of six made
during the same Policy Year. (See "Transfer Fee" page 32.) (For Transfers after
the Annuity Date, see "After the Annuity Date" page 26.)
8
<PAGE>
Withdrawals
All or part of the Cash Surrender Value for a Policy may be withdrawn
by the Owner on or before the Annuity Date. No partial withdrawals will be
permitted while the Systematic Withdrawal Option is in effect. However, amounts
withdrawn may be subject to a Contingent Deferred Sales Load depending upon how
long the withdrawn Premiums have been held under the Policy. TRANSAMERICA
GUARANTEES THAT THE AGGREGATE CONTINGENT DEFERRED SALES LOAD WILL NEVER EXCEED
6% OF THE PREMIUMS. (See "Contingent Deferred Sales Load" page 30.) Amounts
withdrawn may be subject to a premium tax or similar tax, depending upon the
state in which the Owner lives. Withdrawals may further be subject to any
federal, state or local income tax, and subject to a penalty tax. (See "Federal
Tax Matters" page 36.) The annual Policy Fee generally will be deducted on a
full surrender of a Policy. (See "Withdrawals" page 26 for additional
limitations regarding withdrawals.) No partial withdrawals will be permitted
while the Systematic Withdrawal Option is in effect. Contingent Deferred Sales
Load
Transamerica does not deduct a sales charge from Premiums (although
premium taxes may be deducted). However, if any part of the Policy Value is
withdrawn, a Contingent Deferred Sales Load of up to 6% of Premiums may be
assessed by Transamerica to cover certain expenses relating to the sale of the
Policies, including commissions to registered representatives and other
promotional expenses. Up to 10% of Premiums paid that are between one and seven
Policy Years old may be withdrawn each Policy Year after the first complete
Policy Year without the imposition of a Contingent Deferred Sales Load, and
after a Premium has been held by Transamerica for seven Policy Years, the
remaining Premium may be withdrawn without charge. Also, no Contingent Deferred
Sales Load is assessed on death or certain annuitizations or on transfers. Other
amounts withdrawn may be subject to a Contingent Deferred Sales Load up to 6%.
(See "Contingent Deferred Sales Load" page 30 and "Withdrawals" page 26.) Other
Charges and Deductions
Transamerica deducts a daily charge (the "Mortality and Expense Risk
Charge") equal to a percentage of the value of the net assets in the Variable
Account for the mortality and expense risks assumed. The effective annual rate
of this charge is 1.25% of the value of the net assets in the Variable Account
attributable to the Policies. (See "Mortality and Expense Risk Charge" page 31.)
TRANSAMERICA GUARANTEES THAT THIS MORTALITY AND EXPENSE RISK CHARGE WILL NOT BE
INCREASED.
Transamerica also deducts a daily charge (the "Administrative Expense
Charge") equal to a percentage of the value of the net assets in the Variable
Account corresponding to an effective annual rate of .15% to help cover some of
the costs of administering the Policy and the Variable Account. This charge may
change, but it is guaranteed not to exceed a maximum effective annual rate of
.25%. (See "Administrative Charges" page 31).
There is also an administrative charge (the "Policy Fee") each year for
Policy maintenance. This fee currently is $30 (or 2% of the Policy Value, if
less) deducted at the end of the Policy Year. This fee may change but it is
guaranteed not to exceed $60 (or 2% of the Policy Value, if less) per Policy
Year. After the Annuity Date this fee is referred to as the Annuity Fee. The
Annuity Fee is $30 and will not change. (See "Administrative Charges" page 31.)
Currently, no Transfer Fees are imposed. However, for each transfer in
excess of six during a Policy Year, a Transfer Fee may be imposed equal to no
more than $10.
(See "Transfer Fee" page 32.)
Also, New York currently has no premium tax nor retaliatory premium
tax. If New York imposes these taxes in the future, or if the Owner is or
becomes a resident of a state other than New York where such taxes apply, the
charges could be deducted from premiums, from amounts withdrawn, and/or from the
Annuity Purchase Amount upon annuitization. (See "Premium Taxes" page 32.)
9
<PAGE>
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the Owner will bear directly and indirectly. The table
reflects expenses of the Variable Account as well as of the Portfolios. The
information set forth should be considered together with the narrative provided
under the heading "Charges and Deductions" on page 30 of this Prospectus, and
with the Funds' prospectuses. In addition to the expenses listed below, premium
taxes may be applicable. Policy Transaction Expenses
Sales Load Imposed on Purchase Payments 0
Maximum Contingent Deferred Sales Load 6%
- ------------------------------------------------------------------------------
Range of Contingent Deferred Sales Load Over Time
(as a percentage of Premium Reciept)
Policy Years since Contingent Deferred Sales Load
Premium Receipt(1) Percentage
- ------------------ ----------
Less than 2 years 6%
2 years but less than 4 years 5%
4 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more 0%
- ------------------------------------------------------------------------------
Transfer Fee(2) 0
Systematic Withdrawal Fee(2) 0
Policy Fee(3) $30
Variable Account Annual Expenses
(as a percentage of average Variable Account assets)
Mortality and Expense Risk Charges 1.25%
Administrative Expense Charge (4) .15%
Other Fees and Expenses of the Variable Account 0.00%
Total Variable Account Annual Expenses 1.40%
Zero
Money Managed Coupon Quality Small Capital
Portfolio Market Assets 2000 Bond Cap Appreciation
- --------- ------ ------ ---- ---- --- ------------
Annual Expenses(6)
- -------------------
(as a percentage of Portfolio average net assets after fee waiver and/or expense
reimbursement )
Management Fees 0.00% 0.00% 0.00% 0.00% 0.23% 0.00%
Other Expenses 0.00% 0.25% 0.00% 0.00% 0.32% 0.25%
Total Portfolio Annual
Expenses 0.00% 0.25% 0.00% 0.00% 0.55% 0.25%
Growth Stock Socially
and International Index Responsible
Portfolio Income Equity Fund Fund
- --------- ------ ------ ---- ----
Annual Expenses(6)
- -------------------
(as a percentage of Portfolio average net assets after fee waiver and/or expense
reimbursement )
Management Fees 0.00% 0.00% 0.00% 0.14%
Other Expenses 0.22% 0.23% 0.26% 0.25%
Total Portfolio Annual 0.22% 0.23% 0.40% 0.25%
Expenses
<PAGE>
Expense information regarding the Portfolios has been provided by the Funds.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. In preparing the table above and
the examples that follow, Transamerica has relied on the figures provided by the
Funds. Actual expenses in future years may be higher or lower than the figures
above. Notes to Fee Table: (1) A portion of the Premium may be withdrawn each
year after the first Policy Year without imposition of
any Contingent Deferred Sales Load, and after a Premium has been held by
Transamerica for seven Policy Years, the remaining Premium may be withdrawn
free of any Contingent Deferred Sales Load. (See "Charges and Deductions"
page 30.)
(2) Transamerica currently does not impose a Transfer Fee or a Systematic
Withdrawal Fee. However, a Transfer Fee of $10 may be imposed for each
transfer in excess of six in a Policy Year, and a fee of up to $25 per year
may be imposed if the Systematic Withdrawal Option is elected. (See
"Charges and Deductions" page 30.)
(3) The current annual Policy Fee is $30 (or 2% of the Policy Value, if less)
per Policy Year. The fee may be changed annually, but it may not exceed $60
(or 2% of the Policy Value, if less). (See "Charges and Deductions" page
30.)
(4) The current annual Administrative Expense Charge is .15%; it may be
increased to .25%. The total of the charges described in notes (2), (3) and
(4) will never exceed the anticipated or estimated costs to administer the
Policy and the Variable Account. (See "Charges and Deductions" page 30.)
(5) From time to time, the Portfolios' investment advisers (or the manager
and/or administrator in the case of the Stock Index Fund) in their sole
discretion may waive all or part of their fees and/or voluntarily assume
certain Portfolio expenses. For a more complete description of the
Portfolios' fees and expenses, see the Funds' prospectuses. As of the date
of this Prospectus, certain fees are being waived or expenses are being
assumed, in each case on a voluntary basis. Without such waivers or
reimbursements, the Management Fees, Other Expenses and Total Portfolio
Annual Expenses that would have been incurred for the last completed fiscal
year, December 31, 1994 for all Portfolios would be - Money Market: 0.50%,
0.38%, 0.88%; Managed Assets: 0.75%, 0.38%, 1.13%; Zero Coupon 2000: 0.45%,
0.60%, 1.05%; Quality Bond: 0.65%, 0.55%, 1.20%; Small Cap: 0.75%, 0.32%,
1.07%; Capital Appreciation: 0.75%, 0.36%, 1.11%; Growth and Income: 0.75%,
0.75%, 1.50%; International Equity: 0.75%, 1.18%, 1.93%; Stock Index Fund:
0.30%, 0.26%, 0.56%; and Socially Responsible Fund: 0.75%, 2.10%, 2.85%.
There is no guarantee that any fee waivers or expense reimbursements will
continue in the future. See the Funds' prospectuses for a discussion of fee
waiver and expense reimbursements.
11
<PAGE>
Examples*
The following six examples reflect the $30 Policy Fee as an annual charge
of 0.068% of assets based on an approximate average Policy Value of $44,000.
These examples all assume no Transfer Fees, systematic withdrawal fee or
premium tax have been assessed. Premium taxes may be applicable.
(See "Premium Taxes" page 32.)
Examples 1 through 3 show expenses based on fee waivers and reimbursements.
There is no guarantee that any fee waivers or expense reimbursements will
continue in the future.
Example 1
If the Owner surrenders the Policy at the end of the applicable time
period, he/she would pay the following expenses on a $1,000 Initial Premium
assuming a 5% annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $74.94 $91.42 $116.17 $175.54
Managed Assets $77.46 $99.13 $129.24 $202.82
Zero Coupon 2000 $74.94 $91.42 $116.17 $175.54
Quality Bond $74.94 $91.42 $116.17 $175.54
Small Cap $80.48 $108.30 $114.71 $234.61
Capital Appreciation $77.46 $99.13 $129.24 $202.82
Growth and Income $77.16 $98.21 $127.68 $199.58
International Equity $77.26 $98.52 $128.20 $200.66
Stock Index Fund $78.97 $103.72 $137.00 $218.84
Socially Responsible Fund $77.46 $99.13 $129.24 $202.82
Example 2
If the Owner does not surrender and does not annuitize the Policy, he/she
would pay the following expenses on a $1,000 Initial Premium assuming a 5%
annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $14.94 $46.42 $80.17 $175.54
Managed Assets $17.46 $54.13 $93.24 $202.82
Zero Coupon 2000 $14.94 $46.42 $80.17 $175.54
Quality Bond $14.94 $46.42 $80.17 $175.54
Small Cap $20.48 $63.30 $108.71 $234.61
Capital Appreciation $17.46 $54.13 $93.24 $202.82
Growth and Income $17.16 $53.21 $91.68 $199.58
International Equity $17.26 $53.52 $92.20 $200.66
Stock Index Fund $18.97 $58.72 $101.00 $218.84
Socially Responsible Fund $17.46 $54.13 $93.24 $202.82
12
<PAGE>
Example 3
If the Owner elects to annuitize at the end of the applicable period
under an Annuity Form with life contingencies,** he/she would pay the following
expenses on a $1,000 Initial Premium assuming a 5% annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $74.94 $46.42 $80.17 $175.54
Managed Assets $77.46 $54.13 $93.24 $202.82
Zero Coupon 2000 $74.94 $46.42 $80.17 $175.54
Quality Bond $74.94 $46.42 $80.17 $175.54
Small Cap $80.48 $63.30 $108.71 $234.61
Capital Appreciation $77.46 $54.16 $93.24 $202.82
Growth and Income $77.16 $53.21 $91.68 $199.58
International Equity $77.26 $53.52 $92.20 $200.66
Stock Index Fund $78.97 $58.72 $101.00 $218.84
Socially Responsible Fund $17.46 $54.13 $93.24 $202.82
Examples 4 through 6 show examples based on the fund fees and expenses which
would have been incurred for the last completed fiscal year, December 31, 1994,
for all Portfolios if no fee waivers and reimbursements had been in effect.
Example 4
If the Owner surrenders the Policy at the end of the applicable time
period, he/she would pay the following expenses on a $1,000 Initial Premium
assuming a 5% annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $83.79 $118.29 $161.44 $268.43
Managed Assets $86.29 $128.79 $173.94 $293.26
Zero Coupon 2000 $85.49 $123.40 $169.96 $285.38
Quality Bond $86.99 $127.88 $177.41 $300.09
Small Cap $85.69 $124.00 $170.95 $287.36
Capital Appreciation $86.09 $125.19 $172.94 $291.29
Growth and Income $89.98 $136.79 $192.13 $328.79
International Equity $94.25 $149.42 $212.85 $368.32
Stock Index Fund $80.58 $108.60 $145.22 $235.66
Socially Responsible Fund $103.33 $175.88 $255.62 $446.83
13
<PAGE>
Example 5
If the Owner does not surrender and does not annuitize the Policy,
he/she would pay the following expenses on a $1,000 Initial Premium assuming a
5% annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $23.79 $73.29 $125.44 $268.43
Managed Assets $26.29 $80.79 $137.94 $293.26
Zero Coupon 2000 $25.49 $78.40 $133.96 $285.38
Quality Bond $26.99 $82.88 $141.41 $300.09
Small Cap $25.69 $79.00 $134.95 $287.36
Capital Appreciation $26.09 $80.19 $136.94 $291.29
Growth and Income $29.98 $91.79 $156.13 $328.79
International Equity $34.25 $104.42 $176.85 $368.32
Stock Index Fund $20.58 $63.60 $109.22 $235.66
Socially Responsible Fund $43.33 $130.88 $219.62 $446.83
Example 6
If the Owner elects to annuitize at the end of the applicable period
under an Annuity Form with life contingencies,** he/she would pay the following
expenses on a $1,000 Initial Premium assuming a 5% annual return on assets:
One Year Three Years Five Years Ten Years
Money Market $83.79 $73.29 $125.44 $268.43
Managed Assets $86.29 $80.79 $137.94 $293.26
Zero Coupon 2000 $85.49 $78.40 $133.96 $285.38
Quality Bond $86.99 $82.88 $141.41 $300.09
Small Cap $85.69 $79.00 $134.95 $287.36
Capital Appreciation $86.09 $80.19 $136.94 $291.29
Growth and Income $89.98 $91.79 $156.13 $328.79
International Equity $94.25 $104.42 $176.85 $368.32
Stock Index Fund $80.58 $63.60 $109.22 $235.66
Socially Responsible Fund $103.33 $130.88 $219.62 $446.83
* In preparing the examples above, Transamerica has relied on the data
provided by the Funds. Transamerica has no reason to doubt the accuracy
of that information, but Transamerica has not verified those figures.
** For annuitization under a form that does not include life
contingencies, a Contingent Deferred Sales Load may apply.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER
OR LESS THAN THOSE SHOWN, SUBJECT TO THE GUARANTEES IN THE
POLICY.
14
<PAGE>
Annuity Payments
Annuity Payments will be made either on a fixed basis or a variable
basis or a combination of a fixed and variable basis as the Owner selects. The
Owner has flexibility in choosing the Annuity Date for his or her Policy. In no
event may the Annuity Date be later than the first day of the month immediately
preceding the month of the Annuitant's 85th birthday nor earlier than the first
day of the month coinciding with or immediately following the third Policy
Anniversary. Annuity Payments will begin on the first day of the calendar month
following the Annuity Date. (See "Annuity Payments" page 33.)
Four Annuity Forms are available under the Policy: (1) Life Annuity;
(2) Life and Contingent Annuity; (3) Life Annuity with Period Certain; and
(4) Joint and Survivor Annuity. (See "Annuity Forms" page 34.)
Payments on Death Before the Annuity Date
The death benefit for a Policy is the greater of (a) the Policy Value,
or (b) the sum of all Premiums paid to the Policy, less the sum of all
withdrawals and any applicable premium taxes. It is paid on the death of either
the Owner or Annuitant prior to the Annuity Date. The death benefit will
generally be paid within seven days of receipt of the required Proof of Death of
the Owner or the Annuitant and election of the method of settlement or as soon
thereafter as Transamerica has sufficient information about the Beneficiary to
make the payment, but if no settlement method is elected the death benefit will
be paid no later than one year from the date of death. No Contingent Deferred
Sales Load is imposed. The death benefit may be paid as either a lump sum or as
an annuity.
(See "Death Benefit" page 28.)
Federal Income Tax Consequences
An Owner who is a natural person generally should not be taxed on
increases in the Policy Value until a distribution under the Policy occurs
(e.g., a withdrawal or Annuity Payment) or is deemed to occur (e.g., a pledge,
loan, or assignment of a Policy). 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. In addition, a federal penalty tax may apply to
certain distributions or deemed distributions. (See "Federal Tax Matters" page
36.) Right to Cancel
The Owner has the right to examine the Policy for a limited period,
known as a "Free Look Period." The Initial Premium will be held in the Money
Market Sub- Account for fifteen calendar days after the Policy Date. The Owner
can cancel the Policy by delivering or mailing a written notice or by sending a
telegram to the Service Center and by returning the Policy before midnight of
the tenth day (or longer if required under New York law) after receipt of the
Policy. Notice given by mail and the return of the Policy by mail, properly
addressed and postage prepaid, will be deemed by Transamerica to have been made
on the date postmarked. Transamerica will refund the greater of the Premiums
paid or the Policy Value as of the date the Written Notice is postmarked. (See
"Policy Value" page 24.) Questions
Any questions about procedures or the Policy will be answered by the
Transamerica Annuity Service Center ("Service Center"), P.O. Box 30757, Los
Angeles, CA 90030-0757; (800) 258-4261. All inquiries should include the Policy
Number and the Owner's and Annuitant's names.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this Prospectus and in the prospectuses
for Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund, and The Dreyfus
Socially Responsible Growth Fund, Inc. which should be referred to for more
detailed information. With respect to Qualified Policies, it should be noted
that the requirements of a particular retirement plan, an endorsement to the
Policy, or limitations or penalties imposed by the Code or the Employee
Retirement Income Security Act of 1974, as amended,may impose limits or
restrictions on Premiums, Withdrawals, distributions, or
15
<PAGE>
benefits, or on other provisions of the Policy. This Prospectus does not
describe such limitations or restrictions. (See "Federal Tax Matters" page 36.)
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the
financial statements of the Variable Account. The data should be read in
conjunction with the financial statements, related notes, and other financial
information included in the Statement of Additional Information.
The following table sets forth certain information regarding the
Sub-Accounts for a Policy for the period from the effective date of the
registration statement for the Policy, February 18, 1993, through December 31,
1994 except for the Capital Appreciation Sub-Account which commenced operations
on April 5, 1993, and except for the Socially Responsible Sub-Account which
commenced operations on October 7, 1993.
The Variable Accumulation Unit values and the number of Variable
Accumulation Units outstanding for each Sub-Account for the periods shown are as
follows:
<TABLE>
<CAPTION>
Year Ending December 31, 1993
-----------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value
at Beginning of Period $1.021 $12.797 $13.225 $12.310 $39.620
Accumulation Unit Value
at End of Period.. $1.018 $12.861 $13.373 $12.445 $37.702
Number of Accumulation
Units Outstanding
at End of Period.. 2,678,280.492 167,686.797 137,252.898 86,752.856 138,557.449
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Socially Responsible
Sub-Account Sub-Account
(Inception- (Inception-
April 5, Stock Index October 7,
1993) Sub-Account 1993)
----- ----------- -----
<S> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period..... $6.590 $16.590 $12.490
Accumulation Unit Value at
End of Period........... $13.160 $16.521 $13.364
Number of Accumulation Units
Outstanding at End of Period 44,612.892 32,543.274 3,555.254
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Year Ending December 30, 1994
---------------------------------------------------------------------------------
Money Managed Zero Coupon Quality
Market Assets 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value
at Beginning of Period $1.018 $12.861 $13.373 $12.445 $37.702
Accumulation Unit Value
at End of Period.. $1.048 $12.496 $12.672 $11.710 $40.064
Number of Accumulation
Units Outstanding
at End of Period.. 8,547,280.580 820,985.239 203,164.531 164,657.768 612,327.228
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Stock Index Socially Responsible
Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C>
Accumulation Unit Value
at Beginning of Period $13.160 $16.521 $13.364
Accumulation Unit Value
at End of Period..... $13.373 $16.437 $13.377
Number of Accumulation
Units Outstanding
at End of Period..... 285,264.827 190,496.641 24,435.402
</TABLE>
Financial Statements for the Variable Account and Transamerica
The financial statements and reports of the independent certified
public accountants for the Variable Account and Transamerica are contained in
the Statement of Additional Information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average
annual total returns for the Sub-Accounts of the Variable Account. In addition,
Transamerica may advertise the effective yield of the Money Market Sub-Account.
These figures will be based on historical information and are not intended to
indicate future performance.
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in that
Sub-Account is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Sub-Account (other than the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Sub-Account
over a specified thirty-day period. The yield is calculated by assuming that the
income generated by the investment during that thirty-day period is generated
each thirty-day period over a twelve-month period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any Contingent
Deferred Sales Load or premium taxes that may be applicable to a particular
Policy. To the extent that the Contingent Deferred Sales Load is applicable to a
particular Policy, the yield of that Policy will be reduced. For additional
information regarding yields and total returns calculated using the standard
formats briefly described herein, please refer to the Statement of Additional
Information.
17
<PAGE>
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for various
periods of time including, but not limited to, a period measured from the date
the Sub-Account commenced operations. When a Sub-Account has been in operation
for 1, 5, and 10 years, respectively, the average annual total return for these
periods will be provided. The average annual total return quotations will
represent the average annual compounded rates of return that would equate an
initial investment of $1,000 to the redemption value of that investment
(including the deduction of any applicable Contingent Deferred Sales Load but
excluding the deduction of any premium taxes) as of the last day of each of the
periods for which total return quotations are provided.
Performance information for any Sub-Account reflects only the
performance of a hypothetical Policy under which Policy Value is allocated to a
Sub-Account during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies and characteristics of the Portfolios in which the
Sub-Account invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and total
returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any Sub-Account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report, Financial
Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and Poor's
Indices, Dow Jones Industrial Average, and other rating services, companies,
publications, or other persons who rank separate accounts or other investment
products on overall performance or other criteria, and (2) the effect of tax
deferred compounding on Sub-Account investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may include
a comparison, at various points in time, of the return from an investment in a
Policy (or returns in general) on a tax-deferred basis (assuming one or more tax
rates) with the return on a currently taxable basis. Other ranking services and
indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the Policy, the effects of the Policy's lifetime payout
option, and the operation of certain special investment features of the Policy
- -- such as the Dollar Cost Averaging option. Transamerica may explain and depict
in charts, or other graphics, the effects of certain investment strategies.
Transamerica may also discuss the Social Security system and its projected
payout levels, using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the Sub-Accounts. The non-standard average annual total return and cumulative
total return will assume that no Contingent Deferred Sales Load is applicable.
Transamerica may from time to time also disclose yield, standard total returns,
and non-standard total returns for any or all Sub-Accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the
Sub-Accounts based on the performance of a Portfolio prior to the time the
Variable Account commenced operations.
18
<PAGE>
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
First Transamerica Life Insurance Company
First Transamerica Life Insurance Company ("Transamerica") is a stock life
insurance company incorporated under the laws of the State of New York on
February 5, 1986. It is principally engaged in the sale of life insurance and
annuity policies. Transamerica is a wholly-owned subsidiary of Transamerica
Occidental Life Insurance Company, which in turn is an indirect subsidiary of
Transamerica Corporation. The address for First Transamerica Life is 575 Fifth
Avenue, Thirty-Sixth Floor, New York, New York 10017-2422.
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, and Duff & Phelps. The purpose of the ratings is to reflect
the financial strength and/or claims-paying ability of Transamerica and should
not be considered as bearing on the investment performance of assets held in the
Variable Account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of
Transamerica as measured by Standard & Poor's Insurance Ratings Services or Duff
& Phelps may be referred to in advertisements or sales literature or in reports
to Owners. These ratings are opinions of an operating insurance company's
financial capacity to meet the obligations of its insurance and annuity policies
in accordance with their terms. Such ratings do not reflect the investment
performance of the Variable Account or the degree of risk associated with an
investment in the Variable Account. The Variable Account
Separate Account VA-2LNY of Transamerica (the Variable Account) was
established by Transamerica as a separate account under the laws of the State of
New York on June 23, 1992 pursuant to resolutions of Transamerica's Board of
Directors. The Variable Account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the Variable Account.
The assets of the Variable Account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 4240 of the
New York 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) if and to the
extent so provided in the applicable agreements, and the Policies contain such a
provision. Income, gains and losses incurred on the assets in the Variable
Account, whether or not realized, are credited to or charged against the
Variable Account without regard to other income, gains or losses of
Transamerica. Therefore, the investment performance of the Variable Account is
entirely independent of the investment performance of Transamerica's general
account assets or any other separate account maintained by Transamerica.
The Variable Account has ten Sub-Accounts, each of which invests solely in a
specific corresponding Portfolio. (See "The Funds" page 19.) Changes to the
Sub-Accounts may be made at the discretion of Transamerica.
(See "Addition, Deletion, or Substitution" page 22.)
THE FUNDS
The Variable Account invests exclusively in Dreyfus Variable Investment Fund
(the "Variable Fund"), Dreyfus Stock Index Fund (the "Stock Index Fund") and The
19
<PAGE>
Dreyfus Socially Responsible Growth Fund, Inc. (the "Socially Responsible
Fund"). The Variable Fund was organized as an unincorporated business trust
under Massachusetts law pursuant to an Agreement and Declaration of Trust dated
October 29, 1986, commenced operations on August 31, 1990, and is registered
with the Commission as an open-end management investment company under the 1940
Act. Currently, eight Series (i.e., portfolios) of the Variable Fund are
available for the Policies. Each Series has separate investment objectives and
policies. As a result, each Series operates as a separate investment portfolio
and the investment performance of one Series has no effect on the investment
performance of any other Series. The Stock Index Fund was incorporated under
Maryland law on January 24, 1989, commenced operations on September 29, 1989,
and is registered with the Commission as an open-end, non-diversified,
management investment company. The Socially Responsible Fund was incorporated
under Maryland law on July 20, 1992, commenced operations on August 31, 1993,
and is registered with the Commission as an open-end, diversified, management
investment company. However, the Commission does not supervise the management or
the investment practices and policies of any of the Funds. The assets of the
Variable Fund, the Socially Responsible Fund and the Stock Index Fund are each
separate from the assets of the other Funds.
The Dreyfus Corporation provides investment advisory and administrative
services to the Variable Fund and the Socially Responsible Fund, and Wells Fargo
NIKKO Investment Advisors provides index fund management services to the Index
Fund, with The Dreyfus Corporation serving as the administrator, in accordance
with applicable agreements with the Funds. Comstock Partners, Inc., provides
sub-investment advisory services to the Asset Allocation Series and Fayez
Sarofim & Company provides sub-investment advisory services to the Capital
Appreciation Series. NCM Capital Management Group, Inc. provides sub-investment
advisory services for the Socially Responsible Fund.
The Portfolios are described below. See the Variable Fund, the Stock Index
Fund and the Socially Responsible Fund prospectuses for more information.
Money Market Series
The Money Market Series' investment objective is to achieve as high a
level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. It seeks to achieve its objective by investing in
short-term money market instruments. The investment advisory fee is payable
monthly at the annual rate of 0.50 of 1% of the value of the Series' average
daily net assets. This Series is neither insured nor guaranteed by the United
States Government and there can be no assurance that it will be able to maintain
a stable net asset value of $1.00 per share. Managed Assets Series
The Managed Asset Series' investment objective is to maximize total
return, consisting of capital appreciation and current income. It seeks to
achieve its objective by investing in a wide range of equity and debt securities
and money market instruments. An investment advisory fee is payable monthly to
The Dreyfus Corporation, and a sub-investment advisory fee is payable monthly to
Comstock Partners, Inc., each at the annual rate of 0.375 of 1% (for a total of
0.75%) of the value of the Series' average daily net assets. Zero Coupon 2000
Series
The Zero Coupon 2000 Series' investment objective is to provide as
high an investment return as is consistent with the preservation of capital. It
seeks to achieve its objective by investing primarily in debt obligations of the
U.S. Treasury that have been stripped of their unmatured interest coupons,
interest coupons that have been stripped from debt obligations issued by the
U.S. Treasury and receipts and certificates for stripped debt obligations and
stripped coupons, including U.S. Government trust certificates (collectively,
"Stripped Treasury Securities"). The Series also may purchase certain other
types of stripped government or corporate securities. The Series' assets will
consist primarily of portfolio securities which will mature on or about December
31, 2000. The investment advisory fee is payable monthly at the annual rate of
0.45 of 1%
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of the value of the Series' average daily net assets. No more than 55% of the
Series' assets will be invested in Stripped Treasury Securities.
Quality Bond Series
The Quality Bond Series' investment objective is to provide the maximum
amount of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. It seeks to achieve its objective by
investing principally in debt obligations of corporations, the U.S. Government
and its agencies and instrumentalities, and major banking institutions. The
investment advisory fee is payable monthly at the annual rate of 0.65 of 1% of
the value of the Series' average daily net assets.
Small Cap Series
The Small Cap Series' investment objective is to maximize capital
appreciation. It seeks to achieve its objective by investing principally in
common stocks;under normal market conditions, the Series will invest at least
65% of its total assets in companies with market capitalizations of less than
$750 million at the time of purchase which The Dreyfus Corporation believes to
be characterized by new or innovative products, services or processes which
should enhance prospects for growth in the future earnings. The investment
advisory fee is payable monthly at the annual rate of 0.75 of 1% of the value of
the Series' average daily net assets. Capital Appreciation Series
The Capital Appreciation Series' primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary goal. It seeks to achieve its goals by investing
in common stocks of domestic and foreign issuers. An investment advisory fee is
payable to The Dreyfus Corporation and a sub-investment advisory fee is payable
monthly to Fayez Sarofim & Company at the annual rate of 0.75 of 1% of the value
of the Series' average daily net assets. Growth and Income Series
The Growth and Income Series' investment objective is to provide
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. This Series invests primarily in equity and debt
securities and money market instruments of domestic and foreign issuers. The
proportion of the Series' assets invested in each type of security will vary
from time to time in accordance with The Dreyfus Corporation's assessment of
economic conditions and investment opportunities. An investment advisory fee is
payable monthly to The Dreyfus Corporation at the annual rate of 0.75 of 1% of
the value of the Series' average daily net assets. International Equity
The International Equity Series' investment objective is to maximize
capital appreciation. This Series invests primarily in the equity securities of
foreign issuers located throughout the world. An investment advisory fee at an
annual rate of 0.75 of 1% of the value of the Series' average daily net assets
is payable monthly to The Dreyfus Corporation. The Dreyfus Corporation has
agreed to pay M&G Investment Management Limited a monthly fee at the annual rate
of 0.30 of 1% of the value of the Series' average daily net assets. Stock Index
Fund
The Stock Index Fund's investment objective is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. The Stock Index Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation. The Stock Index Fund's index
management fee and administration fee are each paid monthly at the annual rate
of 0.15 of 1% (for a total of 0.30%) of the value of the Stock Index Fund's
average daily net assets. Socially Responsible Fund
The Socially Responsible Fund's primary goal is to provide capital
growth. It seeks to achieve this goal by investing principally in common stocks,
or securities convertible into common stock, of companies which, in the opinion
of the Fund's management, not only meet traditional investment standards, but
also show evidence that they conduct their business in a manner that contributes
to the enhancement of the quality
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of life in America. Current income is a secondary goal. A management fee is
payable monthly to The Dreyfus Corporation at the annual rate of 0.75 of 1% of
the value of the Socially Responsible Fund's average daily net assets. The
Dreyfus Corporation pays NCM Capital Management Group, Inc. a sub-investment
advisory fee at the annual rate of .10 of 1%, if assets of the Socially
Responsible Fund are $500 million or below, and .20% of 1% if such assets are in
excess of $500 million.
Meeting objectives depends on various factors, including, but not
limited to, how well the portfolio managers anticipate changing economic and
market conditions. THERE IS NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL
ACHIEVE THEIR STATED OBJECTIVES.
An investment in the Policy is not a deposit or obligation of, or
guaranteed or endorsed by, any bank, nor is the Policy federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in the Policy involves certain investment risks,
including possible loss of principal.
Since all of the Portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the Variable Account and one or more
other separate accounts investing in the Funds. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate account from investing in
the Funds. See the Funds' prospectuses for more details.
Additional information concerning the investment objectives and
policies of all of the Portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the Funds which accompany this Prospectus. The Funds' prospectuses should be
read carefully before any decision is made concerning the allocation of Premiums
to, or transfers among, the Sub-Accounts. Addition, Deletion, or Substitution
Transamerica does not control the Funds and cannot guarantee that any
of the Sub-Accounts of the Variable Account or any of the Portfolios will always
be available for allocation of Premiums or transfers. Transamerica retains the
right to make changes in the Variable Account and in its investments.
Subject to the approval of the New York Insurance Department,
Transamerica reserves the right to eliminate the shares of any Portfolio held by
a Sub-Account, and to substitute shares of another Portfolio or of another
investment company for the shares of any Portfolio, if the shares of the
Portfolio are no longer available for investment or if, in Transamerica's
judgement, investment in any Portfolio would be inappropriate in view of the
purposes of the Variable Account. To the extent required by the 1940 Act, a
substitution of shares attributable to the Owner's interest in a Sub-Account
will not be made without prior notice to the Owner and the prior approval of the
Commission. Nothing contained herein shall prevent the Variable Account from
purchasing other securities for other series or classes of variable annuity
policies, or from effecting an exchange between series or classes of variable
policies on the basis of requests made by Owners.
New Sub-Accounts may be established when, in the sole discretion of
Transamerica, marketing, tax, investment or other conditions so warrant. Any new
Sub-Accounts will be made available to existing Owners on a basis to be
determined by Transamerica. Each additional Sub-Account will purchase shares in
a Portfolio or in another mutual fund or investment vehicle. Transamerica may
also eliminate one or more Sub-Accounts if, in its sole discretion, marketing,
tax, investment or other conditions so warrant. In the event any Sub-Account is
eliminated, Transamerica will notify Owners and request a re-allocation of the
amounts invested in the eliminated Sub-Account.
In the event of any substitution or change, Transamerica may make such
changes in the Policies as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the Policies, the Variable Account may be
operated as a management company under the
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1940 Act or any other form permitted by law, may be deregistered under such Act
in the event such registration is no longer required, or may be combined with
one or more other separate accounts.
THE POLICY
The Policy is a Flexible Premium Multi-Funded Individual Deferred
Annuity Policy. The rights and benefits under the Policy are described below and
in the Policy; however, Transamerica reserves the right to make any modification
to conform the Policy to, or give the Policy Owner the benefit of, any federal
or state statute or rule or regulation. The obligations under the Policy are
obligations of Transamerica.
The Policies are available on a non-qualified basis and as individual
retirement annuities (IRAs) that qualify for special federal income tax
treatment. Generally, Qualified Policies may be purchased only in connection
with a 'rollover" of funds from another qualified plan or IRA and contain
certain restrictive provisions limiting the timing and amount of payments and
distributions from the Qualified Policy. Qualified Policies
The Policies may be used to fund IRA rollovers for use in connection
with Section 408(b) of the Code. If a Policy is purchased to fund an IRA, the
Annuitant must also be the Owner. In addition, if a Policy is purchased to fund
an IRA, minimum distributions must commence not later than April 1st of the
calendar year following the calendar year in which the Owner attains age 70 1/2.
The Owner should consult his/her tax adviser concerning these matters. The only
type of qualified plan that Policies are available to fund is an IRA rollover.
An IRA rollover is a rollover of certain kinds of distributions from
qualified plans, Section 403(b) tax sheltered annuities and individual
retirement plans, following the rules set out in the Code to maintain favorable
tax treatment to an Individual Retirement Annuity.
POLICY APPLICATION AND PREMIUMS
Premiums
All Premiums must be paid to the Service Center. A confirmation will
be issued to the Owner upon the acceptance of each Premium.
The Initial Premium for each Policy must be at least $5,000. The Policy
will be issued and the Net Premium derived from the Initial Premium
generally will be accepted and credited within two business days after the
receipt of a properly completed application and receipt of the Initial Premium
at the Service Center. (A Net Premium is the Premium less any applicable premium
taxes, including retaliatory premium taxes, should such taxes be levied in the
future in New York or should the Owner live in a state with such taxes in the
future.) Acceptance is subject to the application being received in good order,
and Transamerica reserves the right to reject any application.
If the Initial Premium cannot be credited within two days of receipt of
the Premium and application because the application is incomplete or for any
other reason, then Transamerica will contact the Owner, explain the reason for
the delay and will refund the Initial Premium within five business days, unless
the Owner consents to Transamerica retaining the Initial Premium and crediting
it as soon as the requirements are fulfilled.
Each Policy provides for a Free Look Period of 10 days (or longer if
required under New York law) after receipt of the Policy during which the Owner
may cancel the Policy. To cancel, the Policy must be returned to Transamerica
with a written Notice of Cancellation. Then the Owner will be reimbursed the
greater of the premiums paid under the Policy or the Policy Value as of the date
the Notice is postmarked.
Additional Premiums may be made at any time prior to the Annuity Date,
as long as the Annuitant or Contingent Annuitant is living. Additional Premiums
must be at least $500, or at least $100 if made pursuant to an automatic payment
plan, under which the Additional Premiums is automatically deducted from a bank
account. In addition, minimum allocation amounts apply (see "Allocation of
Premiums" on page 24).
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Additional Net Premiums are credited to the Policy as of the date the payment is
received.
Total Premiums for any Policy may not exceed $1,000,000 without prior
approval of Transamerica.
In no event may the sum of all Premiums for a Policy during any taxable
year exceed the limits imposed by any applicable federal or state laws, rules,
or regulations.
Allocation of Premiums
The Owner specifies in the application how Premiums will be allocated
under the Policy. The Owner may allocate the Net Premium to one or more of the
Sub-Accounts as long as the portions are whole number percentages and any
allocation percentage for a Sub-Account is at least 10%. In addition, the
Initial Premium is subject to a minimum allocation of $1,000 to any selected
Sub-Account. The Owner may choose to allocate nothing to a particular
Sub-Account.
On the Policy Date, the Net Premium derived from the Initial Premium
will first be allocated to the Money Market Sub-Account of the Variable Account
and will remain in that Sub-Account for fifteen calendar days after the Policy
Date. At that time, the dollar value of the Accumulation Units held in the Money
Market sub-Account attributable to such net Premium will be allocated among the
Sub-Accounts of the Variable Account in accordance with the allocation
percentages selected by the Owner in the application.
Each Net Premium will be subject to the allocation percentages in
effect at the time of receipt of such Premium. The allocation percentages for
new Premiums among the Sub-Accounts may be changed by the Owner at any time by
submitting a request for such change to the Service Center in a form and manner
acceptable to Transamerica. Any changes to the allocation percentages are
subject to the limitation above. Any change will take effect with the first
Premium received with or after receipt of request for such change by the Service
Center, in a form and manner acceptable to Transamerica, and will continue in
effect until subsequently changed.
If the allocation of additional Net Premiums is directed to an Inactive
Sub-Account of the Variable Account, then the amount allocated must be at least
$1,000.
POLICY VALUE
Before the Annuity Date, the Policy Value is the total dollar amount
of all Variable Accumulation Units in each Sub-Account credited to a Policy. The
Policy Value is equal to: (a) Net Premiums; plus or minus (b) any increase or
decrease in the value 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) the annual Policy Fees (taken at the end of each Policy
Year); less (f) any Transfer Fees; and less (g) any withdrawals from the
Sub-Accounts.
A Valuation Period is the period between successive Valuation Days. It
begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on
each Valuation Day and ends at the close of the New York Stock Exchange on the
next succeeding Valuation Day. A Valuation Day is each day that the New York
Stock Exchange is open for regular business. The value of the Variable Account
assets is determined at the end of each Valuation Day. To determine the value of
an asset on a day that is not a Valuation Day, the value of that asset as of the
end of the next Valuation Day will be used.
The Policy Value is expected to change from Valuation Period to
Valuation Period, reflecting the investment experience of all of the selected
Portfolios as well as the deductions for charges.
Net Premiums which the Owner allocates to a Sub-Account of the Variable
Account are used to purchase Variable Accumulation Units in that Sub-Account.
The number of Variable Accumulation Units to be credited for each Sub-Account
will be determined by dividing the portion of each Net Premium allocated to the
Sub-Account by the Variable Accumulation Unit Value determined at the end of the
Valuation Period during which the Net Premium was received. In the case of the
Initial Net Premium,
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Variable Accumulation Units for that payment will be credited to the Policy
Value (and held in the Money Market Sub-Account for fifteen calendar days after
the Policy Date) within two Valuation Days of the later of: (a) the date an
acceptable and properly completed application is received at our Service Center;
or (b) the date our Service Center receives the Initial Premium. In the case of
any subsequent Premium, Variable Accumulation Units for that payment will be
credited at the end of the Valuation Period during which Transamerica receives
the payment. The value of a Variable Accumulation Unit for each Sub-Account for
a Valuation Period is established at the end of each Valuation Period and is
calculated by multiplying the value of that unit at the end of the prior
Valuation Period by the Sub-Account's Net Investment Factor for the Valuation
Period. The value of a Variable Accumulation Unit may go up or down.
The Net Investment Factor is used to determine the value of
Accumulation and Annuity Unit Values for the end of a Valuation Period. The
applicable formula can be found in the Statement of Additional Information.
Transfers among the Sub-Accounts will result in the purchase and/or
cancellation of Variable Accumulation Units having a total value equal to the
dollar amount being transferred to or from a particular Sub-Account. The
purchase and cancellation of such units generally are made using the Variable
Accumulation Unit value of the applicable Sub-Accounts as of the end of the
Valuation Day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the Annuity Date, the Owner may transfer all or part of the
Policy Value among the Variable Sub-Account(s) by giving a Written Request to
the Service Center subject to the following conditions: (1) not more than 18
transfers may be made in any Policy Year; (2) the minimum amount which may be
transferred is $500; and (3) the minimum transfer to an Inactive Sub-Account is
$1,000. Transfers are also subject to such terms and conditions as may be
imposed by the Funds.
Transfer requests must specify the amounts being transferred from each
Sub-Account and the amounts being transferred into each Sub-Account.
Currently, there is no charge for transfers. However, Transamerica
reserves the right to impose a charge of the lesser of 2% of the amount
transferred or $10 for each transfer after six in any Policy Year. All requests
received during a single Valuation Period will be treated as a single transfer.
A transfer generally will be effective on the date the request for transfer is
received by the Service Center.
If a transfer reduces the value in a Sub-Account to less than $1,000, then
Transamerica reserves the right to transfer the remaining amount along with the
amount requested to be transferred in accordance with the transfer instructions
provided by the Owner. Under current law, there will not be any tax liability
to the Owner if the Ownermakes a transfer.
Possible Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect Owners from adverse impacts on portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant Sub-Account values from one
Sub-Account to another may prevent the underlying Portfolio from taking
advantage of investment opportunities because the Portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in Portfolio transaction costs which must be
indirectly borne by Owners. Therefore, Transamerica reserves the right to
require that all transfer requests be made by the Owner and not by a third party
holding a power of attorney and to require that each transfer request be made by
a separate communication to Transamerica. Transamerica also reserves the right
to request that each transfer request be submitted in writing and be manually
signed by the Owner or Owners; facsimile transfer requests may not be allowed.
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Dollar Cost Averaging
Prior to the Annuity Date, the Owner may automatically transfer
amounts from either (but not both) of the Sub-Accounts which invest in the Money
Market or Quality Bond Portfolios to any of the other Sub-Accounts on a monthly
basis by giving Written Notice to the Service Center. The transfers will begin
on the tenth day of the next month following receipt of Written Notice, provided
that Dollar Cost Averaging transfers will not commence until the later of (a) 30
days after the Policy Date, or (b) five days after the end of the Free Look
Period. Transfers will continue for twelve consecutive months unless terminated
by the Owner, or automatically terminated by Transamerica because there are
insufficient funds in the applicable Sub-Account, or for other reasons as set
forth in the Policy. The Owner may request that monthly transfers be continued
for an additional twelve months by giving Written Notice to the Service Center
within 30 days prior to the last monthly transfer. If no written request to
continue the monthly transfers is made by the Owner, this option will terminate
automatically with the twelfth transfer.
In order to be eligible for Dollar Cost Averaging, the Owner must meet
the following conditions: (1) the value of the selected Sub-Account (from which
the transfers are made) must be at least $5,000; (2) the minimum amount that can
be transferred out of the selected Sub-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.
Transfers due to Dollar Cost Averaging will not count toward the number of
transfers without charge nor the limit of 18 transfers per Policy Year.
After the Annuity Date
If a Variable Annuity Payout Option is elected, the Owner may
transfer Variable Account amounts after the Annuity Date by submitting a request
to the Service Center, in a form and manner acceptable to Transamerica, subject
to the following provisions: (1) transfers after the Annuity Date may be made no
more than four times during any Annuity Year; and (2) the minimum amount
transferred from one Sub-Account to another is the amount supporting a current
$75 monthly payment.
Transfers among Sub-Accounts during the Annuity Period will be
processed based on the formula outlined in the Statement of Additional
Information.
CASH WITHDRAWALS
Withdrawals
The Owner may withdraw all or part of the Cash Surrender Value for a
Policy at any time during the life of the Annuitant and prior to the Annuity
Date by giving a written request to the Service Center and subject to the rules
below. Federal or state laws, rules or regulations may also apply. The amount
payable to the Owner if the Policy is surrendered on or before the Annuity Date
is the Cash Surrender Value which is equal to the Policy Value, less the Policy
Fee, less any applicable Contingent Deferred Sales Load and less any applicable
premium taxes.
No withdrawals may be made after the Annuity Date. No partial
withdrawals will be permitted while the Systematic Withdrawal Option is in
effect. Partial withdrawals must be at least $500.
A full surrender will result in a cash withdrawal payment equal to the
Cash Surrender Value at the end of the Valuation Period during which the request
is received along with all completed forms. Any applicable Contingent Deferred
Sales Load will be deducted from the amount paid.
In the case of a partial withdrawal, the Owner may instruct the Service
Center as to the amounts to be withdrawn from each Sub-Account. If the Owner
does not specify the Sub-Account(s) from which the withdrawal is to be made, the
withdrawal will be taken pro rata from all Sub-Accounts with current values. If
the requested withdrawal reduces the value of the Sub-Account from which the
withdrawal was made to less than $1,000, Transamerica reserves the right to
transfer the remaining value of that Sub-Account pro rata among the other Active
Sub-Accounts with values equal to or
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greater than $1,000. If no such Sub-Accounts exist, such transfer will be made
to the Money Market Sub-Account. The Owner will be notified in writing of any
such transfer.
A partial withdrawal will not be processed if it would reduce the
Policy Value to less than $2,000. In that case, the Owner will be notified that
he or she will have 10 days from the date notice is mailed to: (a) withdraw a
lesser amount (subject to the $500 minimum), leaving a Policy Value of at least
$2,000; or (b) surrender the Policy for its Cash Surrender Value. (Amounts
payable will be determined as of the end of the Valuation Period during which
the subsequent instructions are received.) If, after the expiration of the
10-day period, no written election is received from the Owner, the withdrawal
request will be considered null and void, and no withdrawal will be processed.
The Policy Fee will be deducted from a full surrender before the
application of any Contingent Deferred Sales Load (see "Charges and Deductions"
page 30). Withdrawals will be allocated on a first-in, first-out basis from
Premiums, and then from earnings (for purposes of calculating the Contingent
Deferred Sales Load).
Withdrawals may be taxable transactions. The Code requires Transamerica
to withhold federal income tax from withdrawals. However, generally an Owner
will be entitled to elect, in writing, not to have tax withholding apply.
Withholding applies to the portion of the withdrawal which is includible in
income and subject to federal income tax. The federal income tax withholding
rate is 10% of the taxable amount of the withdrawal. Withholding applies only if
the taxable amount of the withdrawal is at least $ 200. In addition, under New
York law the Owner may request Transamerica to withhold New York income tax from
withdrawals. Moreover, the Code provides that a 10% penalty tax may be imposed
on the taxable portions of distributions for certain early withdrawals.
(See "Federal Tax Matters" page 36.)
Withdrawal (including surrender) requests generally will be processed
as of the end of the Valuation Period during which the request, including all
completed forms, is received. Payment of any cash withdrawal or lump sum death
benefit due from the Variable Account will occur within seven days from the date
the request is received, except that Transamerica may postpone such payment if:
(1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted; or (2) an
emergency exists as defined by the Commission, or the Commission requires that
trading be restricted; or (3) the Commission permits a delay for the protection
of Owners. The withdrawal request will be effective when all appropriate
withdrawal request forms are received. Payments of any amounts derived from
Premiums paid by check may be delayed until the check has cleared the Owner's
bank.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN
WITHDRAWALS ARE SUBJECT TO A CONTINGENT DEFERRED SALES LOAD, THE TOTAL AMOUNT
PAID UPON SURRENDER OF THE POLICY (TAKING INTO ACCOUNT ANY PRIOR WITHDRAWALS)
MAY BE MORE OR LESS THAN THE TOTAL PREMIUMS PAID.
After a withdrawal of the total Cash Surrender Value, or at any time
that the Policy Value is zero, all rights of the Owner will terminate.
Since the Qualified Policies offered by the Prospectus will be issued
in connection with retirement plans which meet the requirements of Section
408(b) of the Code, reference should be made to the terms of the particular
retirement plans for any additional limitations or restrictions on cash
withdrawals.
An Owner may elect, under the Systematic Withdrawal Option or Automatic
Payout Option (but not both), to withdraw certain amounts on a periodic basis
from the Sub-Accounts prior to the Annuity Date.
Systematic Withdrawal Option
Prior to the Annuity Date, the Owner, by giving Written Notice to the
Service Center, may elect to make automatic monthly withdrawals from the
Variable Account. The withdrawals will commence on the fourth day of the month
following receipt of Written Notice, except that they will not commence sooner
than thirty days after the issue
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date of the Policy. The withdrawals will continue unless terminated by the Owner
or automatically terminated by Transamerica as set forth in the Policy.
Systematic Withdrawals will not count toward the one withdrawal per
Policy Year limit, and will not be subject to the Contingent Deferred Sales
Load.
To be eligible for the Systematic Withdrawal Option, the Policy Value
must be at least $15,000 at the time of election. The minimum monthly amount
that can be withdrawn is $125. The maximum amount that can be withdrawn on an
annual basis is equal to the sum, as of the date of the first withdrawal, of (a)
10% of Premiums that are less than seven Policy Years old and (b) 10% of
remaining Premiums that are at least seven Policy Years old.
Transamerica reserves the right to impose an annual fee of an amount
not to exceed $25 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 Policy Year.
While the Systematic Withdrawal Option is in effect, the Owner may not
make partial cash withdrawals.
Systematic withdrawals may be taxable, subject to withholding, and
subject to the 10% penalty tax. (See "Federal Tax Matters" page 36.)
Automatic Payout Option ("APO")
Prior to the Annuity Date, for Qualified Policies, the Owner may
elect the Automatic Payout Option (APO) to satisfy minimum distribution
requirements under Section 408(b)(3) of the Code. This may be elected no earlier
than six months prior to the calendar year in which the Owner attains age 70
1/2, but payments may not begin earlier than January of such calendar year.
Payments will be made on the seventh day of the month, and will
continue unless terminated by the Owner or automatically terminated by
Transamerica as set forth in the Policy.
APO may be elected in any calendar month, but no later than the month
in which the Owner attains age 84.
If only APO withdrawals are made, no Contingent Deferred Sales Load
will apply, regardless of the 10% free withdrawal limit. In addition, APO
withdrawals do not count toward the one withdrawal per Policy Year limit.
However, if a partial withdrawal is taken, a Contingent Deferred Sales Load will
be applied to both the APO and partial withdrawals above the free withdrawal
amount. (See "Contingent Deferred Sales Load" page 30.)
To be eligible for this option, the following conditions must be met:
(1) the Policy Value must be at least $15,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Section 408(b)(3) or $500; and (3) the minimum amount per payment (if
not annual) must be at least $150.
APO allows the required minimum distribution to be paid in equal
installments, either monthly, quarterly, or annually, from 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 Policy, this option will terminate.
DEATH BENEFIT
If the Owner or Annuitant dies before the Annuity Date, a benefit is
payable. The death benefit for each Policy will be equal to the larger of (1)
the sum of the Premiums, less withdrawals and less premium or similar taxes as
of the Annuitant's or Owner's date of death, or (2) the Policy Value as of the
end of the Valuation Period during which the later of (a) Proof of Death of the
Owner or Annuitant is received by the Service Center and (b) a Written Notice of
the method of settlement elected by the Beneficiary is received at the Service
Center. If no settlement method is elected, the death benefit will be 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
Policy Value remains in the Variable Account, and fluctuates with investment
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performance of the applicable Portfolio(s). Accordingly, the amount of the death
benefit depends on the Policy Value at the time the death benefit is paid.
Payment of Death Benefit
The death benefit is generally payable upon receipt of Proof of Death
of the Annuitant or Owner. Upon receipt of this proof and an election of a
method of settlement, the death benefit generally will be paid within seven
days, or as soon thereafter as Transamerica has sufficient information about the
Beneficiary to make the payment. The Beneficiary may receive the amount payable
in a lump sum cash benefit or, subject to any limitations under any state or
federal law, rule, or regulation, under one of the Annuity Forms unless a
settlement agreement is effective under the Policy preventing such election. If
no settlement method is elected within one year of the date of death, the death
benefit will be paid in a lump sum. The payment of the death benefit may be
subject to certain distribution requirements under the federal income tax laws.
(See "Federal Tax Matters" page 36.)
Designation of Beneficiaries
The Owner may select one or more Beneficiaries and name them in the
application. If the Owner selects more than one beneficiary, unless otherwise
indicated by the Owner they will share equally in any death benefits payable in
the event of the Annuitant's death before the Annuity Date if there is no
Contingent Annuitant, or the Owner's death if there is no Joint Owner. Different
Beneficiaries may be named with respect to the Annuitant's death (Annuitant's
Beneficiary) and the Owner's death (Owner's Beneficiary). Before the Annuitant's
death, the Owner may change the Beneficiary by notice to the Service Center in a
form and manner acceptable to Transamerica. The Owner may also make the
designation of Beneficiary irrevocable by sending notice to and obtaining
approval from the 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 the Beneficiary. The interest of any Beneficiary
who dies at the time of, or within 30 days after, the death of the Owner or
Annuitant will also terminate if no benefits have been paid unless the Policy
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.
Transamerica may rely on an affidavit by any responsible person in
determining the identity or non-existence of any Beneficiary not identified by
name.
Death of Annuitant Prior to the Annuity Date
If the Annuitant dies prior to the Annuity Date and the Annuitant is
not the Owner and there is no Contingent Annuitant, a death benefit under the
Policy relating to that Annuitant will be paid to the Annuitant's Beneficiary.
If there is a Contingent Annuitant, then the Contingent Annuitant will become
the Annuitant.
Death of Owner Prior to the Annuity Date
If the Owner dies before the Annuity Date, a death benefit will be
paid to the Owner's Beneficiary. If the Owner's Beneficiary is the deceased
Owner's spouse, then the spouse may elect to treat the Policy as his or her own.
The payment of the death benefit may be subject to certain distribution
requirements under the federal income tax laws. (See "Federal Tax Matters" page
36.)
Death of Annuitant or Owner After the Annuity Date
If the Annuitant or Owner dies after the annuity starts, the
remaining undistributed portion, if any, of the Policy 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.
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CHARGES AND DEDUCTIONS
No deductions are made from Premiums except for any applicable
premium taxes. Therefore, the full amount, less any premium taxes, of the
Premiums are invested in one or more of the Sub-Accounts of the Variable
Account.
As more fully described below, charges under the Policy are assessed in
three ways: (1) as deductions for the Policy (or Annuity) Fees, any Transfer
Fees, any Systematic Withdrawal Option fees 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
No deduction for sales charges is made from Premiums (although
premium tax may be deducted). However, a Contingent Deferred Sales Load of up to
6% of Premiums paid may be imposed on certain withdrawals or surrenders (and
possibly on certain annuitizations) to partially cover certain expenses incurred
by Transamerica relating to the sale of the Policies, including commissions paid
to salespersons, the costs of preparation of sales literature and other
promotional costs and acquisition expenses.
The Contingent Deferred Sales Load percentage varies according to the
number of Policy Years between the Policy Year in which a Net Premium was
credited to the Policy and the Policy Year in which the withdrawal is made. The
amount of the Contingent Deferred Sales Load is determined by multiplying the
amount withdrawn subject to the Contingent Deferred Sales Load by the Contingent
Deferred Sales Load percentage in accordance with the following table.
Number of
Contract Years
Since Receipt of Contingent Deferred Sales Load
Purchase Payment As a Percentage of PurchasePayment
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%
In no event shall the aggregate Contingent Deferred Sales Load assessed
against the Policy exceed 6% of the aggregate Premiums paid to a Policy.
Any Premiums that have been held by Transamerica for at least seven
Policy Years and not previously withdrawn may be withdrawn free of any
Contingent Deferred Sales Load. In addition, up to 10% of a Premium held less
than seven Policy Years, but more than one complete Policy Year (not adjusted
for any prior withdrawals deemed to be made from such Premiums), may be
withdrawn each year after the first complete Policy Year without imposition of
any Contingent Deferred Sales Load. The 10% free withdrawal amount will be
applied to the oldest remaining Premiums, then to the next oldest and so forth.
No Contingent Deferred Sales Load will be charged on the 10% free
withdrawal amount if surrender of the Policy occurs in the second or subsequent
Policy Year for a Premium and the Owner was eligible to withdraw the amount
without charge but had not made such a withdrawal during the Policy Year in
which the date of surrender occurs. If the 10% free withdrawal amount is not
withdrawn or paid out during a Policy Year,
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it does not carry over to the next Policy Year. In addition, no Contingent
Deferred Sales Load is assessed upon annuitization to an option involving life
contingencies, upon payment of the death benefit, upon transfers of Policy Value
among the Sub-Accounts, under the Systematic Withdrawal Option; or, in some
circumstances, under the Automatic Payout Option. Any applicable Contingent
Deferred Sales Load will be deducted from the amount requested for both partial
withdrawals and full surrenders. Administrative Charges
At the end of each Policy Year before the Annuity Date, Transamerica
deducts an annual Policy Fee as partial compensation for expenses relating to
the issue and maintenance of the Policy and the Variable Account. The annual
Policy Fee is equal to the lesser of $30 or 2% of the Policy Value. The Policy
Fee may be changed upon 30 days advance written notice, but in no event may it
exceed the lesser of $60 or 2% of the Policy Value. Such increases in the Policy
Fee will apply only to future deductions after the effective date of the change.
If the Policy is surrendered on other than the end of a Policy Year, the Policy
Fee will be deducted in full at the time of such surrender. The Policy Fee will
be deducted on a pro rata basis from each Sub-Account in which the Policy is
invested at the time of such deduction.
After the Annuity Date, an annual Annuity Fee of $30 will be deducted
in equal amounts from each Variable Annuity Payment made during the year ($2.50
each month if monthly payments). This fee will not be changed. No Annuity Fee
will be deducted from Fixed Annuity Payments.
Transamerica also makes a deduction (the Administrative Expense Charge)
from the Variable Account at the end of each Valuation Period (both before and
after the Annuity Date) at an effective current annual rate of 0.15% of assets
held in each Sub-Account to reimburse Transamerica for those administrative
expenses attributable to the Policies and the Variable Account which exceed the
revenues received from the Policy Fee, any Transfer Fee, and any fee imposed for
Systematic Withdrawals. Transamerica has the ability to increase or decrease
this charge, but the charge is guaranteed not to exceed 0.25%. Transamerica will
provide 30 days written notice of any change in fees. Transamerica believes that
the Administrative Expense Charge and Policy Fee have been initially set (and
will continue to be set) at a level that will recover no more than the
anticipated and estimated costs associated with administering the Policies and
Variable Account. The administrative charges do not bear any relationship to the
actual administrative costs of a particular Policy. Transamerica does not expect
to make a profit from the Policy Fee or the Administrative Expense Charge. The
Administrative Expense Charge is reflected in the Variable Accumulation or
Variable Annuity Unit Values for each Sub- Account. Mortality and Expense Risk
Charge
Transamerica imposes a charge called the Mortality and Expense Risk
Charge to compensate it for bearing certain mortality and expense risks under
the Policies. For assuming these risks, Transamerica makes 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 before the
Annuity Date and if an Annuity Purchase Amount is applied to a Variable Payment
Option, also after the Annuity Date. The approximate portion of this charge
estimated to be attributable to mortality risks is 0.65%; the approximate
portion of this charge estimated to be attributable to expense risks is 0.60%.
Transamerica guarantees 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 Transamerica. The
mortality risks assumed by Transamerica arise from its contractual obligations
to make Annuity Payments (determined in accordance with the annuity tables and
other provisions contained in the Policy) and to pay death benefits prior to the
Annuity Date. Thus Owners are assured that neither the Annuitant's own longevity
nor an unanticipated
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improvement in general life expectancy will adversely affect the Annuity
Payments under the Policy.
Transamerica also bears substantial risk in connection with the death
benefit before the Annuity Date, since it will pay a death benefit equal to the
greater of the Policy Value without imposition of a Contingent Deferred Sales
Load or the Premiums less withdrawals and premium taxes (so Transamerica bears
the risk of unfavorable experience in the Sub-Accounts).
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the Policy and the Variable
Account will exceed the amount recovered through the Administrative Expense
Charge, Policy Fees, Transfer Fees and any fees imposed for Systematic
Withdrawals.
If the Mortality and Expense Risk Charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the Contingent Deferred Sales Load will
not generate sufficient funds to pay the cost of distributing the Policies. To
the extent that the Contingent Deferred Sales Load is insufficient to cover the
actual cost of Policy distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the Mortality and Expense Risk Charge. Premium Taxes
Currently, New York has no premium tax or retaliatory premium tax.
If New York imposes these taxes in the future, or if the Owner is or becomes a
resident of the state where such taxes apply, Transamerica will deduct
applicable premium taxes, including any retaliatory taxes, paid with respect to
a particular Policy from the Premiums, from amounts withdrawn, or from amounts
applied on the Annuity Date.
Transfer Fee
Transamerica currently does not charge for transfers. However,
Transamerica may impose a fee for each transfer in excess of the first six in a
single Policy Year. Transamerica will deduct the charge from the amount
transferred. This fee would be no more than $10 and would be used to help cover
Transamerica's costs of processing transfers.
Systematic Withdrawal Option
Transamerica reserves the right to impose an annual fee of an amount not to
exceed $25 for administrative expenses associated with processing systematic
withdrawals. This fee, which is currently waived, will be deducted from each
systematic withdrawal in equal installments during a Policy Year.
Taxes
Under present laws, Transamerica will incur state or local taxes (in
addition to the premium taxes described above) in several states. No charges are
currently made for taxes other than state premium taxes. However, Transamerica
reserves the right to deduct charges in the future for federal, state and local
taxes or the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the Policies.
Portfolio Expenses
The value of the assets in the Variable Account reflects the value of
Portfolio shares and therefore the fees and expenses paid by each Portfolio. A
complete description of the fees, expenses, and deductions from the Portfolios
are found in the Funds' prospectuses. (See "The Funds" page 19.)
Employee and Agent Purchases
For Non-Qualified Policies sold to (a) registered representatives or
employees of Transamerica (or its affiliates), (b) registered representatives or
employees of Dreyfus Service Corporation and (c) immediate family members of
such employees or registered representatives, no sales commission will be paid.
Instead, Transamerica will add the
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dollar amount that otherwise would be paid as a commission to the Policy Value
on the Policy Date. This amount will be reported for tax purposes as
compensation to such employee or registered representative, and treated as a
premium for the purposes of the Contingent Deferred Sales Load and any possible
premium tax charge.
ANNUITY PAYMENTS
Annuity Date
Initially, the Annuity Date is selected by the Owner at the time the
Initial Premium is paid. Thereafter, the Annuity Date may be changed from time
to time by the Owner by giving notice to the Service Center provided that notice
of each change is received by the Service Center at least thirty (30) days prior
to the then-current Annuity Date. The Annuity Date must not be earlier than the
third Policy Anniversary. The latest Annuity Date which may be elected is the
first day of the calendar month immediately preceding the month of the
Annuitant's 85th birthday.
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.
Annuity Payment
The Annuity Date is the date that the Annuity Purchase Amount is
applied to provide the Annuity Payments under the Policy under the selected
Annuity Form and Payment Option, unless the entire Policy Value has been
withdrawn or the death benefit has been paid to the Beneficiary prior to that
date. The Annuity Purchase Amount is the Policy Value, less any applicable
Contingent Deferred Sales Load and less any applicable premium taxes. Any
Contingent Deferred Sales Load will be waived if values are applied to an
Annuity Form involving life contingencies on or after the third Policy
Anniversary.
If the amount of the monthly Annuity Payment from any of the Payment
Options selected by the Owner would result in a monthly Annuity Payment of less
than $20, or if the Annuity Purchase Amount is less than $2,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the Policy
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.
The Owner may choose from the Annuity Forms below. Transamerica may
consent to other plans of payment before the Annuity Date. For Annuity Forms
involving life income, the actual age and/or sex of the Annuitant, or a Joint or
Contingent Annuitant will affect the amount of each payment. Sex-distinct rates
generally are not allowed under certain Qualified Policies. Transamerica
reserves the right to ask for satisfactory proof of the Annuitant's (or Joint or
Contingent Annuitant's) age. Transamerica may delay Annuity Payments until
satisfactory proof is received. Since payments to older Annuitants are expected
to be fewer in number, the amount of each Annuity Payment under a selected
Annuity Form shall be greater for older Annuitants than for younger Annuitants.
The Owner may choose from the two Annuity Payment Options described
below. The Annuity Date and Annuity Forms available for Qualified Policies may
also be controlled by endorsements, the plan or applicable law.
A portion or the entire amount of the Annuity Payments may be taxable
as ordinary income. If, at the time the Annuity Payments begin, Transamerica has
not received a proper written election not to have federal income taxes
withheld, Transamerica must by law withhold such taxes from the taxable portion
of such annuity payments and remit that amount to the federal government. State
income tax withholding may also apply. (See "Federal Tax Matters" page 36.)
Election of Annuity Forms and Payment Options
The Annuity Form and Payment Option for each Policy is set as a 120
month period certain and life Annuity Form, under the Variable Payment Option.
Before the Annuity Date, and while the Annuitant is living, the Owner
may, by Written Request, change the Annuity Form or Annuity Payment Option or
may request
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payment of the Cash Surrender Value for the Policy. The request for change of
the Annuity Date or Annuity Payment Option must be received by the Service
Center at least 30 days prior to the Annuity Date.
In the event that an Annuity Form and Payment Option are not selected at least
30 days before the Annuity Date, Transamerica will make Variable Annuity
Payments in accordance with the 120 month period certain and life Annuity Form
and the applicable provisions of the Policy.
Annuity Payment Options
The Annuity Forms may be paid under Fixed or Variable Annuity Payment
Options. Under the Fixed Annuity Payment Option, the amount of each payment will
be determined on the Annuity Date and will not subsequently be affected by the
investment performance of the Sub-Accounts. Under the Variable Annuity Payment
Option, the Annuity Payments, after the first Annuity Payment, will reflect the
investment experience of the Sub-Account or Sub- Accounts chosen by the Owner.
Owners may elect a Fixed Annuity, a Variable Annuity, or a combination
of both (in 25% increments of the Annuity Purchase Amount). If the Owner elects
a combination, he or she must specify what part of the Annuity Purchase Amount
is to be applied to the Fixed and Variable Payment Options. Unless specified
otherwise, the applied Annuity Purchase Amount will be used to provide a
Variable Annuity. In this event, the initial allocation of Variable Annuity
Units for the Variable Sub-Accounts will be in proportion to the Policy's value
in the Sub-Accounts on the Annuity Date. Fixed Annuity Payment Option
A Fixed Annuity provides for Annuity Payments which will remain
constant pursuant to the terms of the Annuity Form elected. If a Fixed Annuity
is selected, the portion of the Annuity Purchase Amount used to provide the
Fixed Annuity will be transferred to the general account assets of Transamerica,
and the amount of Annuity Payments will be established by the fixed annuity
provisions selected and the age and sex (if sex-distinct rates are allowed by
law) of the Annuitant and will not reflect investment experience after the
Annuity Date. The Fixed Annuity Payment amounts are determined by applying the
Annuity Purchase Rate specified in the Policy to the portion of the Annuity
Purchase Amount applied to the Fixed Annuity Option by the Owner. Payments may
vary after the death of the Annuitant under some Annuity Options; the amounts of
these variances are fixed on the Annuity Date. Variable Annuity Payment Option
A Variable Annuity provides for payments that vary in dollar amount,
based on the investment performance of the selected Sub-Account(s) of the
Variable Account. The Variable Annuity Purchase Rate Tables in the Policy
reflect an assumed annual interest rate of 4%, so if the actual net investment
performance of the Sub-Account(s) is less than this rate, then the dollar amount
of the actual Annuity Payments will decrease. If the actual net investment
performance of the Sub-Account(s) is higher than this rate, then the dollar
amount of the actual Annuity Payments will increase. If the net investment
performance exactly equals the 4% rate, then the dollar amount of the actual
Annuity Payments will remain constant.
Variable Annuity Payments will be based on the Sub-Accounts selected by
the Owner, and on the allocations among the Sub-Accounts.
For further details as to the determination of Variable Annuity Payments,
see the Statement of Additional Information.
Annuity Forms
The Owner may choose any of the Annuity Forms described below.
Subject to approval by Transamerica, the Owner may select any other Annuity
Forms then being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the Annuity Date, if the Annuitant is living. Payments end
with the payment due just before the Annuitant's death. There is no death
benefit under this form. It is possible that only one payment will be made under
this form if the Annuitant dies before
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the second payment is due; only two payments will be made if the Annuitant dies
before the third payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the Annuity Date, if the Annuitant is living.
Payments will continue for as long as the Annuitant lives. After the Annuitant
dies, payments will be made to the Contingent Annuitant, if living, for as long
as the Contingent Annuitant lives. The continued payments can be in the same
amount as the original payments, or in an amount equal to one-half or two-thirds
thereof. Payments will end with the payment due just before the death of the
Contingent Annuitant. There is no death benefit after both die. If the
Contingent Annuitant does not survive the Annuitant, payments will end with the
payment due just before the death of the Annuitant. It is possible that only one
payment or very few payments will be made under this form, if the Annuitant and
Contingent Annuitant die shortly after payments begin.
The Written Request for this form must: (a) name the Contingent
Annuitant; and (b) state the percentage of payments for the Contingent
Annuitant. Once Annuity Payments start under this Annuity Form, the person named
as Contingent Annuitant for purposes of being the measuring life, may not be
changed. Transamerica will require proof of age for the Annuitant and for the
Contingent Annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the first day
of the month immediately following the Annuity Date, if the Annuitant is living.
Payments will be made for the longer of: (a) the Annuitant's life: or (b) the
period certain. The period certain may be 120 or 180 or 240 months, but in no
event may it exceed the life expectancy of the Annuitant.
If the Annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the Annuitant's
death. No benefit will then be payable to the Annuitant's Beneficiary.
If the Annuitant dies during the period certain, the rest of the period
certain payments will be made to the Annuitant's Beneficiary. The Owner may
elect to have the commuted value of these payments paid in a single sum.
Transamerica will determine the commuted value by discounting the rest of the
payments at the then current rate of interest used for commuted values.
If the Owner does not elect to have the commuted value paid in a single
sum after the Annuitant's death, the Owner may designate a Payee to receive any
remaining payments payable if the Annuitant's Beneficiary dies before all of the
payments under the period certain have been made. If the Annuitant's Beneficiary
dies before receiving all of the remaining period certain payments and a
designated Payee does not survive the Annuitant's Beneficiary for at least 30
days, then the remaining payments will be paid to the Owner, if living,
otherwise in a single sum to the Owner's estate.
The Written Request for this form must: (a) state the length of the period
certain; and (b) name the Annuitant's Beneficiary.
(4) Joint and Survivor Annuity. Payments will be made to the Annuitant,
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 for so long as the
survivor lives. Payments will be made to the survivor for his or her life.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that only one
payment or very few payments will be made under this form if the Annuitant and
Joint Annuitant both die shortly after payments begin.
The Written Request for this form must: (a) name the Joint Annuitant;
and (b) state the percentage of continued payments for the survivor. Once
payments start under this Annuity Form, the person named as Joint Annuitant, for
the purpose of being the measuring life, may not be changed. Transamerica will
need proof of age for the Joint Annuitant before payments start.
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(5) Other Forms of Payment. Benefits can be provided under any other
Annuity Form not described in this section subject to Transamerica's agreement
and any applicable state or federal law or regulation. Requests for any other
Annuity Form must be made in writing to the Service Center at least 30 days
before the Annuity Date.
Once payments start under the Annuity Form and Payment Option selected
by the Owner: (a) no changes can be made in the Annuity Form and Payment Option;
(b) no additional Premium will be accepted under the Policy; and (c) no further
withdrawals will be allowed.
The Owner may, at any time after the Annuity Date by Written Notice to
us at our Service Center, change the Payee of annuity benefits being provided
under the Policy. The effective date of change in Payee will be the later of:
(a) the date we receive the Written Request for such change; or (b) the date
specified by the Owner. If the Policy is issued as an IRA, the Owner may not
change the Payee on or after the Annuity Date.
Alternate Fixed Annuity Rates
The amount of any Fixed Annuity Payments will be determined on the
Annuity Date by using either the guaranteed fixed annuity rates or
Transamerica's current single premium fixed annuity rates at the time, whichever
would result in a higher amount of monthly Fixed Annuity Payments.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the Policy 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 Policy. Any person concerned about these tax implications
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon Transamerica's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of the continuation of
the present federal income tax laws or of the current interpretation by the
Internal Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Policy may be purchased on a non-tax qualified basis
("Non-Qualified Policy") or purchased and used in connection with plans
qualifying for favorable tax treatment ("Qualified Policy"). Qualified Policies
are designed for use by individuals solely as plans entitled to special income
tax treatment under section 408 of the Internal Revenue Code of 1986, as amended
(the "Code"). The ultimate effect of federal income taxes on the amounts held
under a Policy, on Annuity Payments, and on the economic benefit to the Owner,
the Annuitant, or the Beneficiary may depend on the type of retirement plan, and
on the tax status of the individual concerned. In addition, certain requirements
must be satisfied in purchasing a Qualified Policy and receiving distributions
from a Qualified Policy in order to continue receiving favorable tax treatment.
Therefore, purchasers of Qualified Policies should seek competent legal and tax
advice regarding the suitability of the Policy for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of the
Policy. The following discussion assumes that a Qualified Policy is purchased
with proceeds from and/or contributions under retirement plans that qualify for
the intended special federal income tax treatment.
The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that the Owner who is a natural person generally is not
taxed on increases in the value of a Policy until distribution occurs by
withdrawing all or part of the Policy Value (e.g., withdrawals or Annuity
Payments under the Annuity Option elected). For this
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purpose, the assignment, pledge, or agreement to assign or pledge any portion of
the Policy Value (and in the case of a Qualified Policy, 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 annuity contract who is not a natural person generally
must include in income any increase in the excess of the Policy Value over the
"investment in the contract" (discussed below) during the taxable year. There
are some exceptions to this rule and a prospective Owner that is not a natural
person may wish to discuss these with a competent tax adviser.
The following discussion generally applies to a Policy owned by a
natural person.
Withdrawals
In the case of a withdrawal under a Qualified Policy, including
withdrawals under the Systematic Withdrawal Option or the Automatic Payout
Option, a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit under the retirement plan. The "investment in the contract" generally
equals the amount of any non-deductible Premiums paid by or on behalf of any
individual. For a Qualified Policy , the "investment in the contract" can be
zero. Special tax rules may be available for certain distributions from a
Qualified Policy.
With respect to Non-Qualified Policies, partial withdrawals, including
withdrawals under the Systematic Withdrawal Option, are generally treated as
taxable income to the extent that the Policy Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. 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 Policy, in general, only the portion of the Annuity Payment
that represents the amount by which the Policy Value exceeds the "investment in
the contract" will be taxed; after the "investment in the contract" is
recovered, the full amount of any additional Annuity Payments is taxable. For
Variable Annuity Payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract." For Fixed Annuity Payments, in
general there is no tax on the portion of each payment which represents the same
ratio that the "investment in the contract" bears to the total expected value of
the Annuity Payments for the term of the payments; however, the remainder of
each Annuity Payment is taxable. Once the "investment in the contract" has been
fully recovered, the full amount of any additional Annuity Payments is taxable.
If Annuity Payments cease as a result of an Annuitant's death before full
recovery of the "investment in the contract," consult a competent tax advisor
regarding deductibility of the unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified Policy, there
may be imposed a federal income tax penalty equal to 10% of the amount treated
as taxable income. In general, however, there is no penalty tax on
distributions: (1) made on or after the date on which the Owner attains age
591/2; (2) made as a result of death or disability of the Owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the lives or life expectancies of the Owner and a
"designated beneficiary." Other tax penalties may apply to certain distributions
under a Qualified Policy.
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Taxation of Death Benefit Proceeds
Amounts may be distributed from the Policy because of the death of an
Owner or the Annuitant. Generally such amounts are includible in the income of
the recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender, as described above, or (2) if distributed
under an Annuity Option, they are taxed in the same manner as Annuity Payments,
as described above.
Transfers, Assignments, or Exchanges of the Policy
A transfer of ownership of a Policy, the designation of an Annuitant,
Payee, or Beneficiary who is not also the Owner, or the exchange of a Policy may
result in certain tax consequences to the Owner that are not discussed herein.
An Owner contemplating any such designation, transfer, assignment, or exchange
should contact a competent tax adviser with respect to the potential tax effects
of such a transaction.
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 amount
includible in gross income under section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of section 72(e) through the serial purchase of annuity contracts or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract and
separate deferred annuity contracts as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws.
Withholding
Pension and annuity distributions generally are subject to withholding
for the recipient's federal income tax liability at rates that vary according to
the type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. (See discussion of this election under "Withdrawals" on page 26.)
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation of certain annuities. For example, one
such proposal would have changed the tax treatment of non-qualified annuities
that did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although as of the date of this prospectus Congress is
not actively considering any legislation regarding the taxation of annuities,
there is always the possibility that the tax treatment of annuities could change
by legislation or other means (such as IRS regulations, revenue rulings,
judicial decisions, etc.). Moreover, it is also possible that any change could
be retroactive (that is, effective prior to the date of the change). Other Tax
Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate tax consequences and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the Policy depend on the individual circumstances
of each Owner or recipient of the distribution. A competent tax adviser should
be consulted for further information. Individual Retirement Annuities
The Qualified Policy is designed for use with IRA rollovers. Section
408 of the Code permits eligible individuals to contribute to an individual
retirement program known as an Individual Retirement Annuity or Individual
Retirement Account (each hereinafter referred to as an "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA. The sale of a Policy for use with an IRA
may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of a Policy for use with IRAs will be provided
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with supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke their purchase
within 7 days of the earlier of the establishment of the IRA or their purchase.
Various tax penalties may apply to contributions in excess of specified limits,
aggregate distributions in excess of $150,000 annually, distributions that do
not satisfy specified requirements, and other transactions. A Qualified Policy
will be amended as necessary to conform to the requirements of the Code.
Purchasers should seek competent advice as to the suitability of the Policy for
use with IRAs. General
At the time the Initial Premium is paid, a prospective purchaser must
specify whether he or she is purchasing a Non-Qualified Policy or a Qualified
Policy. If the Initial Premium is derived from an exchange or surrender of
another annuity contract, Transamerica may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity contract. Transamerica will require that persons purchase
separate Policies if they desire to invest monies qualifying for different
annuity tax treatment under the Code. Each such separate Policy would require
the minimum Initial Premium stated above. Additional Premiums under a Policy
must qualify for the same federal income tax treatment as the Initial Premium
under the Policy; Transamerica will not accept an additional Premium under a
Policy if the federal income tax treatment of such Premium would be different
from that of the Initial Premium.
DISTRIBUTION OF THE POLICY
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the Policies. TSSC may also serve as an underwriter and
distributor of other policies issued through the Variable Account and certain
other separate accounts of Transamerica and any affiliates of Transamerica. TSSC
is a wholly-owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker/dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). 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 Policies through registered representatives who are
licensed to sell securities and variable insurance products. These agreements
provide that applications for the Policies may be solicited by registered
representatives of the broker/dealers appointed by Transamerica to sell its
variable life insurance and variable annuities. These broker/dealers are
registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for Policies will be sold by
broker/dealers which will receive compensation of up to 5.25% of any Initial and
additional Premiums paid. Additional amounts may be paid in certain
circumstances.
Transamerica Financial Resources, Inc. ("TFR") also is an underwriter and
distributor of the Policies. TFR is a wholly-owned subsidiary of Transamerica
Insurance Corporation of California and is registered with the Commission and
the NASD as a broker/dealer.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Variable
Account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the Variable Account.
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LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the Policies has been
provided by Sutherland, Asbill & Brennan. The organization of Transamerica, its
authority to issue the Policies and the validity of the form of the Policies
have been passed upon by James W. Dederer General Counsel of Transamerica.
ACCOUNTANTS
The financial statements of Transamerica at December 31, 1994 and
December 31, 1993, and for each of the three years in the period ended December
31, 1994, and the financial statements of the Variable Account at December 31,
1994, have been audited by Ernst & Young, Independent Auditors, as set forth in
their reports appearing in the Statement of Additional Information, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
VOTING RIGHTS
To the extent required by applicable law, all Portfolio shares held
in the Variable Account will be voted by Transamerica at regular and special
shareholder meetings of the respective Funds in accordance with instructions
received from persons having voting interests in the corresponding Sub-Account.
If, however, the 1940 Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, or if Transamerica determines
that it is allowed to vote all Portfolio shares in its own right, Transamerica
may elect to do so.
The person with the voting interest is the Owner. The number of votes
which are available to an Owner will be calculated separately for each
Sub-Account of the Variable Account. Before the Annuity Date, that number will
be determined by applying his or her percentage interest, if any, in a
particular Sub-Account to the total number of votes attributable to that
Sub-Account. The Owner holds a voting interest in each Sub-Account to which the
Policy Value is allocated. After the Annuity Date, the number of votes decreases
as Annuity Payments are made and as the reserves for the Policy decrease.
The number of votes of a Portfolio will be determined as of the date
coincident with the date established by that Portfolio for determining
shareholders eligible to vote at the meeting of the Funds. Voting instructions
will be solicited by written communication prior to such meeting in accordance
with procedures established by the respective Funds.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Policies 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 (the "Registration
Statement") with the Securities and Exchange Commission under the Securities Act
of 1933 relating to the Policy offered by this Prospectus. This Prospectus has
been filed as a part of the Registration Statement and does not contain all of
the information set forth in the Registration Statement and exhibits thereto,
and reference is hereby made to such Registration Statement and exhibits for
further information relating to Transamerica and the Policy. Statements
contained in this Prospectus, as to the content of the Policy and other legal
instruments, are summaries. For a complete statement of the terms thereof,
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reference is made to the instruments filed as exhibits to the Registration
Statement. The Registration Statement and the exhibits thereto may be inspected
and copied at the office of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains
more details concerning the subjects discussed in this Prospectus. The following
is the Table of Contents for that Statement:
TABLE OF CONTENTS Page
THE POLICY........................................................3
DOLLAR COST AVERAGING.............................................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
GENERAL PROVISIONS................................................4
IRS Required Distributions...............................4
Non-Participating........................................4
Misstatement of Age or Sex...............................4
Proof of Existence and Age...............................5
Assignment...............................................5
Annuity Data.............................................5
Annual Report............................................5
Incontestability.........................................5
Ownership................................................5
Entire Contract..........................................5
Changes in the Policy....................................5
Protection of Benefits...................................5
Delay of Payments........................................5
Notices and Directions...................................6
CALCULATION OF YIELDS AND TOTAL RETURNS...........................6
Money Market Sub-Account Yield Calculation...............6
Other Sub-Account Yield Calculations.....................7
Standard Total Return Calculations.......................7
Hypothetical Performance Data............................8
Other Performance Data...................................8
HISTORIC PERFORMANCE DATA.........................................8
General Limitations......................................8
Sub-Account Performance Figures..........................9
Hypothetical Sub-Account Performance Figures............10
Portfolio Performance Figures...........................11
FEDERAL TAX MATTERS..............................................12
Taxation of Transamerica................................13
Tax Status of the Policies..............................13
DISTRIBUTION OF THE POLICY.......................................14
SAFEKEEPING OF ACCOUNT ASSETS....................................14
TRANSAMERICA.....................................................14
General Information and History.........................14
STATE REGULATION ................................................15
RECORDS AND REPORTS..............................................15
FINANCIAL STATEMENTS.............................................15
APPENDIX........................................................A-1
Annuity Transfer Formula...............................A-1
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Appendix A
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a Portfolio at the end of the
current Valuation Period is $20.15; at the end of the immediately preceding
Valuation Period it was $20.10; the Valuation Period is one day; and no
dividends or distributions caused the Portfolio to go "ex-dividend" during the
current Valuation Period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for Mortality and Expense Risk Charge and the Administrative
Expense Charge of .003814% (the daily equivalent of the current charge of 1.40%
on an annual basis) gives a Net Investment Factor of 1.002449. If the value of
the Variable Accumulation Unit for the immediately preceding Valuation Period
had been 15.500000, the value for the current Valuation Period would be
15.537966 (15.5 x 1.002449). Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a Variable Annuity Unit for the immediately preceding Valuation Period had been
13.500000. If the first Variable Annuity Payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the Variable Annuity Unit for the current Valuation Period would be 13.531613
(13.5 x 1.002449 (the Net Investment Factor) x 0.999893). 0.999893 is the
factor, for a one day Valuation Period, that neutralizes the assumed rate of
four percent (4%) per year used to establish the Variable Annuity Rates found in
the Contract. Example of Variable Annuity Payment Calculations
Suppose that the Account is currently credited with 3,200.000000
Variable Accumulation Units of a particular Sub-Account.
Also suppose that the Variable Accumulation Unit Value and the Variable
Annuity Unit Value for the particular Sub-Account for the Valuation Period which
ends immediately preceding the first day of the month is 15.500000 and 13.500000
respectively, and that the Variable Annuity Rate for the age and option elected
is $5.73 per $1,000. Then the first Variable Annuity Payment would be:
3.200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of Variable Annuity Units credited for future payments would
be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the Variable Annuity Unit
Value on the 10th day of the second month is 13.565712. Then the second Variable
Annuity Payment would be $285.59 (21.052444 x 13.565712).
A-1
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