PROFILE Of The
DREYFUS/TRANSAMERICA
TRIPLE ADVANTAGE(R)
VARIABLE ANNUITY
Issued By
TRANSAMERICA LIFE INSURANCE COMPANY OF NEW YORK
May 1, 1998
ThisProfile is a summary of some of the more important
points that you should know and consider before
purchasing a Policy. The Policy is more fully described
in the full Prospectus which accompanies this Profile.
Please read the Prospectus carefully.
<PAGE>
1. The Annuity Policy. The Dreyfus/Transamerica Triple Advantage ("Policy") is
an annuity policy or a contract between you and Transamerica Life Insurance
Company of New York. In the Policy you can invest in your choice of eighteen
Sub-Accounts corresponding to eighteen funds ("Portfolios") in the Variable
Account and the Fixed Account. You could gain or lose money you invest in the
Portfolios.
The Policy is a deferred annuity, which means it has two phases: the
accumulation phase and the annuity phase. During the accumulation phase you can
invest additional premiums in the Policy, transfer your money among the
Portfolios, and withdraw some or all of your investment. During this phase
earnings accumulate on a tax-deferred basis for individuals, but if you withdraw
money some or all of it may be taxable. Tax deferral is not available for
corporations and some trusts.
During the annuity phase Transamerica will make periodic payments to
you. The dollar amount of the payments may depend on the amount of money
invested and earned during the accumulation phase (and other factors, such as
age and sex).
2. The Annuity Payments. You can generally decide when to end the accumulation
phase and begin receiving annuity payments from Transamerica. You can choose
fixed annuity payments, where the dollar amount of each payment generally stays
the same, or variable payments that go up or down in dollar amount based on the
investment performance of the Portfolios you select. You can choose among
payments for the lifetime of an individual, or payments for the longer of one
lifetime or a guaranteed period of 10, 15, or 20 years, or payments for one
lifetime and the lifetime of another individual.
3. Purchasing a Policy. Generally, you must invest at least $5,000 to purchase a
Policy, and then you can make more investments of at least $500 each ($100 each
if made under the automatic payment plan and deducted from your bank account).
You may cancel your Policy during the Free Look Period explained in item 10 on
page 4 of this Profile.
The Triple Advantage is designed for long-term tax-deferred
accumulation of assets, generally for retirement or other long-term goals.
People in high tax brackets get the most benefit from the tax deferral feature.
You should not make an investment in the Policy for short-term purposes or if
you cannot take the risk of losing some of your investment.
4. Investment Options. You can invest your premiums in any of the Sub-Accounts
corresponding to the following eighteen Portfolios:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Money Market Capital Appreciation International Value Transamerica Growth
Special Value Stock Index Disciplined Stock Core Value
Zero Coupon 2000 Socially Responsible Growth Small Company Stock MidCap Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
</TABLE>
These Portfolios are described in their own prospectuses. You can earn
or lose money in any of these Portfolios.
Fixed Account: You can also invest in a Fixed Account option, where Transamerica
guarantees the principal invested plus at least 3% annual interest.
<PAGE>
5. Expenses. The Policy provides many benefits and features that you do not get
with a regular mutual fund. It costs Transamerica money to provide these
benefits, so there are charges in connection with the Policy. If you withdraw
your money within seven years of investing it, there may be a withdrawal charge
of up to 6% of the amount invested. Once each year we deduct a Policy Fee of no
more than $30 (there is no fee if your Policy Value is over $50,000). Insurance
and administrative charges of 1.40% per year are charged against the average
daily value of your Policy and a $10 fee for transfers over 18 in one year.
Advisory fees are also deducted by the Portfolios' manager and the Portfolios
pay other expenses which in total, vary from 0.28% to 1.42% per year of the
amounts in the Portfolios.
Although New York currently has no premium tax on annuities, depending
on where you live during the time you hold this Policy, there might be premium
taxes ranging from 0 to 3.5% of your investment and/or on amounts you use to
purchase annuity benefits.
The following chart shows these charges (except transfer fees and
premium taxes). The $30 annual Policy Fee is not included in the first column
because the fee is waived for Policy Values over $50,000 and the approximate
average Policy Value is over $50,000. The third column is the sum of the first
two. The examples in the last two columns show the total amounts you would be
charged, in dollars, if you invested $1,000, the investment grew 5% each year,
and you withdrew your entire investment after one year or ten years. Year One
includes the withdrawal charge and Year Ten does not.
EXAMPLES:
<TABLE>
<CAPTION>
Annual Annual Total Expenses Total Expenses
Portfolio/ Insurance Portfolio Total Annual at end of at end of
Sub-Account Charges Charges Charges One Year Ten Years
<S> <C> <C> <C> <C> <C>
Money Market 1.40% 0.61% 2.01% $74.40 $233.76
Special Value 1.40% 0.99% 2.39% $78.21 $272.63
Zero Coupon 2000 1.40% 0.61% 2.01% $74.40 $233.76
Quality Bond 1.40% 0.75% 2.15% $75.81 $248.27
Small Cap 1.40% 0.78% 2.18% $76.11 $251.35
Capital Appreciation 1.40% 0.80% 2.20% $76.31 $253.39
Stock Index 1.40% 0.28% 1.68% $71.08 $198.70
Socially Responsible 1.40% 0.82% 2.22% $76.51 $255.44
Growth and Income 1.40% 0.80% 2.20% $76.31 $253.39
International Equity 1.40% 1.06% 2.46% $78.91 $279.62
International Value 1.40% 1.42% 2.82% $82.51 $314.73
Disciplined Stock 1.40% 1.02% 2.42% $78.51 $275.63
Small Company 1.40% 1.12% 2.52% $79.51 $285.56
Balanced 1.40% 1.00% 2.40% $78.31 $273.63
Limited Term High Income 1.40% 0.89% 2.29% $77.21 $262.55
Transamerica Growth 1.40% 0.85% 2.25% $76.84 $261.67
CoreValue 1.40% 1.00% 2.40% $78.36 $279.12
MidCap Stock 1.40% 1.00% 2.40% $78.36 $279.12
</TABLE>
The Annual Portfolio Charges above are for 1997 and do not reflect expense
reimbursement or fee waivers except for the Limited
Term High Income and Transamerica Growth Portfolios. The Core Value and
MidCap Stock Portfolios did not commence
operations in 1997; the numbers for these Portfolios are annualized estimates
including reimbursements or waivers for
1998. Expenses may be higher or lower in the future. See the Variable Account
Fee Table on page 9 of the Triple Advantage
prospectus for more detailed information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
policy value until a distribution occurs (e.g., a withdrawal or annuity payment)
or is deemed to occur (e.g., a pledge, loan, or assignment of the Policy). If
you withdraw money, earnings come out first and are taxed. Generally, some
portion (sometimes all) of any distribution or deemed distribution is taxable as
ordinary income. In some cases, income taxes will be withheld from
distributions. If you are under age 59 1/2 when you withdraw money, an
additional 10% federal tax penalty may apply to the withdrawn earnings. Certain
owners that are not individuals may be currently taxed on increases in the
Policy, whether distributed or not.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. A withdrawal charge of up to 6% of a premium may be assessed
by Transamerica, but no withdrawal charge will be assessed on money that has
been in the Policy for seven years. In addition, after the first Policy Year,
for only the first withdrawal in a Policy Year, you may withdraw the greater of
accumulated earnings or 10% of Premiums received at least one but less than
seven years ago. Additionally, at any time you can withdraw accumulated earnings
on your premiums not previously withdrawn without a withdrawal charge. (See page
24 of the prospectus for a more detailed discussion.) You may have to pay taxes
on amounts you withdraw and there may also be a 10% tax penalty if you make
withdrawals before you are 59 1/2 years old.
8. Past Investment Performance. The value of the money you allocate to the
Sub-Accounts will go up or down, depending on the investment performance of the
Portfolios you pick. The following chart shows the past investment performance
on a year by year basis for each Sub-Account. These figures have already been
reduced by the insurance charges, the policy fee, the fund manager's fee and all
the expenses of the mutual fund Portfolio, but these figures do not include the
withdrawal charge, which would reduce performance if it applied. Remember, past
performance is no guarantee of future performance or earnings.
<PAGE>
<TABLE>
<CAPTION>
CALENDAR YEAR
PORTFOLIO/
SUB-ACCOUNT 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market(1) 3.66% 3.53% 4.21% 3.00% 1.86% 2.71% 4.54% N/A
Special Value(1) 21.36% (5.67%) (0.48%) (3.48%) 26.74% (0.41%) 8.99% N/A
Zero Coupon 2000(1) 5.45% 1.10% 16.35% (5.41%) 13.52% 7.29% 17.14% 6.28%
Quality Bond(1) 7.83% 1.63% 18.91% (6.17%) 13.66% 10.45% 12.47% N/A
Small Cap(1) 15.06% 15.06% 28.84% 4.95% 65.77% 68.98% 156.07% N/A
Capital Appreciation(2) 26.21% 22.71% 32.82% 1.45% N/A N/A N/A N/A
Stock Index(3) 31.05% 19.80% 35.92% (0.60%) 7.75% 5.55% 27.98% (6.52%)
Socially Responsible(4) 26.59% 19.00% 33.67% (0.08%) N/A N/A N/A N/A
Growth and Income(5) 14.53% 18.63% 59.58% N/A N/A N/A N/A N/A
International Equity(5) 8.02% 9.82% 6.62% N/A N/A N/A N/A N/A
International Value(6) 7.13% N/A N/A N/A N/A N/A N/A N/A
Disciplined Stock(6) 29.62% N/A N/A N/A N/A N/A N/A N/A
Small Company Stock(6) 20.01% N/A N/A N/A N/A N/A N/A N/A
Transamerica Growth(7) 50.34% 26.63% 53.02% 7.71% 27.73% 13.58% 41.47% (12.58%)
</TABLE>
(1) Portfolio Inception 8-31-90 (3) Portfolio Inception 9-29-89
(5) Portfolio Inception 12-15-94
(7) Portfolio Inception 2-26-69
(2) Portfolio Inception 4-5-93 (4) Portfolio Inception 10-7-93
(6) Portfolio Inception 5-1-96
Data is for full years only. Therefore, no performance is reported for the
Balanced and Limited Term High Income Sub-Accounts because these Sub-Accounts
had not been in operation for a full year in1997. Additionally, the Core Value
and MidCap Stock Sub-Accounts did not commence operations in 1997 and,
therefore, no performance is reported for these Sub-Accounts. The figures for
the Money Market, Special Value, Zero Coupon 200, Quality Bond, Small Cap, Stock
Index and Transamerica Growth Sub-Accounts include data for periods before the
Sub-Accounts commenced operations, based on the actual performance of the
corresponding Portfolios since they commenced operation.
9. Death Benefit. If you or the Annuitant die during the accumulation phase, the
beneficiary will receive a Death Benefit.
If death occurs before age 85, the death benefit will be the greatest
of: (1), the Policy Value; (2) the Premiums you've paid, less any amounts you
have withdrawn (less any premium taxes applicable to those withdrawal's); or (3)
the highest Policy Value on any anniversary of your purchase of the Policy up to
the Owner's or Annuitant's age 75 (adjusted for additional investments and
withdrawals since that anniversary, and less premium taxes). After age 85, the
death benefit is the Policy Value.
10. Other Information. The Policy offers other features you might be interested
in. These features may not be suitable for your particular situation. Some of
these features include:
FREE LOOK. After you get your Policy, you have ten days to look it over
and decide if it is really right for you. If you decide not to keep the Policy,
you can cancel it during this period, and you will get back all the amounts you
allocated to the Fixed Account plus the current value of the amounts allocated
to the Variable Accounts (this may be more or less than your investment) and no
withdrawal charge will be deducted.
DOLLAR COST AVERAGING. You can instruct Transamerica to automatically
transfer amounts from the Premiums you allocated to the Money Market, Quality
Bond or Limited Term High Income Sub-Accounts or the Fixed Account to any of the
other Sub-Accounts each month. Dollar Cost Averaging is intended to give you a
lower average cost per share or unit than a single, one time investment, but
does not assure a profit or protect against loss and is intended to continue for
some time period.
AUTOMATIC ASSET REBALANCING. The performance of each Sub-Account may
cause the allocation of value among the Sub-Accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
Sub-Accounts by reallocating amounts among them.
SYSTEMATIC WITHDRAWAL OPTION. You can arrange to have Transamerica send
you money automatically each month out of your Policy Value during the
accumulation phase. There are limits on the amounts, but the withdrawal charge
will not apply (the payments may be taxable and subject to the penalty tax if
you are under age 59 1/2 ).
AUTOMATIC PAYOUT OPTION. Certain pension and retirement plans require
that certain amounts be distributed from the plan at certain ages. You can
arrange to have such amounts distributed automatically during the accumulation
phase.
11. INQUIRIES. You can get more information and have your questions answered by
writing or calling:
Transamerica Annuity Service Center
P.O. Box 31728
Charlotte, North Carolina 28231-1728
800-258-4261
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["Front Maroon Cover"]
[LOGO]
<PAGE>
PROSPECTUS FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
A Variable Annuity Issued by
Transamerica Life Insurance Company
of New York
Including Fund Prospectuses for
DREYFUS VARIABLE INVESTMENT FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS INVESTMENT PORTFOLIOS
GROWTH PORTFOLIO OF TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
<PAGE>
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R)
VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE COMPANY OF NEW YORK
100 Manhattanville Road, Purchase New York 10577, 914-701-6000
This Prospectus describes the Dreyfus/Transamerica Triple Advantage
Variable Annuity, a variable annuity policy ("Policy") issued by Transamerica
Life Insurance Company of New York (formerly called 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 Owner may allocate Premiums to one or more Sub-Accounts of Separate
Account VA-2LNY (the "Variable Account"), to the Fixed Account (which credits
interest at guaranteed annual rates) or to both.
The Policy Value, except for amounts in the Fixed Account, will vary in
accordance with the investment performance of the Portfolios in which the
selected Sub-Accounts are invested. The Owner bears the entire investment risk
for amounts allocated to the Variable Account. There is no guaranteed or minimum
withdrawal value for amounts in the Variable Account; the Cash Surrender Value
or Annuity Purchase Amount could be less than the 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 Life Insurance Company of New York, Annuity Service Center,
at P.O. Box 31728, Charlotte, North Carolina 28231-1728 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, 1998
This Prospectus must be accompanied by current Prospectuses for Dreyfus Variable
Investment Fund, Dreyfus Stock Index Fund, The Dreyfus Socially Responsible
Growth Fund, Inc., Dreyfus Investment Portfolios and Growth Portfolio of
Transamerica Variable Insurance Fund, Inc.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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.
<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. The Fixed
Account has restrictions on transfers. 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. Eighteen Portfolios are available
for investment under the Policies: Money Market, Special Value, Zero Coupon
2000, Quality Bond, Small Cap, Capital Appreciation, Growth and Income,
International Equity, International Value, Disciplined Stock, Small Company
Stock, Balanced and Limited Term High Income Portfolios of Dreyfus Variable
Investment Fund; Dreyfus Stock Index Fund; The Dreyfus Socially Responsible
Growth Fund, Inc.; Core Value and MidCap Stock Portfolios of Dreyfus Investment
Portfolios and the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc. Certain fees and expenses are charged against the assets of each Portfolio.
The 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 26. For more information about the Funds, see "The Funds" on page 17 and
the accompanying Funds' prospectuses.
The Initial Premium for the Policy must generally be at least $5,000
unless, with the prior permission of Transamerica, the Policy is sold as a
Qualified Policy to certain retirement plans. Generally, each additional Premium
must be at least $500, unless an automatic payment plan is selected. The prior
approval of Transamerica is required before total Premiums for any Policy in
excess of $1,000,000 will be accepted.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.......................................................... 4
SUMMARY ............................................................6
CONDENSED FINANCIAL INFORMATION...................................... 12
PERFORMANCE DATA..................................................... 15
TRANSAMERICA LIFE INSURANCE COMPANY OF NEW YORK
AND THE VARIABLE ACCOUNT............................................ 16
Transamerica Life Insurance Company of New York............. 16
Published Ratings........................................... 16
The Variable Account........................................ 16
THE FUNDS............................................................ 17
Addition, Deletion or Substitution.......................... 20
THE FIXED ACCOUNT.................................................... 20
THE POLICY........................................................... 21
POLICY APPLICATION AND PREMIUMS...................................... 21
Premiums.................................................... 21
Allocation of Premiums...................................... 22
Investment Option Limit..................................... 22
POLICY VALUE......................................................... 22
TRANSFERS............................................................ 23
Before the Annuity Date..................................... 23
Possible Restrictions....................................... 23
Dollar Cost Averaging....................................... 23
Automatic Asset Rebalancing................................. 24
After the Annuity Date...................................... 24
CASH WITHDRAWALS..................................................... 24
Withdrawals................................................. 24
Systematic Withdrawal Option................................ 25
Automatic Payout Option..................................... 26
DEATH BENEFIT........................................................ 26
Payment of Death Benefit.................................... 26
Designation of Beneficiaries................................ 26
Death of Annuitant Prior to the Annuity Date................ 27
Death of Owner Prior to the Annuity Date.................... 27
Death of Annuitant or Owner After the Annuity Date.......... 27
CHARGES AND DEDUCTIONS............................................... 27
Contingent Deferred Sales Load.............................. 27
Administrative Charges...................................... 28
Mortality and Expense Risk Charge........................... 28
Premium Taxes............................................... 29
Transfer Fee................................................ 29
Systematic Withdrawal Option................................ 29
Taxes....................................................... 29
Portfolio Expenses.......................................... 29
Sales in Special Situations................................. 29
ANNUITY PAYMENTS..................................................... 30
Annuity Date................................................ 30
Annuity Payment............................................. 30
Election of Annuity Forms and Payment Options............... 30
Annuity Payment Options..................................... 30
Fixed Annuity Payment Option................................ 31
Variable Annuity Payment Option............................. 31
Annuity Forms............................................... 31
Alternate Fixed Annuity Rates............................... 32
QUALIFIED POLICIES................................................... 32
Automatic Payout Option..................................... 32
Restrictions under 403(b) Programs.......................... 33
FEDERAL TAX MATTERS.................................................. 33
Introduction................................................ 33
Premiums.................................................... 33
Taxation of Annuities....................................... 34
Qualified Policies.......................................... 36
Possible Change in Taxation................................. 37
Other Tax Consequences...................................... 37
DISTRIBUTION OF THE POLICY........................................... 38
PREPARING FOR THE YEAR 2000.......................................... 38
LEGAL PROCEEDINGS.................................................... 38
LEGAL MATTERS........................................................ 38
ACCOUNTANTS.......................................................... 38
VOTING RIGHTS........................................................ 39
AVAILABLE INFORMATION................................................ 39
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS.............. 40
APPENDIX A........................................................... 41
Example of Variable Accumulation Unit Value Calculations.... 41
Example of Variable Annuity Unit Value Calculations......... 41
Example of Variable Annuity Payment Calculations............ 41
This Policy is available only in New York.
<PAGE>
DEFINITIONS
Active Sub-Account: A Sub-Account of the Variable Account in which the Policy
has current value.
Annuitant: The person: (a) whose life is used to determine the amount of monthly
annuity payments on the Annuity Date; and (b) who is the Payee designated to
receive monthly annuity payments, unless such Payee is changed by the Owner. The
Annuitant cannot be changed after the Policy has been issued, except upon the
Annuitant's death prior to the Annuity Date if a Contingent Annuitant has
previously been named. In the case of a Qualified Policy used to fund an IRA or
a 403(b) annuity, the Owner must be the Annuitant. Annuitant's Beneficiary: The
person(s) named by the Owner who may receive the Death Benefit under the Policy,
if: (a) the Annuitant is not the Owner, there is no named Contingent Annuitant
and the Annuitant dies before the Annuity Date and before the death of the
Owner(s); or (b) the Annuitant dies after the Annuity Date under an Annuity Form
containing a period certain option. Annuity Date: The date on which the Annuity
Purchase Amount will be applied to provide monthly annuity payments under the
Annuity Form and Payment Option selected by the Owner. Monthly annuity payments
will start the first day of the month immediately following the Annuity Date.
Unless the Annuity Date is changed as allowed by the Policy, the Annuity Date
will be as shown in the Policy. The Annuity Date may be changed by the Owner
upon 30 days advance written notice to our Service Office. The revised Annuity
Date may not be earlier than the first day of the calendar month coinciding with
or next following the third Policy Anniversary. The Annuity Date may not be
later than the first day of the calendar month immediately preceding the month
of the Annuitant's 85th birthday. 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 and the Annuity Date occurs on or after the third
Policy Anniversary. Annuity Year: A one-year period starting on the Annuity Date
and, after that, each succeeding one-year period. Cash Surrender Value: The
amount payable to the Owner if the 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. The Contingent Annuitant may be changed at any time by the Owner
while the Annuitant is living and before the Annuity Date. Fixed Account: All or
portions of Net Premiums and transfers may be allocated to the Fixed Account.
The Fixed Account assets are general assets of the Company and are
distinguishable from those allocated to a separate account of the Company. Fixed
Accumulated Value: The total dollar amount of all amounts held under the Fixed
Account for the policy prior to the Annuity Date. The Fixed Accumulated Value
prior to the Annuity Date is equal to: (a) Net Premiums allocated to the Fixed
Account plus interest credited; less (b) reductions for the annual Policy Fee
deducted on the last business day of each Policy Year; plus or minus (c) amounts
transferred to or from the Variable Sub-Accounts; less (d) any applicable
Transfer Fees; and less (e) withdrawals from Fixed Account. Fixed Annuity: An
annuity with predetermined payment amounts. Free Look Period: The period of
time, currently 10 days, beginning when the Owner has received the Policy,
during which the Owner has the right to cancel the Policy. Funds: Dreyfus
Variable Investment Fund, Dreyfus Stock Index Fund, The Dreyfus Socially
Responsible Growth Fund, Inc., Dreyfus Investment Portfolios and Transamerica
Variable Insurance Fund, Inc., in which the Variable Account currently invests.
Inactive Sub-Account: A Sub-Account of the Variable Account in which the Policy
has a zero balance. Net Investment Factor: An index that measures the investment
performance of a Sub-Account from one Valuation Period to the next. Net Premium:
A Premium reduced by any applicable premium tax (including retaliatory premium
taxes). Non-Qualified Policy: A Policy other than a Qualified Policy. Owner
(Joint Owners): The person or persons who, while living, control(s) all rights
and benefits under the Policy. Joint Owners own the Policy equally with the
right of survivorship. The right of survivorship means that if a Joint Owner
dies, his or her interest in the policy will pass to the surviving Joint Owner
in accordance with the Death Benefit provision. Qualified Policies may not have
Joint Owners. 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. 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 sum of the Fixed Accumulated Value plus the
Variable Accumulated Value.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 or any
one of the Portfolios of Dreyfus Investment Portfolios or the Growth Portfolio
of Transamerica Variable Insurance Fund, Inc., underlying a Sub-Account of the
Variable Account. Proof of Death: May be: (a) a copy of a certified death
certificate; (b) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; (c) a written statement by a medical
doctor who attended the deceased; or (d) any other proof satisfactory to
Transamerica. Qualified Policy: A Policy issued in connection with a retirement
plan or program.Receipt: Receipt and acceptance by Transamerica at its Service
Center. Series: Any of the portfolios of Dreyfus Variable Investment Fund
available for investment by a Sub-Account under the Policy. Service Center:
Transamerica's Annuity Service Center, at P.O. Box 31728, Charlotte, North
Carolina 28231-1728 and at telephone (800) 258-4261. Source Account: A
Sub-Account of the Variable Account or the Fixed Account, as permitted, from
which Dollar Cost Averaging transfers are being made. Sub-Account: A subdivision
of the Variable Account investing solely in shares of one of the Portfolios.
Valuation Day: Any day the New York Stock Exchange is open for trading.
Valuation Period: The time interval between the closing of the New York Stock
Exchange on consecutive Valuation Days. Variable Account: Separate Account
VA-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 Accumulated Value: The total dollar amount of all Variable
Accumulation Units under each Sub-Account of the Variable Account held for the
Policy prior to the Annuity Date. The Variable Accumulated Value prior to the
Annuity Date is equal to: (a) Net Premiums allocated to the Sub-Accounts; plus
or minus (b) any increase or decrease in the value of assets of the Sub-Accounts
due to investment results; less (c) the daily Mortality and Expense Risk Charge;
less (d) the daily Administrative Expense Charge; less (e) reductions for the
annual Policy Fee deducted on the last business day of each Policy Year; plus or
minus (f) amounts transferred to or from the Fixed Account; less (g) any
applicable Transfer Fees; and less (h) withdrawals from the Sub-Accounts.
Variable Accumulation Unit: A unit of measure used to determine the 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. Withdrawals: Refers to partial withdrawals, full
surrenders, and systematic withdrawals that are paid in cash to the Owner or
person(s) specified by 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.
<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) non-qualified plans; (b) as an
individual retirement annuity that qualifies for special tax treatment under
Code Section 408 and whose initial Premium is a rollover or transfer from a
qualified retirement plan receiving special tax treatment under Code Sections
401(a), 403(b) and 408 (a "rollover IRA"); or (c) with Transamerica's prior
approval, as an individual retirement annuity that qualifies for special tax
treatment under Code Section 408A and whose initial Premium is a rollover,
transfer or conversion from other individual retirement plans issued under
Sections 408 or 408A of the Code (a "rollover Roth IRA"). Additionally, with
Transamerica's prior permission, the Policy may be used as an IRA or Roth IRA
whose initial Premium is limited to the contribution limitations of the Code (a
"contributory IRA" or "contributory Roth IRA") under Sections 408 or 408A of the
Code, as an annuity under Section 403(b) of the Code and with various types of
qualified pension and profit-sharing plans under Section 401(a) of the Code. The
Policy is issued by Transamerica Life Insurance Company of New York (formerly
called First Transamerica Life Insurance Company) ("Transamerica"), a
wholly-owned subsidiary of Transamerica Occidental Life Insurance Company,
having its principal office at 100 Manhattanville Road, Purchase, New York
10577, telephone (914) 701-6000. The change in name to Transamerica Life
Insurance Company of New York is effective May 1, 1997.
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
(see "Annuity Date", page 30).
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 generally be at least $5,000
unless, with Transamerica's permission, the Policy is sold as a Qualified Policy
to certain retirement plans. Generally, 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. The minimum Net Premium that may be allocated to an
Inactive Sub-Account is $500. (See "Policy Application and Premiums" page 21.)
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 16.)
Assets of each Sub-Account are invested in a specified mutual fund Portfolio.
Each Sub-Account uses its assets to purchase, at their net asset value, shares
of a specific Series of Dreyfus Variable Investment Fund or a Portfolio of
Dreyfus Investment Portfolios or in the Growth Portfolio of Transamerica
Variable Insurance Fund, Inc., or in Dreyfus Stock Index Fund or in The Dreyfus
Socially Responsible Growth Fund, Inc. (together "The Funds"). The following
eighteen Portfolios are currently available for investment in the Variable
Account. All Sub-Accounts may not be available May 1, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Money Market Capital Appreciation International Value Transamerica Growth
Special Value Stock Index Disciplined Stock Core Value
Zero Coupon 2000 Socially Responsible Growth Small Company Stock MidCap Stock
Quality Bond Growth and Income Balanced
Small Cap International Equity Limited Term High Income
</TABLE>
The Funds pay their investment adviser 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 27.
For more information about the Funds, see "The Funds" page 17 and the
accompanying Funds' prospectuses. The Fixed Account
The amounts in the Fixed Account will be credited interest at a
rate of not less than 3% annually. Transamerica
may credit interest at a rate in excess of 3% at its discretion for any
class. Each interest rate will be guaranteed to be
credtied for at least 12 months. (See "The Fixed Account" page 20.)
Investment Option Limit
Currently, the owner may not elect more than a total of eighteen
investment options over the life of the Policy.
Investment options include Sub-Accounts of the Variable Account and the Fixed
Account. See "Investment Option Limit" page
22.
Transfers Before the Annuity Date
Prior to the Annuity Date, the Owner may make transfers between and
among the Sub-Accounts of the Variable Account. A "transfer" is the reallocation
of amounts among the Sub-Accounts of the Variable Account.
There is a $10 fee for each transfer in excess of 18 per Policy
Year. Transfers specifically excluded under
certain programs will not count towards the 18 free transfers per
Policy Year. (See "Transfers" on page 23.) (See
"Transfer Fee" page 29.) (For Transfers after the Annuity Date, see "After the
Annuity Date" page 24.)
Withdrawals
All or part of the Cash Surrender Value for a Policy may be withdrawn
by the Owner on or before the Annuity Date. However, amounts withdrawn may be
subject to a Contingent Deferred Sales Load. (See "Contingent Deferred Sales
Load" page 27.) 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 and Qualified Policies may be subject to severe restrictions. (See
"Qualified Policies" page 32 and "Federal Tax Matters" page 33.) (Except for
rollover IRA's, Qualified Policies are sold only with Transamerica's prior
permission.) The annual Policy Fee generally will be deducted on a full
surrender of a Policy. (See "Cash Withdrawals" page 24 for additional
limitations regarding withdrawals.) 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 withdrawn
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. TRANSAMERICA GUARANTEES THAT THE AGGREGATE CONTINGENT
DEFERRED SALES LOAD WILL NEVER EXCEED 6% OF THE PREMIUMS. After a Premium has
been held by Transamerica for seven Policy Years, the remaining Premium may be
withdrawn without charge.
Certain amounts may be withdrawn free of any Contingent Deferred Sales
Load. The Owner may make withdrawals up to the "Allowed Amount" (described
below) without incurring a Contingent Deferred Sales Load each Policy Year
before the Annuity Date. During the first Policy Year, the Allowed Amount is
equal to accumulated earnings not previously withdrawn. For the first
withdrawal, and only the first withdrawal, in a Policy Year after the first
Policy Year, the available Allowed Amount is equal to the sum of (a) 100% of
Premiums not previously withdrawn and received at least seven Policy years
before the date of withdrawal; plus (b) the greater of (i) the accumulated
earnings not previously withdrawn or (ii) 10% of Premiums received at least one
but less than seven complete Policy Years before the date of withdrawal not
reduced to take into account any withdrawals deemed to be made from such
Premiums. After the first withdrawal in a Policy Year, after the first Policy
Year, the available Allowed Amount is equal to the sum of: (a) 100% of Premiums
not previously withdrawn and received at least seven complete Policy Years
before the date of withdrawal; plus (b) accumulated earnings not previously
withdrawn. Withdrawals will always be made first from accumulated earnings, and
then from Premiums on a first in first out basis. Therefore, accumulated
earnings could be withdrawn as part of the first withdrawal in a Policy Year
and, therefore, not be available for withdrawals made later that Policy Year. If
an Allowed Amount is not withdrawn during a Policy Year. However, accumulated
earnings, if any, in an Owner's Policy Value are always available as the Allowed
Amount. No withdrawals are allowed with regard to Premiums made by a check which
has not cleared. (See "Contingent Deferred Sales Load" page 27 and "Cash
Withdrawals" page 24.) 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 28.)
TRANSAMERICA GUARANTEES THAT THIS MORTALITY AND EXPENSE RISK CHARGE WILL NOT BE
INCREASED.
Transamerica also deducts a daily charge (the "Administrative Expense
Charge") equal to a percentage of the value of the net assets in the Variable
Account corresponding to an effective annual rate of 0.15% to help cover some of
the costs of administering the Policy and the Variable Account. This charge may
change, but it is guaranteed not to exceed a maximum effective annual rate of
0.25%. (See "Administrative Charges" page 28).
There is also an administrative charge (the "Policy Fee") each year for
Policy maintenance. This fee is currently $30 (or 2% of the Policy Value, if
less) but 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. The Policy Fee will be deducted at the end of the
Policy Year or when the Policy is surrendered, if earlier. The Policy 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 28.)
A $10 charge is imposed for each transfer in excess of eighteen
during a Policy Year. (See "Transfer Fee" page
29.)
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 and/or from the Annuity Purchase Amount
upon annuitization. (See "Premium Taxes" page 28.)
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the Owner will bear directly and indirectly. The table
reflects expenses of the Variable Account as well as of the Portfolios. The
table assumes that the entire Policy Value is in the Variable Account. The
information set forth should be considered together with the narrative provided
under the heading "Charges and Deductions" on page 27 of this Prospectus, and
with the Funds' prospectuses. In addition to the expenses listed below, premium
taxes may be applicable.
Policy Transaction Expenses(1)
Sales Load Imposed on Premiums 0
Maximum Contingent Deferred Sales Load(2) 6%
Range of Contingent Deferred Sales Load Over Time
Contingent Deferred
Policy Years since Sales Load
Premiums Receipt Percentage
Less than 2 years 6%
2 years but less than 4 years 5%
4 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more 0%
Transfer Fee (first 18 per Policy Year)(3) 0
Systematic Withdrawal Fee(3) 0
Policy Fee(4) $30
Variable Account Annual Expenses(1)
Mortality and Expense Risk Charges 1.25%
Administrative Expense Charge(5) 0.15%
Other Fees and Expenses of the Variable Account 0.00%
Total Variable Account Annual Expenses 1.40%
<PAGE>
<TABLE>
<CAPTION>
Portfolio Annual Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(6)
-------------------------------------- ------------------ ------------------ --------------------------
Management Other Total Portfolio
Portfolios Fee Expenses Annual Expense
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
<S> <C> <C> <C>
Money Market 0.50% 0.11% 0.61%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Special Value 0.75% 0.24% 0.99%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Zero Coupon 2000 0.45% 0.16% 0.61%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Quality Bond 0.65% 0.10% 0.75%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Small Cap 0.75% 0.03% 0.78%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Capital Appreciation 0.75% 0.05% 0.80%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Stock Index Fund 0.25% 0.03% 0.28%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Socially Responsible Growth Fund 0.75% 0.07% 0.82%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Growth and Income 0.75% 0.05% 0.80%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
International Equity 0.75% 0.31% 1.06%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
International Value 1.00% 0.42% 1.42%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Disciplined Stock 0.75% 0.27% 1.02%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Small Company Stock 0.75% 0.37% 1.12%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Balanced 0.75% 0.25% 1.00%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Limited Term High Income 0.65% 0.24% 0.89%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Transamerica Growth 0.75% 0.10% 0.85%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
Core Value 0.75% 0.25% 1.00%
-------------------------------------- ------------------ ------------------ --------------------------
-------------------------------------- ------------------ ------------------ --------------------------
MidCap Stock 0.75% 0.25% 1.00%
-------------------------------------- ------------------ ------------------ --------------------------
</TABLE>
Expense information regarding the Portfolios has been provided by the Funds.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. In preparing the table above and
the examples that follow, Transamerica has relied on the figures provided by the
Funds. These figures are for the year ended December 31, 1997, except for Core
Value and MidCap Stock, which are annualized estimates for the year 1998, their
first year of operation. Actual expenses in future years may be higher or lower
than the figures above.
Notes to Fee Table:
(1) The Policy Transaction Expenses apply to each Policy, regardless of how
Policy Value is allocated between the Variable Account and the Fixed
Account. The Variable Account Annual Expenses do not apply to the Fixed
Account.
(2) A portion of the Premiums may be withdrawn each year after the first
Policy Year without imposition of any Contingent Deferred Sales Load;
after a Premium has been held by Transamerica for seven Policy Years,
the remaining may be withdrawn free of any Contingent Deferred Sales
Load ("CDSL"); accumulated earnings may always be withdrawn without
imposition of a CDSL. (See "Contingent Deferred Sales Load" page 27.)
(3) A Transfer Fee of $10 will be imposed for each transfer in excess of 18
in a Policy Year. Transamerica may also impose a fee (of up to $25 per
year) if the systematic withdrawal option is elected. (See "Charges and
Deductions" page 27.)
(4) 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 27.)
(5) The current annual Administrative Expense Charge is 0.15%;
it may be increased to 0.25%. (See "Charges and
Deductions" page 27.)
(6) From time to time, each Portfolio's investment adviser, in its sole
discretion, may waive all or part of its fees and/or voluntarily assume
certain Portfolio expenses. The expenses shown in the above Portfolio
Annual Expenses table reflect the Portfolio's Adviser's waiver of fees
or reimbursement of expenses, if applicable, for calendar year 1997,
except for Core Value and MidCap Stock Portfolios which are annualized
estimates of expenses to be paid in 1998. It is anticipated that such
waivers and reimbursements will continue for calendar year 1998.
Without such waivers or reimbursements, the management fee, other
expenses and total portfolio annual expenses for 1997 would have been,
as a percentage of assets, 0.75%, 0.23% and 0.98% for Transamerica
Growth Portfolio and 0.65%, 0.29%, and 0.94% for Limited Term High
Income Portfolio, respectively.
Examples*
The following three examples reflect no Policy Fee deduction because
the approximate average Policy Value is more than $50,000 and the Policy Fee is
waived for Policy Value over $50,000.
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 29.)
These examples show expenses without reflecting fee waivers and
reimbursements for 1997. Except for the Limited Term High Income and
Transamerica Growth Portfolios, it is not anticipated that there will be any fee
waivers or expense reimbursements in the future.
Example 1
If the Owner surrenders the 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market $74.40 $108.05 $141.94 $233.76
Special Value $78.21 $119.55 $162.05 $272.63
Zero Coupon 2000 $74.40 $108.05 $141.94 $233.76
Quality Bond $75.81 $112.30 $149.39 $248.27
Small Capital $76.11 $113.21 $150.98 $251.35
Capital Appreciation $76.31 $113.82 $152.04 $253.39
Stock Index $71.08 $97.81 $124.16 $198.70
Socially Responsible Growth $76.51 $114.42 $153.10 $255.44
Growth Income $76.31 $113.82 $152.04 $253.39
International Equity $78.91 $121.65 $165.71 $279.62
International Value $82.51 $132.40 $184.33 $314.73
Disciplined Stock $78.51 $120.45 $163.62 $275.63
Small Company Stock $79.51 $123.45 $168.84 $285.56
Balanced Fund $78.31 $119.85 $162.57 $273.63
Limited Term High Income $77.21 $116.53 $156.79 $262.55
Transamerica Growth Fund $76.84 $115.58 $154.87 $261.67
Core Value $78.36 $120.28 $162.95 $279.12
MidCap Stock $78.36 $120.28 $162.95 $279.12
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:
1 Year 3 Years 5 Years 10 Years
Money Market $20.40 $63.05 $108.29 $233.76
Special Value $24.21 $74.55 $127.55 $272.63
Zero Coupon 2000 $20.40 $63.05 $108.29 $233.76
Quality Bond $21.81 $67.30 $115.43 $248.27
Small Capital $22.11 $68.21 $116.95 $251.35
Capital Appreciation $22.31 $68.82 $117.96 $253.39
Stock Index $17.08 $52.96 $91.26 $198.70
Socially Responsible Growth $22.51 $69.42 $118.98 $255.44
Growth Income $22.31 $68.82 $117.96 $253.39
International Equity $24.91 $76.65 $131.05 $279.62
International Value $28.51 $87.40 $148.89 $314.73
Disciplined Stock $24.51 $75.45 $129.05 $275.63
Small Company Stock $25.51 $78.45 $134.05 $285.56
Balanced Fund $24.31 $74.85 $128.05 $273.63
Limited Term High Income $23.21 $71.53 $122.51 $262.55
Transamerica Growth Fund $22.84 $70.58 $121.22 $261.67
Core Value $24.36 $75.28 $129.30 $279.12
MidCap Stock $24.36 $75.28 $129.30 $279.12
Example 3
If the Owner elects to annuitize at the end of the applicable period
under an Annuity Form with life contingencies,** he/she would pay the following
expenses on a $1,000 Initial Premium assuming a 5% annual return on assets:
1 Year 3 Years 5 Years 10 Years
Money Market $74.40 $63.05 $108.29 $233.76
Special Value $78.21 $74.55 $127.55 $272.63
Zero Coupon 2000 $74.40 $63.05 $108.29 $233.76
Quality Bond $75.81 $67.30 $115.43 $248.27
Small Capital $76.11 $68.21 $116.95 $251.35
Capital Appreciation $76.31 $68.82 $117.96 $253.39
Stock Index $71.08 $52.96 $91.26 $198.70
Socially Responsible. Growth $76.51 $69.42 $118.98 $255.44
Growth Income $76.31 $68.82 $117.96 $253.39
International Equity $78.91 $76.65 $131.05 $279.62
International Value $82.51 $87.40 $148.89 $314.73
Disciplined Stock $78.51 $75.45 $129.05 $275.63
Small Company Stock $79.51 $78.45 $134.05 $285.56
Balanced Fund $78.31 $74.85 $128.05 $273.63
Limited Term High Income $77.21 $71.53 $122.51 $262.55
Transamerica Growth Fund $76.84 $70.58 $121.22 $261.67
Core Value $78.36 $75.28 $129.30 $279.12
MidCap Stock $78.36 $75.28 $129.30 $279.12
</TABLE>
* In preparing the examples above, Transamerica has relied on the data
provided by the Funds. Transamerica has no reason to doubt the accuracy
of that information, but Transamerica has not verified those figures.
** For 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. The assumed
5% annual return is only hypothetical. It is
not a representation of past or future returns. Actual returns could be
greater or less than this assumed rate.
Annuity Payments
Annuity Payments will be made either on a fixed basis or a variable
basis or a combination of a fixed and variable basis as the Owner selects. The
Owner has flexibility in choosing the Annuity Date for his or her 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 30.)
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 31.)
Payments on Death Before the Annuity Date
A death benefit is paid on the death of either the Owner or Annuitant
prior to the Annuity Date. If the deceased Owner or Annuitant, as applicable,
had not attained their 85th birthday, the death benefit for a Policy is the
greatest of (a) the Policy Value, (b) all Premiums paid to the Policy less
withdrawals and any premium taxes applicable to those withdrawals or (c) the
greatest Policy Anniversary Value prior to the earliest of the Annuitant's or
Owner's 75th birthday increased by Premiums paid since that Policy Anniversary
less withdrawals and any premium taxes applicable to those withdrawals. If the
deceased Owner or Annuitant, as applicable, had attained age 85, the death
benefit will be the Policy Value. 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 26.) 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, except that mandatory withholding may apply for
certain Qualified Policies. In addition, a federal penalty tax may apply to
certain distributions or deemed distributions. (See "Federal Tax Matters" page
33.) Right to Cancel
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 (or longer if required by New York Department of Insurance) 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 amounts allocated to the
Fixed Account and the Variable Accumulated Value determined as of the date the
notice is postmarked within seven days after receipt of such notice to cancel
and the returned Policy. Questions
Any questions about procedures or the Policy will be answered by the
Transamerica Annuity Service Center ("Service Center") at P.O. Box 31728,
Charlotte, North Carolina 28231-1728 or call (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 the Funds 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 benefits, or on other provisions of the Policy. This
Prospectus does not describe such limitations or restrictions. (See "Federal Tax
Matters" page 33.)
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the
financial statements of the Variable Account. The data should be read in
conjunction with the financial statements, related notes, and other financial
information included in the Statement of Additional Information.
The following table sets forth certain information regarding the
Sub-Accounts for the period from commencement of business operations of the
Sub-Account through December 31, 1997. The Core Value, MidCap Stock and
Transamerica Growth Sub-Accounts are not included because these Sub-Accounts did
not commence operations during1997. The Variable Accumulation Unit values and
the number of Variable Accumulation Units outstanding for each Sub-Account for
the periods shown are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, 1993
- -----------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
(Inception 1/4/93)(Inception 1/4/93)(Inception 1/4/93)(Inception 1/4/93) (Inception 1/4/93)
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $1.021 $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
<PAGE>
Capital Appreciation Stock IndexSocially Responsible
Sub-Account Sub-Account Sub-Account
(Inception- (Inception (Inception-
4/5/93 1/4/93 10/7/93
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
Year Ending December 31, 1994
---------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
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 8,547,165.659 820,985.237 203,164.533 164,657.770 612,327.237
Capital Appreciation Stock Index Socially Responsible
Sub-Account Sub-Account Sub-Account
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 285,265.910 190,496.642 24,171.591
Year Ending December 31, 1995
---------------------------------------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $1.048 $12.496 $12.672 $11.710 $40.064
Accumulation Unit Value
at End of Period $1.093 $12.292 $14.740 $13.908 $51.121
Number of Accumulation
Units Outstanding
at End of Period 9,084,943.487 666,488.480 351,788.006 454,139.991 817,445.023
Growth and Income International Equity
Sub-Account Sub-Account
Capital Appreciation Stock Index Socially Responsible (Inception (Inception
Sub-Account Sub-Account Sub-Account 1/5/95) 1/5/95)
Accumulation Unit Value
at Beginning of Period $13.373 $16.437 $13.377 $12.235 $12.024
Accumulation Unit Value
at End of Period $17.610 $22.172 $17.752 $19.426 $12.964
Number of Accumulation
Units Outstanding
at End of Period 587,928.246 365,482.688 49,020.846 734,393.096 61,152.467
Year Ending December 31, 1996
---------------------------------------------------------------------------------------------------------
Money Special Zero Coupon Quality
Market Value 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $1.093 $12.292 $14.740 $13.908 $51.121
Accumulation Unit Value
at End of Period $1.132 $11.682 $14.911 $14.142 $58.773
Number of Accumulation
Units Outstanding
at End of Period 10,392,468.634 489,733.637 396,886.829 664,469.782 1,000,594.786
International
Capital Appreciation Stock Index Socially Responsible Growth and Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $17.610 $22.172 $17.752 $19.426 $12.964
Accumulation Unit Value
at End of Period $21.802 $26.791 $21.221 $23.131 $14.267
Number of Accumulation
Units Outstanding
at End of Period 1,074,614.761 585,454.420 103,732.717 1,906,011.179 226,976.242
International Value Disciplined Stock Small Company Stock
Sub-Account Sub-Account Sub-Account
(Inception 5/1/96) (Inception 5/1/96) (Incepiton 5/1/96)
Accumulation Unit Value
at Beginning of Period $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $10.244 $11.776 $10.772
Number of Accumulation
Units Outstanding
at End of Period 47,815.855 381,884.114 212,878.654
Year Ending December 31,
1997_________________________________________________________________________________________________________
Money Special Zero Coupon Quality
Market Value 2000 Bond Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $1.132 $11.682 $14.911 $14.142 $58.773
Accumulation Unit Value
at End of Period $1.175 $14.185 $15.736 $15.260 $67.668
Number of Accumulation
Units Outstanding
at End of Period 12,049,327.817 1,017,390.458 424,325.816 987,773.886 1,031,483.594
International
Capital Appreciation Stock Index Socially Responsible Growth and Income Equity
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period $21.802 $26.791 $21.221 $23.131 $14.267
Accumulation Unit Value
at End of Period $27.532 $35.128 $26.879 $26.509 $15.422
Number of Accumulation
Units Outstanding
at End of Period 1,798,913.636 808,857.987 230,281.724 2,179,109.968 378,355.293
<PAGE>
Limited Term
High Income Balanced
International Value Disciplined Stock Small Company Stock Sub-Account Sub-Account
Sub-Account Sub-Account Sub-Account (Inception 5/1/97)(Inception 5/1/97)
Accumulation Unit Value
at Beginning of Period $10.244 $11.776 $10.772 $10.000 $10.000
Accumulation Unit Value
at End of Period $10.982 $15.272 $12.935 $10.852 $11.738
Number of Accumulation
Units Outstanding
at End of Period 172,941.244 1,196,912.676 513,524.112 473,373.863 333,714.857
</TABLE>
Financial Statements for the Variable Account and Transamerica
The financial statements and reports of independent auditors for the
Variable Account and Transamerica are contained in the Statement of Additional
Information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the Sub-Accounts of the Variable Account. In addition,
Transamerica may advertise the effective yield of the Money Market Sub-Account.
These figures will be based on historical information and are not intended to
indicate future performance. The yield of the Money Market Sub-Account refers to
the annualized income generated by an investment in that Sub-Account over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in that Sub-Account is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a Sub-Account (other than the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Sub-Account
over a specified thirty-day period. The yield is calculated by assuming that the
income generated by the investment during that thirty-day period is generated
each thirty-day period over a twelve-month period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any Contingent
Deferred Sales Load or premium taxes that may be applicable to a particular
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.
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 and retirement plans generally, using graphs, charts and other
illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the Sub-Accounts. The non-standard average annual total return and cumulative
total return will assume that no Contingent Deferred Sales Load is applicable.
Transamerica may from time to time also disclose yield, standard total returns,
and non-standard total returns for any or all Sub-Accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the
Sub-Accounts based on the performance of a Portfolio prior to the time the
Variable Account commenced operations.
TRANSAMERICA LIFE INSURANCE COMPANY OF NEW YORK
AND THE VARIABLE ACCOUNT
Transamerica Life Insurance Company of New York
Transamerica Life Insurance Company of New York, formerly called 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 Transamerica Life Insurance Company of New York
is100 Manhattanville Road, Purchase, New York 10577. The name change to
Transamerica Life Insurance Company of New York was effective May 1, 1997.
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 eighteen Sub-Accounts, each of which
invests solely in a specific corresponding
Portfolio. (See "The Funds" page 17.) Changes to the Sub-Accounts may be
made at the discretion of Transamerica. (See
"Addition, Deletion, or Substitution" page 20.)
THE FUNDS
The Variable Account invests exclusively in Series of Dreyfus Variable
Investment Fund (the "Variable Fund"), Dreyfus Stock Index Fund (the "Stock
Index Fund"), The Dreyfus Socially Responsible Growth Fund, Inc. (the "Socially
Responsible Fund"), Portfolios of Dreyfus Investment Portfolios and the Growth
Portfolio of Transamerica Variable Insurance Fund, Inc. ("Transamerica VIF").
The Variable Fund was organized as an unincorporated business trust under
Massachusetts law pursuant to an Agreement and Declaration of Trust dated
October 29, 1986, commenced operations on August 31, 1990, and is registered
with the Commission as an open-end management investment company under the 1940
Act. Currently, thirteen Series (i.e., Portfolios) of the Variable Fund are
available for the Policies. Each Portfolio has separate investment objectives
and policies. As a result, each Portfolio operates as a separate investment
portfolio and the investment performance of one Portfolio has no effect on the
investment performance of any other Portfolio. The Stock Index Fund was
incorporated under Maryland law on January 24, 1989, commenced operations on
September 29, 1989, and is registered with the Commission as an open-end,
non-diversified, management investment company. The Socially Responsible Fund
was incorporated under Maryland law on July 20, 1992, commenced operations on
August 31, 1993, and is registered with the Commission as an open-end,
diversified, management investment company. Dreyfus Investment Portfolios was
organized as an unincorproated business trust under Massachusetts law pursuant
to an Agreement and Declaration of Trust dated May 14, 1993, is registered with
the Commission as an open-end management company under the 1940 Act and
commenced operations May 1, 1998. Currently, two Portfolios of Dreyfus
Investment Portfolios are available for the Policy. Transamerica VIF was
incorporated under Maryland law on June 23, 1995, commenced operations on
November 1, 1996, and is registered with the SEC as a management investment
company. However, the Commission does not supervise the management or the
investment practices and policies of any of the Funds. The assets of the
Variable Fund, the Socially Responsible Fund, the Stock Index Fund are each
separate from the assets of the other Funds.
The Dreyfus Corporation provides investment advisory and administrative
services to the Variable Fund and the Socially Responsible Fund. Mellon Equity
Associates provides index fund management services to the Stock Index Fund, with
The Dreyfus Corporation serving as the manager, in accordance with applicable
agreements with the Fund. Fayez Sarofim & Co. provides sub-investment advisory
services for the Capital Appreciation Portfolio. NCM Capital Management Group,
Inc., provides sub-investment advisory services for the Socially Responsible
Fund. Transamerica provides investment advisory services to Transamerica VIF,
with Transamerica Investment Services, Inc., providing sub-investment advisory
services.
The Portfolios are described below. See the Variable Fund, the
Stock Index Fund, the Socially Responsible Fund,
Dreyfus Investment Portfolio and Transamerica VIF prospectuses for more
information.
Money Market Portfolio
The Money Market Portfolio's investment objective is to achieve as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. It seeks to achieve its objective by investing in
short-term money market instruments. The investment advisory fee is payable
monthly at the annual rate of 0.50 of 1% of the value of the Portfolio's average
daily net assets. This Portfolio is neither insured nor guaranteed by the United
States Government and there can be no assurance that it will be able to maintain
a stable net asset value of $1.00 per share. Special Value Portfolio
The Special Value Portfolio's investment objective is to maximize total
return, consisting of capital appreciation and current income. It seeks to
achieve its objective by investing in a wide range of equity and debt securities
and money market instruments. An investment advisory fee is payable monthly to
The Dreyfus Corporation at the annual rate of 0.75 of 1% of the value of the
Portfolio's average daily net assets. Zero Coupon 2000 Portfolio
The Zero Coupon 2000 Portfolio's investment objective is to provide as
high an investment return as is consistent with the preservation of capital. It
seeks to achieve its objective by investing primarily in debt obligations of the
U.S. Treasury that have been stripped of their unmatured interest coupons,
interest coupons that have been stripped from debt obligations issued by the
U.S. Treasury and receipts and certificates for stripped debt obligations and
stripped coupons, including U.S. Government trust certificates (collectively,
"Stripped Treasury Securities"). The Portfolio's also may purchase certain other
types of stripped government or corporate securities. The Portfolio's assets
will consist primarily of portfolio securities which will mature on or about
December 31, 2000. The investment advisory fee is payable monthly at the annual
rate of 0.45 of 1% of the value of the Portfolio's average daily net assets.
Quality Bond Portfolio
The Quality Bond Portfolio's investment objective is to provide the
maximum amount of current income to the extent consistent with the preservation
of capital and the maintenance of liquidity. It seeks to achieve its objective
by investing principally in debt obligations of corporations, the U.S.
Government and its agencies and instrumentalities, and major banking
institutions. The investment advisory fee is payable monthly at the annual rate
of 0.65 of 1% of the value of the Portfolio's average daily net assets. Small
Cap Portfolio
The Small Cap Portfolio's investment objective is to maximize capital
appreciation. It seeks to achieve its objective by investing principally in
common stocks;under normal market conditions, the Portfolio's will invest at
least 65% of its total assets in companies with market capitalizations of less
than $1.5 billion at the time of purchase which The Dreyfus Corporation believes
to be characterized by new or innovative products, services or processes which
should enhance prospects for growth in the future earnings. The investment
advisory fee is payable monthly at the annual rate of 0.75 of 1% of the value of
the Portfolio's average daily net assets. Capital Appreciation Portfolio
The Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary goal. It seeks to achieve its goals by investing
in common stocks of domestic and foreign issuers. An investment advisory fee is
payable to The Dreyfus Corporation and a sub-investment advisory fee is payable
monthly to Fayez Sarofim & Co. at the aggregate annual rate of 0.75 of 1% of the
value of the Portfolio's average daily net assets. Growth and Income Portfolio
The Growth and Income Portfolio's investment objective is to provide
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. This Portfolio invests primarily in equity and debt
securities and money market instruments of domestic and foreign issuers. The
proportion of the Portfolio's assets invested in each type of security will vary
from time to time in accordance with The Dreyfus Corporation's assessment of
economic conditions and investment opportunities. An investment advisory fee is
payable monthly to The Dreyfus Corporation at the annual rate of 0.75 of 1% of
the value of the Portfolio's average daily net assets. International Equity
Portfolio
The International Equity Portfolio's investment objective is to
maximize capital appreciation. This Portfolio's
invests primarily in the equity securities of foreign issuers located
throughout the world. An investment advisory fee at
an annual rate of 0.75 of 1% of the value of the Portfolio's average
daily net assets is payable monthly to The Dreyfus
Corporation.
International Value Portfolio
The International Value Portfolio's investment objective is long-term
capital growth. This Portfolio invests primarily in a portfolio of publicly
traded equity securities of foreign issuers which would be characterized as
"value" companies according to criteria established by the Portfolio's
investment adviser. An investment advisory fee is payable monthly to The Dreyfus
Corporation at the annual rate of 1.00% of the value of the Portfolio's average
daily net assets. Disciplined Stock Portfolio
The Disciplined Stock Portfolio's investment objective is to provide
investment results that are greater than the total return performance of
publicly traded common stocks in the aggregate, as presented by the Standard &
Poor's 500 Composite Stock Price Index. This Portfolio will use quantitative
statistical modeling techniques to construct a portfolio in an attempt to
achieve its investment objective without assuming undue risk relative to the
broad stock market. An investment advisory fee is payable monthly to The Dreyfus
Corporation at the annual rate of 0.75 of 1% of the value of the Portfolio's
average daily net assets. Small Company Stock Portfolio
The Small Company Stock Portfolio's investment objective is to provide
investment results that are greater than the total return performance of
publicly traded common stocks in the aggregate as represented by the Russell
2500 Index. This Portfolio invests primarily in a portfolio of equity securities
of small- to medium-sized domestic issuers, while attempting to maintain
volatility and diversification similar to that of the Russell 2500 Index. An
investment advisory fee is payable monthly to the Dreyfus Corporation at the
annual rate of 0.75 of 1% of the value of the Portfolio's average daily net
assets. Balanced Portfolio The Balanced Portfolio's investment objective is to
provide investment results that are greater than the total return performance of
common stocks and bonds in the aggregate, as represented by a hybrid index, 60%
of which is composed of the common stocks in the Standard & Poor's 500 Composite
Stock Price Index and 40% of which is composed of the bonds in the Lehman
Brothers Intermediate Government/Corporate Bond Index. This Series invests
primarily in common stocks and bonds in proportion consistent with their
expected returns and risks as determined by The Dreyfus Corporation. An
investment advisory fee is payable monthly to the Dreyfus Corporation at the
annual rate of 0.75 of 1% of the value of the Portfolio's average daily net
assets. Limited Term High Income Portfolio
The Limited Term High Income Portfolio's investment objective is to
maximize total return, consisting of capital appreciation and current income.
This Portfolio seeks to achieve its objective by investing up to all of its
assets in a portfolio of lower rated fixed-income securities, commonly known as
"junk bonds," that, under normal market conditions, has an effective duration of
three and on-half years or less and an effective average portfolio maturity of
four years or less. Investments of this type are subject to a greater risk of
loss of principal and non-payment of interest. Investors should carefully assess
the risks associated with an investment in the Portfolio (those risks are
described in the Portfolio's prospectus). An investment advisory fee is payable
monthly to the Dreyfus Corporation at the annual rate of 0.65of 1% of the value
of the Portfolio's average daily net assets. Stock Index Fund
The Stock Index Fund's investment objective is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. The Stock Index Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation. The Stock Index Fund pays a
monthly management fee to The Dreyfus Corporation at the annual rate of 0.245 of
1% of the value of the Stock Index Fund's average daily net assets. Socially
Responsible Fund
The Socially Responsible Fund's primary goal is to provide capital
growth. It seeks to achieve this goal by investing principally in common stocks,
or securities convertible into common stock, of companies which, in the opinion
of the Fund's management, not only meet traditional investment standards, but
also show evidence that they conduct their business in a manner that contributes
to the enhancement of the quality of life in America. Current income is a
secondary goal. A management fee is payable monthly to The Dreyfus Corporation
and a sub-investment adviosry fee is payable monthly to NCM Capital Management
Group, Inc. at the aggregate annual rate of 0.75 of 1% of the value of the
Socially Responsible Fund's average daily net assets. Core Value Portfolio
The Core Value Portfolio is a diversified portfolios, the primary
investment objective of which is to provide long-term growth of capital; current
income is a secondary investment objective. The Portfolio anticipates that at
least 65% of the value of its total assets (except when maintaining a temporary
defensive position) will be invested in equity securities, such as common
stocks, preferred stock and securities convertible into common stocks, including
Depository Receipts, which would be characterized as "value" companies according
to criteria established by The Dreyfus Corporation. In general, the Portfolio's
investments are broadly diversified over a number of industries and, as a matter
of operating policy, the Portfolio will not invest more than 25% of its total
assets in any one industry. A management fee is payable monthly to The Dreyfus
Corporation at the annual rate of 0.75 of 1% of the Portfolio's average daily
net assets. MidCap Stock Portfolio
The MidCap Stock Portfolio is a diversified portfolio, the investment
objective of which is to provide investment results that are greater than the
total return performance of publicly-traded common stocks in the aggregate, as
represented by the Standard & Poor's MidCap 400 Index. Medium-size issuers will
include those U.S. companies with market capitalizations (market price per share
times the number of shares outstanding) generally ranging in value from $200
million to $5 billion. The Portfolio also may invest in large and small
capitalization companies, including emerging and cyclical growth companies.
Emerging and cyclical growth companies are firms which, while they may not have
a history of stable long-term growth, are nontheless expected to represent
attractive investments. The equity securities in which the Portfolio invests
consist of common stocks, preferred stocks and securtieis convertible into
common stocks, including those in the form of Depositary Receipts. The Portfolio
is not an index fund and its investments are not limited to securities of
issuers included in the S&P 400 Index. A management fee is payable monthly to
The Dreyfus Corporation at the annual rate of 0.75 of 1 of the Portfolio's
average daily net assets. Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc., seeks long-term capital growth. Common stock (list and
unlisted) is the basic form of investment. The Growth Portfolio invests
primarily in common stocks of growth companies that are considered by the
manager to be premier companies. In the manager's view, characteristics of
premier companies include one or more of the following: dominant market share;
leading brand recognition; proprietary products or technology; low-cost
production capability; and excellent management with shareholder orientation.
The manager of the Portfolio believes in long-term investing and places great
emphasis on the sustainability of the above competitive advantages. Unless
market conditions indicate otherwise, the manager also tries to keep the
Portfolio fully invested in equity-type securities and does not try to time
stock market movements. When in the judgment of the manager market conditions
warrant, the portfolio may, for temporary defensive purposes, hold part or all
of its assets in cash, debt or money market instruments. The Portfolio may
invest up to 10% of its assets in debt securities having a call on common stocks
that are rated below investment grade. A management fee of 0.75 of 1% of the
average daily net assets is payable monthly to Transamerica Occidental Life
Insurance Company, as adviser, and adviser pays Transamerica Investment
Services, Inc. a monthly fee of at the annual reate of 0.30 of 1% of the first
$50 million, 0.25 of 1% of the next $150 million and 0.20 of 1% of assets in
excess of $200 million.
Meeting objectives depends on various factors, including, but not
limited to, how well the portfolio managers anticipate changing economic and
market conditions. THERE IS NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL
ACHIEVE THEIR STATED OBJECTIVES.
An investment in the 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.
Transamerica receives fees from the Dreyfus Corporation or its
affiliates for providing certain administrative and or other services.
Additional information concerning the investment objectives and
policies of all of the Portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the Funds which accompany this Prospectus. The Funds' prospectuses should be
read carefully before any decision is made concerning the allocation of 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 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 FIXED ACCOUNT
This Prospectus is generally intended to serve as a disclosure document
only for the Policy and the Variable Account. For complete details regarding the
Fixed Account, see the Policy itself.
Premiums allocated to and amounts transferred to the Fixed Account
become part of the general account of Transamerica, which supports insurance and
annuity obligations. Because of exemptive and exvlusionary provisions, interests
in the general account have not been registered under the Securities Act of 1933
(the "1933 Act"), nor is the general account registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act,
and the Securities and Exchange Commission has not reviewed the disclosures in
this Prospectus which related to the Fixed Account.
The Fixed Account is part of the general account of Transamerica. The
general Account of Transamerica consists of all the general assets of
Transamerica, other than those in the Variable Account, or in any other
segregated asset account. Transamerica has sole discretion to invest the assets
of its general account subject to applicable law. The allocation or transfer of
funds to the Fixed Account does not entitle the Owner to share in the investment
experience of Transamerica's general account.
Transamerica guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the policies. However, Transamerica reserves the right to change
the minimum rate. Transamerica may credit interest at a rate in excess of 3% per
year. There is no specific formula for the determination of excess interest
credits. Some of the factors that the company may consider in determining
whether to credit excess interest to amounts allocated to the fixed account and
the amount in that account are general economic trends, rates of return
currently available and anticipated on the company's investments, regulatory and
tax requirements, and competitive factors.
Any interest credited to amounts allocated to the fixed account in
excess of 3% per year will be determined in the sole discretion of Transamerica.
The owner assumes the risk that interest credited to the fixed account
allocations may not exceed the minimum guarantee of 3% for any given year.
Rates of interest credited to the fixed account will be guaranteed for
at least twelve months and will vary by the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, Transamerica may change the annual rate of interest for
that class; this new annual rate of interest will remain in effect for at least
twelve months. New purchase payments made to the policy which are allocated to
the fixed account may receive different rates of interest. These rates of
interest may differ from those interest rates credited to amounts transferred
from the variable sub-accounts or guarantee period account and from those
credited to amounts remaining in the fixed account and receiving renewal rates.
These rates of interest may also differ from rates for allocations applied under
certain options and services Transamerica may be offering. Transfers from the
Fixed Account
Transfers from the Fixed Account into a Sub-Account of the Variable
Account are limited to four per Policy Year. The maximum transfer amount allowed
from the Fixed Account will be the maximum transfer amount in effect on the date
of such transfer during a Policy Year. The maximum transfer amount is a
percentage of the value of the Fixed Account as of the date of the last Policy
Anniversary. The percentage rate, which will be declared by Transamerica from
time to time, will be a minimum of 25% and, currently, is 25%. Transfers into
the Fixed Account
Transfers from a Sub-Account of the Variable Account into the Fixed
Account are not allowed during the 90 day period directly following any transfer
made from the Fixed Account in a Sub-Account of the Variable Account.
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 as rollover IRAs
and as rollover Roth IRAs that qualify for special federal income tax treatment.
With Transamerica's prior permission, the Policies may also be available as a
contributory IRAs, as contributory Roth IRAs, as Section 403(b) annuities and
for use in Section 401(a) qualified pension and profit sharing plans established
by corporate employers. Generally, Qualified Policies contain restrictive
provisions limiting the timing and amount of payments and distributions from the
Qualified Policy.
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 generally be at least $5,000.
Transamerica, may, in its discretion, accept lower initial Premiums for certain
Qualified Policies.
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. Policies
normally will not be issued with respect to Annuitants more than 80 years old,
although Transamerica in its discretion may waive this restriction in certain
cases.
If the Initial 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.
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
Premium allocated to the Fixed Account plus the Variable Accumulated Value,
determined as of the date the notice is postmarked, within seven days after
receipt of such notice to cancel and the returned Policy.
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"below). Additional Net Premiums are credited to the Policy as of the
date the payment is received. Currently, additional Premiums after the initial
Premium may not be made to Section 401(a) and Section 403(b) annuity Policies.
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 $500 to any selected
Sub-Account. The Owner may choose to allocate nothing to a particular
Sub-Account.
For IRAs, 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. This initial allocation
after the Free Look Period from the Money Market Sub-Account to the Sub-Accounts
selected by the Owner does not count towards the limit of 18 free transfers per
Policy Year. 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.
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 $500.
Investment Option Limit
Currently, the Owner may not allocate amounts to more than eighteen
investment options over the life of the Policy. Investment options include
Sub-Accounts of the Variable Account and the Fixed Account. Each Sub-Account and
the Fixed Account that ever received a transfer or purchase payment allocation
count as one towards this total of eighteen limit. Transamerica may waive this
limit in the future. For example, if the Owner makes an allocation to the Money
Market Sub-Account and later transfers all amounts out of this Money Market
Sub-Account, it would still count as one for the purposes of the limitation even
if it held no value. If the Owner transfers from a Sub-Account to another
Sub-Account and later back to the first, the count towards the limitation would
be two, not three.
POLICY VALUE
Before the Annuity Date, the Policy Value is the sum of the Fixed
Accumulated Value plus the Variable Accumulated Value.
A Valuation Period is the period between successive Valuation Days. It
begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on
each Valuation Day and ends at the close of the New York Stock Exchange on the
next succeeding Valuation Day. A Valuation Day is each day that the New York
Stock Exchange is open for regular business. The value of the Variable Account
assets is determined at the end of each Valuation Day. To determine the value of
an asset on a day that is not a Valuation Day, the value of that asset as of the
end of the next Valuation Day will be used.
The Variable Accumulated Value is expected to change from Valuation
Period to Valuation Period, reflecting the investment experience of all of the
selected Portfolios as well as the deductions for charges.
Net 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, 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 Sub-Accounts by giving a Written Request to the Service
Center subject to the following conditions: (1) the minimum amount which may be
transferred is $500; and (2) the minimum transfer to an Inactive Sub-Account is
$500. Transfers are restricted into or out of the Fixed Account. See the Fixed
Account, page 20. Transfers are also subject to such terms and conditions as may
be imposed by the Portfolios.
Transfer requests must specify the amounts being transferred from each
Sub-Account or the Fixed Account and the amounts being transferred into each
Sub-Account or the Fixed Account.
Transamerica imposes a transfer fee of $10 for each transfer over 18 in
a Policy Year. Transamerica reserves the right to waive the transfer fee or vary
the number of transfers without charge or not count transfers under certain
opitons or services for purposes of the allowed number without charge.
If a transfer reduces the value in a Sub-Account or the Fixed Account
to less than $500, then Transamerica reserves the right to transfer the
remaining amount along with the amount requested to be transferred in accordance
with the transfer instructions provided by the Owner. Under current law, there
will not be any tax liability to the Owner if the Owner makes a transfer.
Possible Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges 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. Dollar Cost Averaging
Prior to the Annuity Date, the Owner may request that amounts be
automatically transferred from one (and only one) of the Sub-Accounts which
invest in the Money Market, Quality Bond or Limited Term High Income Portfolios
or the Fixed Account (the "Source Account") to any of the Sub-Accounts on a
monthly basis by submitting a request to the Service Center in a form and manner
acceptable to Transamerica. The transfers will begin the month following, but no
sooner than one week following, receipt of such request, provided that Dollar
Cost Averaging transfers will not commence until the later of (a) 30 days after
the Policy Date, or (b) the estimated end of the Free Look Period (allowing 5
days for delivery of the Policy by mail). Transfers will continue for the
duration selected by the Owner unless (1) terminated by the Owner, (2)
automatically terminated by Transamerica because there are insufficient funds in
the applicable Sub-Account or Fixed Account, or (3) for other reasons as set
forth in the Policy. The Owner may request that monthly transfers be continued
for an additional period of time by giving notice to the Service Center in a
form and manner acceptable to Transamerica within 30 days prior to the last
monthly transfer. If no request to continue the monthly transfers is made by the
Owner, this option will terminate automatically with the last transfer.
In order to be eligible for Dollar Cost Averaging, the Owner must meet
the following conditions: (1) the value of the 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 or Fixed Account is $250 per
month; and (3) the minimum amount transferred into any other Sub-Account is the
greater of $250 or 10% of the amount being transferred. Dollar Cost Averaging
transfers can not be made from a Sub-Account from which Systematic Withdrawals
or Automatic Payouts are being made.
There is no charge for the Dollar Cost Averaging service and transfers
due to Dollar Cost Averaging will not count toward 18 transfers without charge
per Policy Year.
Dollar Cost Averaging transfers may not be made to the Fixed Account.
Automatic Asset Rebalancing
After Premiums have been allocated among the variable Sub-Accounts, the
performance of each Sub-Account may cause this allocation to change. The Owner
may instruct Transamerica to automatically rebalance the amounts in the Variable
Accumulated Value by reallocating amounts among the variable Sub-Accounts, at
the time, and in the percentages, specified in the Owner instructions to
Transamerica and accepted by Transamerica. The Owner may elect to have the
rebalancing done on an annual, semi-annual or quarterly basis. The Owner may
elect to have amounts allocated among the Sub-Accounts using whole percentages,
with a minimum of 10% allocated to each Sub-Account.
The Owner may elect to establish, change or terminate the Automatic
Asset Rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. The restrictions concerning transfers
described on page 29 will not be applicable to the Automatic Asset Rebalancing;
Automatic Asset Rebalancing will not count towards the limit of 18 free
transfers in a Policy Year. There is currently no charge for the Automatic Asset
Rebalancing, however, Transamerica reserves the right to charge a nominal amount
for this feature. Transamerica reserves the right to discontinue offering
Automatic Asset Rebalancing any time for any reason. After the Annuity Date
If a Variable Annuity Payout Option is elected, the Owner may transfer
Variable Account amounts after the Annuity Date by submitting a request in a
form acceptable to Transamerica 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 $50 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 any Policy
Fee, less any applicable Contingent Deferred Sales Load and less any applicable
premium taxes.
No withdrawals may be made after the Annuity Date. Only one partial
withdrawal 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 or Fixed Account.
If the Owner does not specify from where the withdrawal is to be made, the
withdrawal will be taken pro rata from all Sub-Accounts with current values. If
the requested withdrawal reduces the value of the Sub-Account from which the
withdrawal was made to less than $500, Transamerica reserves the right to
transfer the remaining value of that Sub-Account pro rata. 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 27). 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, except for distributions from certain Qualified Policies that may be
subject to mandatory 20% withholding. Withholding applies to the portion of the
withdrawal which is includible in income and subject to federal income tax. The
federal income tax withholding rate for partial withdrawals and full surrenders
is 10%, or 20% in the case of certain qualified plans, of the taxable amount of
the withdrawal. Withholding applies only if the taxable amount of the withdrawal
is at least $200. 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 33.) In addition, under New York law the Owner
may request Transamerica to withhold New York income tax from withdrawals.
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. The payment of a withdrawal from the Fixed Account may be delayed for up
to six months. If delayed for more than 10 days, interest will be paid on the
withdrawal amount up to the date of payment.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK FOR AMOUNT ALLOCATED TO THE
VARIABLE ACCOUNT 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, only with
Transamerica's prior permission (except for rollover IRA's), 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 have withdrawals automatically made from one or
more Sub-Account(s) on a monthly basis. (Other distribution modes may be
permitted.) The withdrawals will commence the month following, but no sooner
than one week following, receipt of Written Notice, except that they will not
commence sooner than the later of (a) 30 days after the Policy Date or (b) the
end of the Free Look Period. Upon written notice to the Owners, Transamerica may
change the day of the month on which withdrawals are made under this option.
Withdrawals will be from the Sub-Account(s) and in the percentage allocations
specified by the Owner. If no specifications are made, withdrawals will be pro
rata from all Sub-Account(s) and Fixed Account with value. Systematic
Withdrawals can not be made from a Sub-Account from which Dollar Cost Averaging
transfers are being made.
To be eligible for the Systematic Withdrawal Option, the Policy Value
must be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. The maximum monthly amount that can be withdrawn
on an annual basis is equal to the sum, as of the date of the first withdrawal,
of (a) 10% of Premiums that are less than seven Policy Years old and (b) 10% of
remaining Premiums that are at least seven Policy Years old.
Systematic withdrawals are not subject to the Contingent Deferred
Sales Load but can be reduced by any applicable
premium tax. Systematic withdrawals may be taxable, subject to
withholding, and subject to the 10% penalty tax. (See
"Federal Tax Matters" page 33.)
The systematic withdrawals will continue unless terminated by the Owner
or automatically terminated by Transamerica as set forth in the Policy. If this
option is terminated it may not be elected again until the next Policy
Anniversary. Only one partial withdrawal can be made while the Systematic
Withdrawal Option is in effect and a second partial withdrawal taken while this
option is in effect will automatically terminate the Systematic Withdrawal
Option and any amount requested as a partial withdrawal (including the first in
a Policy Year) will be subject to a Contingent Deferred Sales Load to the extent
it exceeds accumulated earnings.
Transamerica reserves the right to impose an annual fee of an amount
not to exceed $25 per Policy year for administrative expenses associated with
processing the systematic withdrawals. This fee, which is currently waived, will
be deducted from each systematic withdrawal in equal installments during a
Policy Year. Consult your tax adviser and, if applicable, the particular
retirement plan, before requesting withdrawals from a Qualified Policy. There
may be severe restrictions with regard to withdrawals from Qualified Policies.
Automatic Payout Option ("APO")
Prior to the Annuity Date, the Owner may elect the Automatic Payout
Option ("APO") to satisfy minimum distribution requirements under the Code for
certain Qualified Policies. See the Automatic Payout Option discussion under
Qualified Policies on page 32.
DEATH BENEFIT
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 premium taxes
applicable to those withdrawals 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 all withdrawals and any
premium taxes applicable to those withdrawals 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. The Death Benefit will be determined
as of the Valuation Period during which the later of (a) Proof of Death of the
Owner or Annuitant is received by the Service Center or (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 will remain in the Sub-Accounts as previously specified by the
Owner or as reallocated pursuant to instructions received by Transamerica from
all Beneficiaries. Therefore, the Policy Value will fluctuate with investment
performance of the applicable Sub-Account(s) and accordingly, the amount of the
death benefit will depend 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 to make
the payment. The death benefit may be paid 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 33.)
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.
<PAGE>
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 upon the death of the Annuitant the
Contingent Annuitant will become the Annuitant and no Death Benefit will be paid
at that time. Death of Owner Prior to the Annuity Date
If an Owner dies before the Annuity Date, a death benefit will be
paid to that Owner's Beneficiary. If the Policy has Joint Owners, the surviving
Joint Owner will be 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 or receives payment of the death benefit. The payment of the death
benefit may be subject to certain distribution requirements under the federal
income tax laws. (See "Federal Tax Matters" page 33.)
Death of Annuitant or Owner After the Annuity Date
If the Annuitant or an Owner dies after the annuity starts, the
remaining undistributed portion, if any, of the 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. If the
Owner is not the Annuitant, upon an Owner's death, any remaining ownership
rights will pass to the Owner's Beneficiary.
CHARGES AND DEDUCTIONS
No deductions are made from 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
or the Fixed 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 Policy Years Contingent Deferred Sales Load
Since Receipt of Each Premium As a Percentage of Premium
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.
Certain amounts may be withdrawn free of any Contingent Deferred Sales
Load. The Owner may make withdrawals up to the "Allowed Amount" (described
below) without incurring a Contingent Deferred Sales Load each Policy Year
before the Annuity Date. During the first Policy Year, the Allowed Amount is
equal to accumulated earnings not previously withdrawn. For the first
withdrawal, and only the first withdrawal in a Policy Year after the first
Policy Year, the available Allowed Amount is equal to the sum of (a) 100% of
Premiums not previously withdrawn and received at least seven Policy years
before the date of withdrawal; please (b) the greater of (i) the accumulated
earnings not previously withdrawn or (ii) 10% of Premiums received at least one
but less than seven complete Policy Years before the date of withdrawal not
reduced to take into account any withdrawals deemed to be made from such
Premiums. After the first withdrawal in a Policy Year, after the first Policy
Year, the available Allowed Amount is equal to the sum of: (a) 100% of Premiums
not previously withdrawn and received at least seven complete Policy Years
before the date of withdrawal; plus (b) accumulated earnings not previously
withdrawn. Withdrawals will always be made first from accumulated earnings, and
then from Premiums on a first in first out basis, so that accumulated earnings
may be depleted with the first withdrawal and the 10% of Premiums discussed
above is not used in the calculation of the Allowed Amount. If an Allowed Amount
is not withdrawn during a Policy Year, it does not carry over to the next Policy
Year. However, accumulated earnings, if any, in an Owner's Policy Value are
always available as the Allowed Amount. No withdrawals are allowed with regard
to Premiums made by a check which has not cleared.
Some Policy Owners may hold Policies which, when originally issued,
provided for an Allowed Amount which was equal to the sum of (1) all Premiums,
not previously withdrawn and held more then seven Policy Years plus (2) 10% of
Premiums held between one and seven Policy Years not reduced by any withdrawals
made from such Premiums. Under these Policies, withdrawals were made first from
Premiums (on a first in first out basis) then from earnings. The Allowed Amount
applicable to these Policy Owners will be determined by whichever formula
provides them with the larger amount available, for full surrenders only,
without a Contingent Deferred Sales Load.
In addition, no Contingent Deferred Sales Load is assessed: (a) upon
annuitization to an option involving life contingencies on or after the third
Policy Anniversary; (b) on distributions resulting from the death of the Owner
or Annuitant before the Annuity Date; (c) upon withdrawals of Policy Value among
the Sub-Accounts under the Systematic Withdrawal Option; (d) 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. No Policy
Fee will be deducted for a Policy Year if the Policy Value exceeds $50,000 on
the last business day of the Policy Year or as of the date the Policy is
surrendered. The Policy Fee may be changed upon 30 days advance written notice,
subject to the prior approval of the New York State Insurance Department 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 or
from the Fixed Account if there are insufficient funds in the Sub-Accounts.
After the Annuity Date, an annual Annuity Fee of $30 will be deducted
in equal amounts from each Variable Annuity Payment made during the year ($2.50
each month if monthly payments). This fee will not be changed. No Annuity Fee
will be deducted from Fixed Annuity Payments.
Transamerica also makes a deduction (the Administrative Expense Charge)
from the Variable Account at the end of each Valuation Period (both before and
after the Annuity Date) at an effective current annual rate of 0.15% of assets
held in each Sub-Account for those administrative expenses attributable to the
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. The administrative charges do not bear any
relationship to the actual administrative costs of a particular Policy. 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. 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 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 that may be
greater than the Policy Value. In this way, Transamerica bears the risk of
unfavorable experience in the Sub-Accounts.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the 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 a 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.
In certain limited circumstances, a broker-dealer or other entity
distributing the Policies may elect to pay to
Transamerica an amount equal to the premium taxes that would otherwise be
attributable to that entity's customers. In such
cases, Transamerica will not impose a premium tax charge on those Policies.
Transfer Fee
A $10 fee is charged for each transfer in excess of 18 in a
Policy Year. Currently, no fee is charged for
Automatic Asset Rebalancing. However, Transamerica reserves the right to
impose a nominal fee.
Systematic Withdrawal Option
Transamerica reserves the right to impose an annual fee of an
amount not to exceed $25 for administrative
expenses associated with processing systematic withdrawals. This fee, which
is currently waived, will be deducted from each
systematic withdrawal in equal installments during a 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 17.)
Sales in Special Situations
Transamerica may sell the Policies in special situations that are
expected to involve reduced expenses for Transamerica. These instances may
include: 1) sales in certain group arrangements, such as employee savings plans;
2) sales to current or former officers, directors and employees (and their
families) of Transamerica and its affiliates; 3) sales to officers, directors,
and employees (and their families) of the Portfolios' investment advisers and
their affiliates; and 4) sales to officers, directors, employees and sales
agents (registered representatives) (and their families) of broker-dealers and
other financial institutions that have sales agreements with Transamerica to
sell the policies. In such situations, 1) the contingent deferred sales load may
be reduced or waived, 2) the mortality and expense risk charge or administration
charges may be reduced or waived; and/or 3) certain amounts may be credited to
the policy account value (for examples, amounts related to commissions or sales
compensation otherwise payable to a broker-dealer may be credited to the Policy
Account Value. These reductions in fees or charges or credits to account value
will not unfairly discriminate against any Policy Owner. These reductions in
fees or charges or credits to Account Value are generally taxable and treated as
Premiums for purposes of income tax and any possible premium tax charge.
<PAGE>
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
$50 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 33.)
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 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.
<PAGE>
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 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, starting on the
first day of the month immediately following the Annuity Date, if and for as
long as the Annuitant and Joint Annuitant are living. After the Annuitant or
Joint Annuitant dies, payments will continue as long as the survivor lives. The
continued payments can be in the same amount as the original payments, or in an
amount equal to one-half or two-thirds thereof. It is possible that only one
payment or very few payments will be made under this form if the Annuitant and
Joint Annuitant both die shortly after payments begin.
The Written Request for this form must: (a) name the Joint Annuitant;
and (b) state the percentage of continued payments for the survivor. Once
payments start under this Annuity Form, the person named as Joint Annuitant, for
the purpose of being the measuring life, may not be changed. Transamerica will
need proof of age for the Joint Annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under any other
Annuity Form not described in this section subject to Transamerica's agreement
and any applicable state or federal law or regulation. Requests for any other
Annuity Form must be made in writing to the Service Center at least 30 days
before the Annuity Date.
Once payments start under the Annuity Form and Payment Option selected
by the Owner: (a) no changes can be made in the Annuity Form and Payment Option;
(b) no additional 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 a
Qualified Policy, the Owner may not change the Payee on or after the Annuity
Date.
Alternate Fixed Annuity Rates
The amount of any Fixed Annuity Payments will be determined on the
Annuity Date by using either the guaranteed fixed annuity rates or
Transamerica's current single premium fixed annuity rates at the time, whichever
would result in a higher amount of monthly Fixed Annuity Payments.
QUALIFIED POLICIES
The Policies may be used to fund rollover IRAs and, with Transamerica's
prior permission, to fund rollover Roth IRAS, contributory IRAs and contributory
Roth IRAs, for use in connection with Section 408 and 408A of the Code. A
rollover IRA is one whose initial Purchase Payment is from the rollover or
transfer of certain kinds of distributions from a non-Roth IRA, qualified plans,
or Section 403(b) tax sheltered annuities, following the rules set out in the
Code to maintain favorable tax treatment of the rollover IRA. A rollover Roth
IRA is one whose initial Purchase Payment is from the rollover, transfer or
conversion from non-Roth IRA or Roth IRA. A contributory IRA or contributory
Roth IRA are those whose initial and subsequent Purchase Payments are subject to
limitations imposed by the Code.
With Transamerica's prior permission, the Policy may also be used for
various types of qualified pension and profit sharing plans under Section 401 of
the Code, which permits corporate employers to establish various types of
retirement plans for employees, and as Section 403(b) annuities. Currently,
additional Premiums after the initial Premium may not be made to Policies used
as Section 401(a) or Section 403(b) annuities. The tax rules applicable to
distribution from qualified retirement plans, including restrictions on
contributions and benefits, taxation of distributions, and any tax penalties,
vary according to the type of plan and the terms and conditions of the plan
itself. Various tax penalties may apply to contributions in excess of specified
limits, distributions prior to age 59 1/2 (subject to certain exceptions),
distributions that do not satisfy specified requirements and certain other
transactions with subject to qualified plans. Purchasers of the Policies for use
in qualified plans should seek competent advice regarding the suitability of the
proposed plan documents and the Policies to their specific needs. Transamerica
reserves the right to decline to sell the Policy to certain qualified plans or
terminate the policy if in Transamerica's judgment the Policy is not appropriate
for the plan.
If a Policy is purchased to fund an IRA or Roth IRA, the Annuitant must
also be the Owner. In addition, under current tax law, minimum distributions are
required from certain Qualified Policies. See "Federal Tax Matters" page 33.
The Owner should consult his/her tax adviser concerning these matters.
Automatic Payout Option ("APO")
Prior to the Annuity Date, for Qualified Policy other than Roth IRAs,
the Owner may elect the Automatic Payout Option ("APO") to satisfy minimum
distribution requirements under Sections 401(a)(9), 403(b), and 408(b)(3) of the
Code with regard to this Policy. See "Federal Tax Matters" page 33. For IRAs and
Sep/IRAs this may be elected no earlier than six months prior to the calendar
year in which the Owner attains age 70 1/2, but payments may not begin earlier
than January of such calendar year. For other Qualified Policies, APO can be
elected no earlier than six months prior to the later of when the Owner (a)
attains age 70 1/2; and (b) retires from employment. Additionally, APO
withdrawals may not begin before the later of (a) 30 days after the Policy Date
or (b) the end of the Free Look Period. APO may be elected in any calendar
month, but no later than the month in which the Owner attains age 84.
APO withdrawals will be from the Sub-Account(s) and in the percentage
allocations specified by the Owner. If no specifications are made, withdrawals
will be pro rata from all Sub-Account(s) with value. Withdrawals can not be made
from a Sub-Account from which Dollar Cost Averaging transfers are being made.
Payments will be made annually, and will continue unless terminated by
the Owner or automatically terminated by Transamerica as set forth in the
Policy. Once terminated, APO may not be elected again.
If only APO withdrawals are made, no Contingent Deferred Sales Load
will apply, regardless of the "Allowed Amount" (described on page 27). However,
if a partial withdrawal is taken, that partial withdrawal and any subsequent
withdrawals that Policy Year will be subject to a Contingent Deferred Sales
Charge to the extent they exceed the "Allowed Amount." (See "Contingent Deferred
Sales Load" page 27.)
To be eligible for this option, the following conditions must be met:
(1) the Policy Value must be at least $12,000 at the time of election; and (2)
the annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500.
APO allows the required minimum distribution to be paid from the
Sub-Account(s) of the Variable Account. If there are insufficient funds in the
Variable Account to make a withdrawal, or for other reasons as set forth in the
Policy, this option will terminate.
If you have more than one qualified plan subject to the Code's minimum
distribution requirements, you must consider all such plans in the calculation
of your minimum distribution requirement, but Transamerica will make
calculations and distribution with regard to this Policy only. Restrictions
under Section 403(b) Programs
Certain restrictions apply to annuity contracts used in connection with
Internal Revenue Code Section 403(b) retirement plans. Section 403(b) of the
Internal Revenue Code provides for tax-deferred retirement savings plans for
employees of certain non-profit and educational organizations. In accordance
with the requirements of the Code, Section 403(b) annuities generally may not
permit distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributable to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon death of the employee, on or after attainment of age 59 1/2,
separation from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the 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 special tax treatment ("Qualified Policy"). Qualified Policies
are designed for use by individuals solely as plans entitled to special income
tax treatment under Sections 401, 403(b), 408 and 408A of the Code. The ultimate
effect of federal income taxes on the amounts held under a 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 with proceeds from a tax qualified retirement plan
and receiving distributions from a Qualified Policy in order to continue
receiving special 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.
Premiums
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 policy, Transamerica may require that the prospective purchaser
provide information with regard to the federal income tax status of the previous
annuity policy. 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.
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 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 Non-Qualified Policy 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 Policies owned by a
natural persons.
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 apply to 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.
Withholding
The Code requires Transamerica to withhold federal income tax from
distributions under the Policies. However, except for distributions from certain
Qualified Policies, an Owner will be entitled to elect, in writing, not to have
tax withheld. Withholding applies to the portion of a distribution which is
includible in income and subject to federal income tax, where the taxable amount
is at least $200. Some states also require withholding for state income taxes.
The withholding varies according to the type of distribution and the
Owner's tax status. "Eligible rollover distributions" from Section 401(a) plans
and Section 403(b) tax sheltered annuities are subject to mandatory federal
income tax withholding at the rate of 20%. An eligible rollover distribution is
the taxable portion of any distribution from such a plan, except for certain
distributions, such as minimum required distributions or settlement option
payments made in a specified form. The 20% mandatory withholding does not apply,
however, if the Owner chooses a "direct rollover" from the plan to another
tax-qualified plan or to an IRA (other than a Roth IRA).
The federal income tax withholding rate for a distribution that is not
an "eligible rollover distribution" is 10% of the taxable amount of the
distribution.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified 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 59
1/2; (2) made as a result of death or disability of the Owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the lives or life expectancies of the Owner and a Joint
Owner. Other tax penalties may apply to certain distributions under a Qualified
Policy.
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 income as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender, as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity Payments, as described
above. For these purposes, the investment in the Policy is not affected by the
Owner's or Annuitant's death. That is, the investment in the Policy remains the
amount of any Premiums paid which were not excluded from gross income. Other
rules relating to distributions at death apply to Qualified Policies. You should
consult your legal counsel and tax adviser regarding these rules and their
impact on Qualified Policies.
Required Distributions upon Owner's Death
Notwithstanding any provision of the Policy or this prospectus to the
contrary, no payment of benefits provided under the Policy will be allowed that
does not satisfy the requirements of Section 72(s) of the Code. If the Owner
dies before the Annuity Date, the Death Benefit payable to the Owner's
Beneficiary will be distributed as follows:
(a) the Death Benefit must be completely distributed within five years
of the Owner's date of death; or (b) the Owner's Beneficiary may elect,
within the one year period after the Owner's date of death, to receive
the Death Benefit in the form of an annuity from us, provided
that: (1) such annuity is distributed in substantially equal
installments over the life of such Owner's Beneficiary or over
a period not extending beyond the life expectancy of such
Owner's Beneficiary; and (2) such distributions begin not
later than one year after the Owner's date of death.
Notwithstanding (a) and (b) above, if the sole Owner's Beneficiary is
the deceased Owner's surviving spouse, then such spouse may elect, within the
one year period after the Owner's date of death, to continue the Policy under
the same terms as before the Owner's death. Upon receipt of such election from
the spouse, in a form and manner acceptable to us, at our Service Office: (1)
all rights of the spouse as Owner's Beneficiary under the Policy in effect prior
to such election will cease; (2) the spouse will become the Owner of the Policy
and will also be treated as the Contingent Annuitant, if none has been named and
only if the deceased Owner was the Annuitant; and (3) all rights and privileges
granted by the Policy or allowed by Transamerica will belong to the spouse as
Owner of the Policy. This election will be deemed to have been made by the
spouse if such spouse makes a Premium payment to the Policy or fails to make a
timely election as described in this paragraph.
If the Owner's Beneficiary is a nonspouse, the distribution provisions
described in subparagraphs (a) and (b) above, will apply even if the Annuitant
and/or Contingent Annuitant are alive at the time of the Owner's death. If the
nonspouse Owner's Beneficiary is not an individual, then only a cash payment
will be paid.
If no election is received by us from a nonspouse Owner's Beneficiary
within the one year period after the Owner's date of death, then we will pay the
Death Benefit to the Owner's Beneficiary in a cash payment. The Death Benefit
will be determined as of the date we make the cash payment. Such cash payment
will be in full settlement of all our liability under the Policy.
If Annuitant Dies After Annuity Starts - If the Annuitant dies after
the annuity starts, any benefit payable will be distributed at least as rapidly
as under the Annuity Form then in effect.
If Owner Dies After Annuity Starts - If the Owner dies after the
annuity starts, any benefit payable will continue to be distributed at least as
rapidly as under the Annuity Form then in effect. All of the Owner's rights
granted under the Policy or allowed by us will pass to the Owner's Beneficiary.
Joint Ownership - For purposes of this section, if the Policy has Joint
Owners we will consider the date of death of the first Joint Owner as the death
of the Owner and the surviving Joint Owner will become the Owner of the Policy.
Transfers, Assignments, or Exchanges of the Policy
A transfer of ownership of a Non-Qualified 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. Certain Qualified Policies
cannot be transferred or assigned, except as permitted by the Code or the
Employee Retirement Income Security Act of 1974 (ERISA).
Multiple Policies
All deferred non-qualified annuity policies that are issued by
Transamerica (or its affiliates) to the same Owner during any calendar year are
treated as one annuity policy 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 policies or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity policy and
separate deferred annuity policies as a single annuity policy under its general
authority to prescribe rules as may be necessary to enforce the income tax laws.
Qualified Policies
In General
The Qualified Policy is designed for use as a rollover IRA. With
Transamerica's prior permission, the Policy may also be used as a rollover Roth
IRA, a contributory IRA, or as a contributory Roth IRA, as a Section 403(b)
annuity, and for use in qualified pension and profit sharing plans established
by Corporate employers. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
and in other specified circumstances. We make no attempt to provide more than
general information about use of the Policies with the various types of
retirement plans. Owners and participants under retirement plans as well as
annuitants and beneficiaries are cautioned that the rights of any person to any
benefits under Qualified Policies may be subject to the terms and conditions of
the plans themselves, regardless of the terms and conditions of the Policy
issued in connection with such a plan. Some retirement plans are subject to
distribution and other requirements that are not incorporated in the
administration of the Policies. Owners are responsible for determining that
contributions, distributions and other transactions with respect to the Policies
satisfy applicable law. Purchasers of Policies for use with any retirement plan
should consult their legal counsel and tax adviser regarding the suitability of
the Policy.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form and manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the Policy in order to provide retirement savings under the plans. The
Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10," also permits self-employed individuals to establish
qualified plans for themselves and their employees. Adverse tax consequences to
the plan, to the participant or to both may result if this Policy is assigned or
transferred to any individual as a means to provide benefits payments.
Purchasers of a Policy for use with such plans should seek competent advice
regarding the suitability of the proposed plan documents and the Policy to their
specific needs. The Policy is designed to invest retirement savings and not to
distribute retirement benefits.
Individual Retirement Annuities, Simplified Employee Plans and Roth IRAs
The Policies are designed for use with rollover IRAs and contributory
IRAs. A contributory IRA is a Policy in which initial and subsequent Purchase
Payments are subject to limitations imposed by the Code. Section 408 of the Code
permits eligible individuals to contribute to an individual retirement program
known as an Individual Retirement Annuity or Individual Retirement Account (each
hereinafter referred to as an "IRA"). Also, distributions from certain other
qualified plans may be "rolled over" or transferred on a tax-deferred basis into
an IRA.
Earnings in an IRA are not taxed until distributed. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's
compensation (including earned income as defined in Code Section 401(c)(2)) and
may be deductible in whole or in part depending on the individual's adjusted
gross income and whether or not the individual is considered an active
participant in a qualified plan. The limit on the amount contributed to an IRA
does not apply to distributions from certain other types of qualified plans that
are "rolled over" or transferred on a tax-deferred basis into an IRA. Amounts in
the IRA (other than nondeductible contributions) are taxed when distributed from
the IRA. Distributions prior to age 59 1/2 are subject to a 10% penalty tax,
unless certain exceptions apply. Purchasers should seek competent advice as to
the suitability of the Policy for use with IRAs.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP-IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP-IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The Policies may also be used with rollover Roth IRAs and contributory
Roth IRAs. A contributory Roth IRA is a policy to which initial and subsequent
Purchase Payments are subject to limitations imposed by the Code. Section 408A
of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a Section 408 IRA may be converted to a Roth IRA. A Section
408 IRA is an IRA described in Sections 408(a) or 408(b), other than a Roth IRA.
You should consult a tax adviser before combining any converted amounts with any
other Roth IRA contributions, including any other conversion amounts from other
tax years. Distributions from a Roth IRA generally are not taxed, except that,
once aggregate distributions exceed contributions to the Roth IRA, income tax
and a 10% penalty tax may apply to distributions made (1) before age 59 1/2
(subject to certain exceptions) or (2) during the five taxable years starting
with the year in which the first contribution is made to the Roth IRA.
Purchasers should seek competent advice as to the suitability of the policy for
use with Roth IRAs.
The sale of a Policy for use with an IRA, SEP-IRA or Roth IRA may be
subject to special disclosure requirements of the Internal Revenue Service.
Purchasers of these Policies will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA, SEP-IRA or Roth IRA or their purchase.
Tax Sheltered Annuities Under Code Section 403(b), payments made by
public school systems and certain tax exempt organizations to purchase annuity
contracts for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, these payments may be subject
to Social Security and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
Qualified Policy from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified Policies
Other restrictions with respect to the election, commencement,
or distribution of benefits may apply under
Qualified Policies or under the terms of the plans in respect of which
Qualified Policies are issued. A Qualified Policy
will be amended as necessary to conform to the requirements of the Code.
Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity policies. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable policies. A second proposal would reduce the
"investment in the policy" under cash value life insurance and certain annuity
policies by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
Policies could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Policy. 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 gift and 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. 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 generally receive compensation of up to 6.25% of any
Initial and additional Premiums paid (although higher amounts may be paid in
certain circumstances). Additional amounts, including asset based trail
commissions, 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.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 12/31/00
as the year 1900 rather than the year 2000, disruptions of business activities
may occur with the year 2000. In response, Transamerica established in 1997 a
"Y2K" committee to address this issue. With regard to the systems and software
which administer and affect the policies, Transamerica has determined that is
own internal systems will be Year 2000 compliant. Additionally, Transamerica
requires any third party vendor which supplies software or administrative
services to Transamerica in connection with the administration of the policies,
to certify that the software or services will be Year 2000 compliant. In
determining the variable accumulation unit values for each variable sub-account,
Transamerica is reliant upon information received from the portfolios and is
confirming that Year 2000 issues will not interfere with this flow of
information. As of the date of this prospectus, it is not anticipated that
policy owners will experience negative afffects on their investment, or on the
services received in connection with their policies, as a result of Year 2000
issues. However, especially when taking into account interaction with other
systems, it is difficult to predict with precision that there will be no
disruption of services in connection with the year 2000.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Variable
Account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the Variable Account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the 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, 1997 and 1996, and for
each of the three years in the period then ended December 31, 1997, and the
financial statements for the Variable Account at December 31, 1997, and for each
of the two years in the period then ended, appearing in the Statement of
Additional Information have been audited by Ernst & Young LLP, Independent
Auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
experts in accounting and auditing.
<PAGE>
VOTING RIGHTS
To the extent required by applicable law, all Portfolio shares held
in the Variable Account will be voted by Transamerica at regular and special
shareholder meetings of the respective Funds in accordance with instructions
received from persons having voting interests in the corresponding Sub-Account.
If, however, the 1940 Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, or if Transamerica determines
that it is allowed to vote all Portfolio shares in its own right, Transamerica
may elect to do so.
The person with the voting interest is the Owner. The number of votes
which are available to an Owner will be calculated separately for each
Sub-Account of the Variable Account. Before the Annuity Date, that number will
be determined by applying his or her percentage interest, if any, in a
particular Sub-Account to the total number of votes attributable to that
Sub-Account. The Owner holds a voting interest in each Sub-Account to which the
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,
reference is made to the instruments filed as exhibits to the Registration
Statement. The Registration Statement and the exhibits thereto may be inspected
and copied at the office of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
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 (page 22).............................................3
DOLLAR COST AVERAGING (page 25)..................................3
NET INVESTMENT FACTOR (page 24)..................................3
ANNUITY PERIOD (page 33).........................................3
Variable Annuity Units and Payments.....................3
Variable Annuity Unit Value.............................4
Transfers After the Annuity Date........................4
GENERAL PROVISIONS...............................................4
IRS Required Distributions..............................4
Non-Participating.......................................4
Misstatement of Age or Sex..............................4
Proof of Existence and Age..............................4
Assignment..............................................4
Annuity Data............................................5
Annual Report...........................................5
Incontestability........................................5
Ownership...............................................5
Entire Policy...........................................5
Changes in the Policy...................................5
Protection of Benefits..................................5
Delay of Payments.......................................5
Notices and Directions..................................6
CALCULATION OF YIELDS AND TOTAL RETURNS (page 16)................6
Money Market Sub-Account Yield Calculation..............6
Other Sub-Account Yield Calculations....................6
Standard Total Return Calculations......................7
Hypothetical Performance Data...........................8
Other Performance Data..................................8
HISTORIC PERFORMANCE DATA........................................8
General Limitations.....................................8
Sub-Account Performance Figures.........................8
Hypothetical Sub-Account Performance Figures............8
FEDERAL TAX MATTERS (page 35)...................................10
Taxation of Transamerica...............................10
Tax Status of the Policies.............................11
DISTRIBUTION OF THE POLICY (page 37)............................11
SAFEKEEPING OF ACCOUNT ASSETS (page 18).........................12
TRANSAMERICA (page 18)..........................................12
General Information and History........................12
STATE REGULATION (page 18)......................................12
RECORDS AND REPORTS.............................................12
FINANCIAL STATEMENTS............................................12
APPENDIX........................................................13
Annuity Transfer Formula...............................13
<PAGE>
Appendix A
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a Portfolio at the end of the
current Valuation Period is $20.15; at the end of the immediately preceding
Valuation Period it was $20.10; the Valuation Period is one day; and no
dividends or distributions caused the Portfolio to go "ex-dividend" during the
current Valuation Period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for Mortality and Expense Risk Charge and the Administrative
Expense Charge of .003814% (the daily equivalent of the current charge of 1.40%
on an annual basis) gives a Net Investment Factor of 1.002449. If the value of
the Variable Accumulation Unit for the immediately preceding Valuation Period
had been 15.500000, the value for the current Valuation Period would be
15.537966 (15.5 x 1.002449). Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a Variable Annuity Unit for the immediately preceding Valuation Period had been
13.500000. If the first Variable Annuity Payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the Variable Annuity Unit for the current Valuation Period would be 13.531613
(13.5 x 1.002449 (the Net Investment Factor) x 0.999893). 0.999893 is the
factor, for a one day Valuation Period, that neutralizes the assumed rate of
four percent (4%) per year used to establish the Variable Annuity Rates found in
the Policy. Example of Variable Annuity Payment Calculations
Suppose that the Account is currently credited with 3,200.000000
Variable Accumulation Units of a particular Sub-Account.
Also suppose that the Variable Accumulation Unit Value and the Variable
Annuity Unit Value for the particular Sub-Account for the Valuation Period which
ends immediately preceding the first day of the month is 15.500000 and 13.500000
respectively, and that the Variable Annuity Rate for the age and option elected
is $5.73 per $1,000. Then the first Variable Annuity Payment would be:
3.200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of Variable Annuity Units credited for future payments
would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the Variable Annuity Unit
Value on the 10th day of the second month is 13.565712. Then the second Variable
Annuity Payment would be $285.59 (21.052444 x 13.565712).
<PAGE>
4
STATEMENT OF ADDITIONAL INFORMATION FOR
DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE
VARIABLE ANNUITY POLICY
Issued By
Transamerica Life Insurance Company of New York
The Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the Dreyfus/Transamerica Triple Advantage Variable
Annuity Policy ("Policy") issued by Transamerica Life Insurance Company of New
York (formerly called First Transamerica Life Insurance Company). The Owner may
obtain a copy of the Prospectus dated May 1, 1998, as supplemented from time to
time, by writing to Transamerica Life Insurance Company of New York, Annuity
Service Center, P.O. Box 31728, Charlotte, North Carolina 28231-1728 or by
calling 800-258-4261. Terms used in the current Prospectus for the Policy are
incorporated in this Statement. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE
POLICY.
Dated May 1, 1998
<PAGE>
TABLE OF CONTENTS Page
THE POLICY (page 22).............................................3
DOLLAR COST AVERAGING (page 25)..................................3
NET INVESTMENT FACTOR (page 24)..................................3
ANNUITY PERIOD (page 33).........................................3
Variable Annuity Units and Payments.....................3
Variable Annuity Unit Value.............................4
Transfers After the Annuity Date........................4
GENERAL PROVISIONS...............................................4
IRS Required Distributions..............................4
Non-Participating.......................................4
Misstatement of Age or Sex..............................4
Proof of Existence and Age..............................4
Assignment..............................................4
Annuity Data............................................5
Annual Report...........................................5
Incontestability........................................5
Ownership...............................................5
Entire Policy...........................................5
Changes in the Policy...................................5
Protection of Benefits..................................5
Delay of Payments.......................................5
Notices and Directions..................................6
CALCULATION OF YIELDS AND TOTAL RETURNS (page 16)................6
Money Market Sub-Account Yield Calculation..............6
Other Sub-Account Yield Calculations....................6
Standard Total Return Calculations......................7
Hypothetical Performance Data...........................8
Other Performance Data..................................8
HISTORIC PERFORMANCE DATA........................................8
General Limitations.....................................8
Sub-Account Performance Figures.........................8
Hypothetical Sub-Account Performance Figures............8
FEDERAL TAX MATTERS (page 35)...................................10
Taxation of Transamerica...............................10
Tax Status of the Policies.............................11
DISTRIBUTION OF THE POLICY (page 37)............................11
SAFEKEEPING OF ACCOUNT ASSETS (page 18).........................12
TRANSAMERICA (page 18)..........................................12
General Information and History........................12
STATE REGULATION (page 18)......................................12
RECORDS AND REPORTS.............................................12
FINANCIAL STATEMENTS............................................12
APPENDIX........................................................13
Annuity Transfer Formula...............................13
(Additional page references refer to the current
Prospectus.)
<PAGE>
THE POLICY
As a supplement to the description in the Prospectus, the following
provides additional information about the Policy which may be of
interest to some Owners.
DOLLAR COST AVERAGING
We reserve the right to send written notification to the Owner
as to the options available if termination of Dollar Cost Averaging,
either by the Owner or by Transamerica, results in the value in the
receiving Sub-Account(s) to which monthly transfers were made to be
less than $500. The Owner will have 10 days from the date our notice is
mailed to:
(a) transfer the value of the Sub-Account(s) to
another Sub-Account with a value equal to or greater
than $500; or (b) transfer funds from another
Sub-Account into the receiving Sub-Account(s) to
bring the value of that Sub-Account to at least $500;
or (c) submit an additional Premium to make the value
of the Sub-Account equal to or greater than $500; or
(d) transfer the entire value of the receiving
Sub-Account(s) back into the Source Account from
which the automatic transfers were made.
If no election, in a form and manner acceptable to
Transamerica, is made by the Owner prior to the end of the 10 day
period, Transamerica reserves the right to transfer the value of the
receiving Sub-Account(s) back into the Source Accountfrom which the
automatic transfers were made. Transfers made as a result of (a), (b),
or (d) above will not be counted for purposes of the eighteen free
transfers per Policy Year limitation.
NET INVESTMENT FACTOR
For any Sub-Account of the Variable Account, the Net
Investment Factor for a Valuation Period before
the Annuity Date is (a) divided by (b), minus (c) minus (d).
Where (a) is
The net asset value per share held in the Sub-Account, as of
the end of the Valuation Period,
plus or minus
The per-share amount of any dividend or capital gain
distributions if the "ex-dividend" date occurs in the Valuation Period,
plus or minus
A per-share charge or credit as Transamerica may determine, as
of the end of the Valuation Period, for taxes. Where (b) is
The net asset value per share held in the Sub-Account as of
the end of the last prior Valuation Period.
Where (c) is
The daily charge of 0.003403% (1.25% annually) for the
Mortality and Expense Risk Charge under this Policy times the number of
calendar days in the current Valuation Period. Where (d) is
The daily Administrative Charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current Valuation
Period. This charge may be increased, but will not exceed 0.000684%
(0.25% annually).
A Valuation Day is defined as any day on which the New York
Stock Exchange is open.
ANNUITY PERIOD
The Variable Annuity Options provide for payments that
fluctuate or vary in dollar amount, based on the investment performance
of the selected Variable Account Sub-Account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of Variable Annuity
Units credited in each Sub-Account will be determined by dividing (a)
the product of the portion of the value to be applied to the
Sub-Account and the Variable Annuity Purchase Rate specified in the
Policy by (b) the value of one Variable Annuity Unit in that
Sub-Account on the Annuity Date. The amount of each subsequent Variable
Annuity Payment equals the product of the number of Variable Annuity
Units in each Sub-Account and the Sub-Account's Variable Annuity Unit
Value as of the tenth day of the month before the payment due date. The
amount of each payment may vary.
Variable Annuity Unit Value
The value of a Variable Annuity Unit in a Sub-Account on any
Valuation Day is determined as described below.
The Net Investment Factor for the Valuation Period (for the
appropriate Annuity Payment frequency) just ended is multiplied by the
value of the Variable Annuity Unit for the Sub-Account on the preceding
Valuation Day. The Net Investment Factor after the Annuity Date is
calculated in the same manner as before the Annuity Date and then
multiplied by an interest factor. The interest factor equals (.999893)
where n is the number of days since the preceding Valuation Day. This
compensates for the 4% interest assumption built into the Variable
Annuity Purchase Rates.
Transfers After the Annuity Date
After the Annuity Date, the Owner may transfer Variable
Annuity Units from one Sub-Account to another, subject to certain
limitations. (See "Transfers" page 24 of the Prospectus.) The dollar
amount of each subsequent monthly Variable Annuity Payment after the
transfer must be determined using the new number of Variable Annuity
Units multiplied by the Sub-Account's Variable Annuity Unit Value on
the tenth day of the month preceding payment.
The formula used to determine a transfer after the Annuity
Date can be found in the Appendix to this Statement of Additional
Information.
GENERAL PROVISIONS
IRS Required Distributions
The Policy is intended to qualify as an annuity contract for
federal income tax purposes. All provisions in the Policy will be
interpreted to maintain such tax qualification. We may make changes in
order to maintain this qualification or to conform to the Policy to any
applicable changes in the tax qualification requirements. We will
provide you with a copy of any changes made to the Policy. If any Owner
under a Non-Qualified Policy dies before the entire interest in the
Policy is distributed, the value generally must be distributed to the
designated Beneficiary so that the Policy qualifies as an annuity under
the Code. (See "Federal Tax Matters" page 10.)
Non-Participating
The Policies are non-participating. No dividends are payable
and the Policies will not share in the profits or surplus earnings of
Transamerica.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any other measuring life
has been misstated in the application, the Annuity Payments under the
Policy will be whatever the Annuity Purchase Amount applied on the
Annuity Date would purchase on the basis of the correct age or sex of
the Annuitant and/or other measuring life. Any overpayments or
underpayments by Transamerica as a result of any such misstatement may
be respectively charged against or credited to the Annuity Payment or
Annuity Payments to be made after the correction so as to adjust for
such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the Policy, Transamerica may
require proof of the existence and/or proof of the age of the Annuitant
or any other measuring life, or any other information deemed necessary
in order to provide benefits under the Policy.
Assignment
No assignment of a Policy will be binding on Transamerica
unless made in writing and given to Transamerica at its ServiceCenter.
Transamerica is not responsible for the adequacy of any assignment. The
Owner's rights and the interest of any Annuitant or non-irrevocable
Beneficiary will be subject to the rights of any assignee of record.
Annuity Data
Transamerica will not be liable for obligations which depend
on receiving information from a Payee or measuring life until such
information is received in a satisfactory form.
Annual Report
At least once each Policy Year prior to the Annuity Date, the
Owner will be given a report of the current Policy Value. This report
will also include any other information required by law or regulation.
After the Annuity Date, a confirmation will be provided with every
Variable Annuity Payment.
Incontestability
The Policies are incontestable from the Policy Date.
Ownership
Only the Owner(s) will be entitled to the rights granted by
the Policy, or allowed by Transamerica under the Policy. If an Owner
dies, the rights of the Owner belong to the estate of the Owner unless
the Owner has previously named an Owner's Beneficiary. A surviving
Joint Owner automatically becomes the Owner's Beneficiary.
Entire Policy
Transamerica has issued the Policy in consideration and
acceptance of the application and payment of the Initial Premium. A
copy of the application is attached to and is part of the Policy and
along with the Policy constitutes the entire Policy. All statements
made by the Owner are considered representations and not warranties.
Transamerica will not use any statement in defense of a claim unless it
is made in the application and a copy of the application is attached to
the Policy when issued.
Changes in the Policy
Only two authorized officers of Transamerica, acting together,
have the authority to bind Transamerica or to make any change in the
Policy and then only in writing. Transamerica will not be bound by any
promise or representation made by any other persons.
Transamerica may not change or amend the Policy, except as
expressly provided in the Policy, without the Owner's consent. However,
Transamerica may change or amend the Policy if such change or amendment
is necessary for the Policy to comply with any state or federal law,
rule or regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death
benefits) under the Policy will be subject to any claim or process of
law by any creditor.
Delay of Payments
Payment of any cash withdrawal or lump sum death benefit due
from the Variable Account will occur within seven days from the date
the election becomes effective, except that Transamerica may be
permitted to postpone such payment if: (1) the New York Stock Exchange
is closed for other than usual weekends or holidays, or trading on the
Exchange is otherwise restricted; or (2) an emergency exists as defined
by the Securities and Exchange Commission (Commission), or the
Commission requires that trading be restricted; or (3) the Commission
permits a delay for the protection of Owners.
In addition, while it is our intention to process all
transfers from the Sub-Accounts immediately upon receipt of a transfer
request, the Policy gives us the right to delay effecting a transfer
from a Sub-Account for up to seven days, but only in certain limited
circumstances. However, the staff of the Commission currently
interprets the Investment Company Act of 1940 to require the immediate
processing of all transfers, and in compliance with that interpretation
we will process all transfers immediately unless and until the
Commission or its staff changes its interpretation or otherwise permits
us to exercise this right. Subject to such approval, we may delay
effecting such a transfer only if there is a delay of payment from an
affected Portfolio. If this happens, and if the prior approval of the
Commission or its staff is obtained, then we will calculate the dollar
value or number of units involved in the transfer from a Sub-Account on
or as of the date we receive a written transfer request, but will not
process the transfer to the transferee Sub-Account until a later date
during the seven-day delay period when the Portfolio underlying the
transferring Sub-Account obtains liquidity to fund the transfer request
through sales of portfolio securities, new Premiums, transfers by
investors or otherwise. During this period, the amount transferred
would not be invested in a Sub-Account.
Transamerica may delay payment of any withdrawal from the
Fixed Account for a period of not more than six months after
Transamerica receives the request for such withdrawal. If Transamerica
delays payment for more than 30 days, Transamerica will pay interest on
the withdrawal amount up to the date of payment. (See "Cash
Withdrawals" page 24 of the Prospectus.)
Notices and Directions
We will not be bound by any authorization, direction, election
or notice which is not in writing, or in a form and manner acceptable
to Transamerica, and received at our ServiceCenter.
Any written notice requirement by Transamerica to the Owner
will be satisfied by our mailing of any such required written notice,
by first-class mail, to the Owner's last known address as shown on our
records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission,
Transamerica is required to compute the Money Market Sub-Account's
current annualized yield for a seven-day period in a manner which does
not take into consideration any realized or unrealized gains or losses
on shares of the Money Market Series or on its portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market
Sub-Account and income other than investment income at the beginning of
such seven-day period, dividing such net change in Policy Value by the
value of the account at the beginning of the period to determine the
base period return and annualizing this quotient on a 365-day basis.
The net change in Policy Value reflects the deductions for the annual
Policy Fee, the Mortality and Expense Risk Charges and Administrative
Expense Charges and income and expenses accrued during the period.
Because of these deductions, the yield for the Money Market Sub-Account
of the Variable Account will be lower than the yield for the Money
Market Portfolio or any comparable substitute funding vehicle.
The Commission also permits Transamerica to disclose the
effective yield of the Money Market Sub-Account for the same seven-day
period, determined on a compounded basis. The effective yield is
calculated by compounding the unannualized base period return by adding
one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
The yield on amounts held in the Money Market Sub-Account
normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation
of future yields or rates of return. The Money Market Sub-Account's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the Money Market Portfolio or
substitute funding vehicle, the types and quality of portfolio
securities held by the Money Market Portfolio or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not
reflect the effect of any Contingent Deferred Sales Load (of up to 6%
of Premiums) that may be applicable to a Policy.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current
annualized yield of one or more of the Sub-Accounts (except the Money
Market Sub-Account) for 30-day periods. The annualized yield of a
Sub-Account refers to the income generated by the Sub-Account over a
specified 30-day period. Because this yield is annualized, the yield
generated by a Sub-Account during the 30-day period is assumed to be
generated each 30-day period. The yield is computed by dividing the net
investment income per Variable Accumulation Unit earned during the
period by the price per unit on the last day of the period, according
to the following formula:
<PAGE>
YIELD= 2[{a - b+1}6-1]
cd
Where:
a = net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period (net of
reimbursements). c = the average daily number of Variable Accumulation
Units outstanding during the period. d = the maximum offering price per
Variable Accumulation Unit on the last day of the period.
Net investment income will be determined in accordance with
rules established by the Commission. Accrued expenses will include all
recurring fees that are charged to all Policies. The yield calculations
do not reflect the effect of any Contingent Deferred Sales Load that
may be applicable to a particular Policy. Contingent Deferred Sales
Load range from 6% to 0% of the amount of Policy Value withdrawn
depending on the elapsed time since the receipt of each Premium
attributable to the portion of the Policy Value withdrawn.
Because of the charges and deductions imposed by the Variable
Account, the yield for the Sub-Account will be lower than the yield for
the corresponding Portfolio. The yield on amounts held in the
Sub-Accounts normally will fluctuate over time. Therefore, the
disclosed yield for any given period is not an indication or
representation of future yields or rates of return. The Sub-Account's
actual yield will be affected by the types and quality of portfolio
securities held by the Portfolio, and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average
annual total returns for one or more of the Sub-Accounts for various
periods of time. Average annual total return quotations are computed by
finding the average annual compounded rates of return over one, five
and ten year periods that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P{1+T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one, five, or ten-year period at
the end of the one, five or ten-year period (or fractional
portion thereof).
All recurring fees are recognized in the ending redeemable
value. The standard average annual total return calculations will
reflect the effect of any Contingent Deferred Sales Loads that may be
applicable to a particular period.
Hypothetical Performance Data
Transamerica may also disclose "hypothetical" performance data
for a Sub-Account, for periods before the Sub-Account commenced
operations. Such performance information for the Sub-Account will be
calculated based on the performance of the corresponding Portfolio and
the assumption that the Sub-Account was in existence for the same
periods as those indicated for the Portfolio, with a level of Policy
charges currently in effect. The Portfolio used for these calculations
will be the actual Portfolio that the Sub-Account will invest in.
This type of hypothetical performance data may be disclosed on
both an average annual total return and a cumulative total return
basis. Moreover, it may be disclosed assuming that the Policy is not
surrendered (i.e., with no deduction for the Contingent Deferred Sales
Load) and assuming that the Policy is surrendered at the end of the
applicable period (i.e., reflecting a deduction for any applicable
Contingent Deferred Sales Load).
<PAGE>
Other Performance Data
Transamerica may from time to time also disclose average
annual total returns in a non-standard format in conjunction with the
standard described above. The non-standard format will be identical to
the standard format except that the Contingent Deferred Sales Load
percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative
total returns in conjunction with the standard format described above.
The cumulative returns will be calculated using the following formula
assuming that the Contingent Deferred Sales Load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR= the cumulative total return net of Sub-Account recurring charges
for the period.
ERV= ending redeemable value of a hypothetical $1,000 payment at
the beginning of the one, five, or ten-year period at the end
of the one, five, or ten-year period (or fractional portion
thereof).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the
standard performance data is also disclosed.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent the past performance of the Sub-Accounts
and are not indicative of future performance. The figures may reflect the waiver
of advisory fees and reimbursement of other expenses.
Except for Transamerica Growth, the Funds have provided the performance
data for the Sub-Accounts. Except for Transamerica Growth none of the Funds or
their investment advisers are affiliated with Transamerica. In preparing the
tables below, Transamerica has relied on the data provided by the Funds. While
Transamerica has no reason to doubt the accuracy of the figures provided by the
Funds, Transamerica has not verified those figures. No data is provided for the
Core Value and MidCap Stock Sub-Accounts since, prior to May 1, 1998, the
related Portfolios had not yet commenced operations.
Sub-Account Performance Figures Including Hypothetical Performance
The charts below show historical performance data for the Sub-Accounts,
including, for six Sub-Accounts, "hypothetical" data for the periods prior to
the inception of the Sub-Accounts, based on the performance of the corresponding
Portfolios since their inception date, with a level of charges equal to those
currently assessed under the Polices. These figures are not an indication of the
future performance of the Sub-Accounts. Some of the figures reflect the waiver
of advisory fees and reimbursement of other expenses for part or all of the
periods indicated.
The dates to the left of the Sub-Account names below indicate the date
of commencement of operation of the Portfolios, which coincide with the date of
commencement of operation of the corresponding Sub-Account, with these seven
exceptions: the Money Market; Managed Assets, Zero Coupon 2000, Qualify Bond,
Small Cap and Stock Index Sub-Accounts which commenced operations January 4,
1993 and the Transamerica Growth Sub-Account which commenced operations May 1,
1998. Hence, the performance data given for these seven Sub-Accounts which
precedes these dates are "hypothetical".
Standard Average annual total returns for periods since inception of
the Portfolio, including hypothetical performance, for each Sub-Account are as
follows. These figures include mortality and expenses charges deducted at 1.25%,
the administrative expenses charge of 0.15% per annum, the administration charge
of $30 per annum adjusted for average account size and the maximum contingent
deferred sales load of 6%.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
For the period
from
commencement of
SUB-ACCOUNT (date of commencement of For the 1-year For the 3-year For the 5-year Portfolio
operation of Corresponding Portfolio) period ending period ending period ending operations to
12/31/97 12/31/97 12/31/97 12/31/97
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market (8/31/90) -1.96% 2.20% 2.49% 3.42%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Special Value (8/31/90) 15.36% 2.89% 6.26% 6.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Zero Coupon 2000 (8/31/90) -0.27% 5.99% 5.27% 8.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Quality Bond (8/31/90) 1.96% 7.82% 6.19% 8.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Cap (8/31/90) 9.06% 18.31% 24.00% 41.95%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Capital Appreciation (4/5/93) 20.21% 26.16% N/A 17.65%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Stock Index (9/29/89) 25.05% 27.74% 17.57% 14.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Socially Responsible (10/7/93) 20.59% 25.24% N/A 19.21%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Growth & Income (12/15/94) 8.53% 28.45% N/A 28.16%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Equity (12/15/94) 2.14% 6.71% N/A 6.71%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Value (5/1/96) 1.30% N/A N/A 2.19%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Disciplined Stock (5/1/96) 23.62% N/A N/A 25.72%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Company Stock (5/1/96) 14.01% N/A N/A 13.30%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Balanced (5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Limited Term High Income(5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Transamerica Growth(2/26/69)* 44.94% 41.91% 29.73% 24.12%*
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
</TABLE>
Non-Standard Average annual total returns for period since inception of
the Portfolio including hypothetical performance, for each Sub-Account are as
follows. These figures include mortality and expenses charges deducted at 1.25%,
the administrative expenses charge of 0.15% per annum, the administration charge
of $30 per annum adjusted for average account size but do not reflect the
maximum contingent deferred sales load of 6% which if reflected would reduce the
figures. Non-Standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
For the period
from
commencement of
SUB-ACCOUNT (date of commencement of For the 1-year For the 3-year For the 5-year Portfolio
operation of Corresponding Portfolio) period ending period ending period ending operations to
12/31/97 12/31/97 12/31/97 12/31/97
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market (8/31/90) 3.66% 3.78% 3.21% 3.43%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Special Value (8/31/90) 21.36% 4.44% 6.88% 6.01%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Zero Coupon 2000 (8/31/90) 5.45% 7.45% 5.91% 8.18%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Quality Bond (8/31/90) 7.83% 9.23% 6.81% 8.02%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Cap (8/31/90) 15.06% 19.49% 24.33% 41.96%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Capital Appreciation (4/5/93) 26.21% 27.19% N/A 18.11%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Stock Index (9/29/89) 31.05% 28.76% 17.99% 14.19%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Socially Responsible (10/7/93) 26.59% 26.30% N/A 19.75%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Growth & Income (12/15/94) 14.53% 29.45% N/A 29.14%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Equity (12/15/94) 8.02% 8.15% N/A 8.13%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
International Value (5/1/96) 7.13% N/A N/A 5.73%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Disciplined Stock (5/1/96) 29.52% N/A N/A 28.81%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Small Company Stock (5/1/96) 20.01% N/A N/A 16.61%
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Balanced (5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Limited Term High Income(5/1/97) N/A N/A N/A N/A
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
Transamerica Growth(2/26/69)* 50.34% 42.65% 29.98% 24.12%*
- ---------------------------------------- ------------------- ------------------ ------------------ ------------------
</TABLE>
Non-Standard Cumulative total returns for periods since inception of the
Portfolio, including hypothetical performance, for each Sub-Account are as
follows. These figures include mortality and expenses charges deducted at 1.25%,
the administrative expenses charge of 0.15% per annum, the administration charge
of $30 per annum adjusted for average account size but do not reflect the
maximum contingent deferred sales load of 6%, which if reflected would reduce
the figures. Nonstandard performance data will only be disclosed if standard
performance data for the required periods is also disclosed.
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------- ------------------
For the 1-year
SUB-ACCOUNT (date of commencement of period ending Since Inception
operation of Corresponding Portfolio) 12/31/97
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Money Market (8/31/90) 3.66% 28.08%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Special Value (8/31/90) 21.36% 53.51%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Zero Coupon 2000 (8/31/90) 5.45% 78.14%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Quality Bond (8/31/90) 7.83% 76.16%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Small Cap (8/31/90) 15.06% 1208.55%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Capital Appreciation (4/5/93) 26.21% 120.51%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Stock Index (9/29/89) 31.05% 199.18%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Socially Responsible (10/7/93) 26.59% 114.76%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Growth & Income (12/15/94) 14.53% 118.14%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
International Equity (12/15/94) 8.02% 26.91%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
International Value (5/1/96) 7.13% 9.75%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Disciplined Stock (5/1/96) 29.62% 52.63%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Small Company Stock (5/1/96) 20.01% 29.26%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Balanced (5/1/97) N/A% 17.38%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Limited Term High Income(5/1/97) N/A% 8.52%
- ---------------------------------------- ------------------- ------------------
- ---------------------------------------- ------------------- ------------------
Transamerica Growth(2/26/69)* 50.34% 767.83%*
- ---------------------------------------- ------------------- ------------------
</TABLE>
*The Growth Portfolio of the Transamerica Variable Insurance Fund,
Inc., is the successor to Separate Account Fund C of Transamerica Occidental
Life Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio include performance
of its predecessor. The performance shown in the "since inception" box for the
Transamerica Growth Sub-Account is 10-year performance, not performance since
1969.
FEDERAL TAX MATTERS
The Dreyfus/Transamerica Triple Advantage Variable Annuity may be
purchased on a non-tax-qualified basis ("Non-Qualified Policy") or purchased and
used in connection with plans qualifying for special tax treatment ("Qualified
Polices"). Qualified Polices are designed for use by individual retirement plans
qualified for special tax treatment under Section 401, 403(b) or 408 of the
Internal Revenue Code of 1986, as amendment (the "Code").The ultimate effect of
federal income taxes on the Policy Value, on Annuity Payments, and on the
economic benefit to the Owner, the Annuitant or the Beneficiary may depend on
the type of retirement plan for which the Policy is purchased, on the tax and
employment status of the individual concerned and on Transamerica's tax status.
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. Any
person concerned about these tax implications should consult a competent tax
adviser. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the likelihood
of continuation of these present federal income tax laws or of the current
interpretations by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the Policy. Under existing federal income tax law,
Transamerica believes that the Variable Account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Policy.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the Variable Account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the Variable
Account, then Transamerica may impose a charge against the Variable Account
(with respect to some or all Policies) in order to set aside provisions to pay
such taxes.
Tax Status of the Policies
Section 817(h) of the Code requires that with respect to Non-Qualified
Policies, the investments of the Funds be "adequately diversified" in accordance
with Treasury regulations in order for the Policies to qualify as annuity
contracts under federal tax law. The Variable Account, through the Funds,
intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affect how the Funds' assets may be
invested.
In certain circumstances, Owners of variable annuity policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their Policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policy owner's gross income. The IRS has stated in published rulings that a
variable policy owner will be considered the owner of separate account assets if
the policy owner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control for the investments of a segregated
asset account may cause the investor (i.e., the Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that owners were not owners of separate account assets. For example,
the Owner has additional flexibility in allocating premium payments and Policy
Values. These differences could result in an Owner being treated as the owner of
a pro rata portion of the assets of the Variable Account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the Policy as
necessary to attempt to prevent an Owner from being considered the owner of a
pro rata share of the assets of the Variable Account.
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any Non-Qualified Policy to provide
that (a) if any Owner dies on or after the Annuity Date but prior to the time
the entire interest in the Policy has been distributed, the remaining portion of
such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Owner's death; and (b) if any
Owner dies prior to the Annuity Date, the entire interest in the Policy will be
distributed within five years after the date of the Owner's death. These
requirements will be considered satisfied as to any portion of the Owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that Beneficiary, provided
that such distributions begin within one year of that Owner's death. The Owner's
"designated beneficiary" refers to a natural person designated by such Owner as
a Beneficiary and to whom ownership of the Policy passes by reason of death.
However, if the Owner's "designated beneficiary" is the surviving spouse of the
deceased Owner, the Policy may be continued with the surviving spouse as the new
owner.
The Non-Qualified Policies contain provisions which are intended to
comply with the requirements of section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. Transamerica
intends to review such provisions and modify them if necessary to assure that
they comply with the requirements of Code section 72(s) when clarified by
regulation or otherwise. Other rules may apply to Qualified Policies.
DISTRIBUTION OF THE POLICY
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the Policies. TSSC may also serve as principal underwriter and
distributor of other contracts issued through the Variable Account and certain
other separate accounts of Transamerica and any affiliates of Transamerica. TSSC
is a wholly-owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker/dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Transamerica pays
TSSC for acting as the principal underwriter under a distribution agreement.
TSSC has entered into sales agreements with other broker/dealers to
solicit applications for the Polices through registered representatives who are
licensed to sell securities and variable insurance products. These agreements
provide that applications for the Polices may be solicited by registered
representatives of the broker/dealers appointed by Transamerica to sell its
variable life insurance and variable annuities. These broker/dealers are
registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Transamerica Financial Resources, Inc. ("TFR") is an underwriter
and distributor of the Polices. TFR is a
wholly-owned subsidiary of Transamerica Insurance Corporation of California
and is registered with the Commission and the
NASD as a broker/dealer.
Under the agreements, applications for the Polices will be sold by
broker/dealers which will receive compensation as described in the Prospectus.
The offering of the Policies is expected to be continuous and neither
TSSC nor TFR anticipate discontinuing the offering of the Policies. However,
TSSC and TFR reserve the right to discontinue the offering of the Policies.
During fiscal year 1997, $5,543,415.68 in commission were paid to TSSC
as underwriter of the Policies; no amounts were retained by TSSC. During fiscal
year 1996, $4,277,511.85 in commissions were paid to TSSC as underwriter of the
Policies; no amounts were retained by TSSC. During fiscal year 1995,
$2,355,155.93 in commissions were paid to TSSC as underwriter of the Policies;
no amounts were retained by TSSC. During fiscal year 1997, $81.50 in commissions
were paid to TFR as underwriter of the Policies; no amounts were retained by
TFR. During fiscal year 1996, $66.00 in commissions were paid to TFR as
underwriter of the Policies; no amounts were retained by TFR. During fiscal year
1995, $286.000 in commissions were paid to TFR as underwriter of the Policy.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Variable Account is held by Transamerica. The
assets are kept separate and apart from Transamerica's general account assets.
Records are maintained of all purchases and redemptions of Portfolio shares held
by each of the Sub-Accounts.
TRANSAMERICA
General Information and History
Transamerica is wholly-owned by Transamerica Occidental Life Insurance
Company, which is, in turn, an indirect subsidiary of Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in two primary businesses: finance and insurance.
Finance consists of consumer lending, commercial lending, leasing and real
estate services. Insurance comprises life insurance, asset management and
insurance brokerage.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain Policy
rights and provisions depends on state approval and/or filing and review
processes.
Where required by state law or regulation, the Policies will be modified
accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Variable Account will be
maintained by Transamerica or by its Service Office. As presently required by
the 1940 Act and regulations promulgated thereunder which pertain to the
Variable Account, reports containing such information as may be required under
the 1940 Act or by other applicable law or regulation will be sent to Owners
semi-annually at their last known address of record.
FINANCIAL STATEMENTS
This Statement of Additional Information contains the financial
statements of the Variable Account as of December 31,1997.
The financial statements of Transamerica included in this Statement of
Additional Information should be considered only as bearing on the ability of
Transamerica to meet its obligations under the Policies. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next Variable Accumulation Payment's due date.
Where:
(AUV1) is the variable accumulation Unit value of the Variable
sub-account that the transfer is being made from as of the end of the
valuation Period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the Variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
<PAGE>
1
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street, Los Angeles, California 90015, (213) 742-2111
PROSPECTUS
May 1, 1998
The Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
management investment company. The Growth Portfolio seeks long-term capital
growth. Common stock (listed and unlisted) is the basic form of investment. The
Portfolio may also invest in debt securities and preferred stock having a call
on common stocks.
Shares of the Fund are currently offered only to separate accounts of
insurance companies to fund the benefits of variable annuity contracts and
variable life insurance policies (collectively "variable insurance contracts").
Each variable insurance contract involves fees and expenses not described in
this Prospectus. See the accompanying variable insurance contract prospectus for
information regarding contract fees and expenses and any restrictions on
purchases or allocations.
This Prospectus contains information about the Fund and the Portfolio
that a prospective purchaser of a variable insurance contract should know before
allocating purchase payments or premiums to the Portfolio. It should be read in
conjunction with the Prospectus for the variable insurance contract and should
be retained for future reference. A Statement of Additional Information
containing more detailed information about the Fund is available free by writing
to the Fund at the Transamerica Annuity Service Center, 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202, or by calling 800-258-4260. The
Statement of Additional Information, which has the same date as this Prospectus,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus should be read in
conjunction with the prospectus for the
variable insurance contract.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are fund shares federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in fund shares involves certain investment risks,
including possible loss of principal.
<PAGE>
TABLE OF CONTENTS
3
Page
CONDENSED FINANCIAL INFORMATION...........................1
TRANSAMERICA VARIABLE INSURANCE FUND, INC.................3
GROWTH PORTFOLIO..........................................3
INVESTMENT OBJECTIVE AND POLICIES.........................3
INVESTMENT METHODS AND RISKS..............................4
Small Capitalization Companies...................4
Convertible Securities...........................5
High-Yield ("Junk") Bonds........................5
Repurchase Agreements............................5
State Insurance Regulation.......................6
PORTFOLIO TURNOVER........................................6
MANAGEMENT................................................6
Directors and Officers...........................6
Investment Adviser...............................6
Investment Sub-Adviser...........................7
PERFORMANCE INFORMATION...................................7
DETERMINATION OF NET ASSET VALUE..........................8
OFFERING, PURCHASE AND REDEMPTION OF SHARES...............8
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS...........9
TAXES ...................................................9
OTHER INFORMATION...........................................9
Preparing for Year 2000.............................
Reports ...................................................9
Voting and Other Rights............................9
Custody of Assets and Administrative Services.....10
Summary of Bond Ratings...........................10
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION........................11
<PAGE>
CONDENSED FINANCIAL INFORMATION
Financial Highlights
The following table gives information regarding income, expenses and
capital changes for the Growth Portfolio of the Transamerica Variable Insurance
Fund, Inc. (formerly Transamerica Occidental's Separate Account Fund C)
attributable to a Portfolio share outstanding throughout the periods indicated.
The information is presented as if the reorganization of Separate Account Fund
C, described below, in which the assets and liabilities of the Separate Account
were transferred intact to the Growth Portfolio, had always been in effect. The
activity prior to the November 1, 1996, reorganization of Separate Account Fund
C, represents accumulation unit values of Separate Account Fund C which have
been converted into share values for presentation purposes.
The per share data in the table for the period January 1, 1993, through
December 31, 1997, has been audited by Ernst & Young LLP, independent auditors
of the Fund, in connection with the annual audits of the Portfolio's financial
statements. The per share data in the table for the period January 1, 1988,
through December 31, 1991, is based upon data from the audited financial
statements of Separate Account Fund C, but Ernst & Young, LLP has not audited
the conversion of that data to Growth Portfolio share values. Prior to November
1, 1996, activity represents accumulated unit values of Separate Account Fund C
which have been converted to share values for presentation purposes. The
financial statements which appear in the Statement of Additional Information are
dated as of December 31, 1997.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
1997 1996 1995 1994 1993
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.93 $8.582 $5.615 $5.239 $4.287
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Investment Operations
Net investment income (loss) (0.05) (0.065) (0.069) (0.042) (0.030)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net realized and unrealized gain 5.13 2.413 3.036 0.418 0.982
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total from investment operations 5.08 2.348 2.967 0.376 0.952
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Distribution from realized gains (1.26) - - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net asset value, end of year $14.75 $10.930 $8.582 $5.615 $5.239
====== ======= ====== ====== ======
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total Return 46.50% 27.36% 52.84% 7.19% 22.20%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net assets, end of year (in thousands) $46,378 $32,238 $25,738 $17,267 $16,584
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Expenses to average net assets (1) 0.85% 1.27% 1.41% 1.43% 1.43%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net investment income (loss) to average net assets (2) (0.39%) (0.68%) (0.94%) (0.80%) (0.65%)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Portfolio turnover rate 20.54% 34.58% 18.11% 30.84% 42.04%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Average commission rate (3) $0.0575 $0.07 - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
1992 1991 1990 1989 1988
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, beginning of year $3.783 $2.689 $3.026 $2.266 $1.694
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Investment Operations
Net investment income (loss) (0.012) (0.009) (0.022) (0.010) (0.054)
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net realized and unrealized gain 0.492 1.085 (0.360) 0.750 0.517
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total from investment operations 0.504 1.095 (0.337) 0.760 0.572
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, end of year $4.287 $3.783 $2.689 $3.026 $2.266
====== ====== ====== ====== ======
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total Return 13.32% 40.71% (11.14%) 33.56 33.74%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net assets, end of year (in thousands) $13,966 $12,516 $9,281 $10,861 $8,453
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Expenses to average net assets (1) 1.43% 1.43% 1.43% 1.44% 1.43%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net investment income (loss) to average net assets (2) (0.31%) 0.28% 0.81% 0.37% 2.66%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Portfolio turnover rate 43.07% 32.90% 49.87% 22.39% 52.18%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Average commission rate (3) - - - - -
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
</TABLE>
(1) If the Investment Adviser had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.98% and 1.34%
for the years ended December 31, 1997 and 1996, respectively.
(2) If the Investment Adviser had not reimbursed expenses the ratio of net
investment loss to average net assets would have been (0.52%) and (0.75%)
for the years ended December 31, 1997 and 1996, respectively.
(3) This disclosure is required for fiscal periods beginning on or after
September 1, 1995, and represents
the average commission rate paid on equity security transactions on which
commissions are charged.
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.GROWTH PORTFOLIO
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
diversified management investment company established as a Maryland Corporation
on June 23, 1995. The Fund currently consists of two investment portfolios, the
Growth Portfolio and the Money Market Portfolio. This prospectus sets forth
information about the Growth Portfolio only. Additional Portfolios may be
created from time to time. By investing in the Growth Portfolio, an investor
becomes entitled to a pro rata share of all dividends and distributions arising
from the net income and capital gains, if any, on the investments of the Growth
Portfolio. Likewise, an investor shares pro-rata in any losses of the
Portfolio.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust was approved at a meeting of the Contract owners held on
October 30, 1996. The asset and liabilities of Separate Account Fund C as of the
close of business October 31, 1996, were transferred intact to the Growth
Portfolio in exchange for shares of the Growth Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's Board of Directors, Transamerica Occidental Life
Insurance Company ("Transamerica" or the "Investment Adviser") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services" or "Sub-Adviser" or "Manager") to act as the Fund's sub-advisor to
provide the day-to-day portfolio management for the Portfolio.
The Portfolios are designed primarily to serve as investment vehicles for
variable annuity and variable life insurance contracts offered by separate
accounts of various insurance companies. The Fund may sell its shares to
qualified pension and retirement plans, but currently does not do so. The Fund
does not offer its stock directly to the general public.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Growth Portfolio are
described below. There can be no assurance that the Growth Portfolio will
achieve its investment objective. Investors should not consider any one
Portfolio alone to be a complete investment program. As with any security, a
risk of loss, including possible loss of principal, is inherent in an investment
in the shares of the Portfolio.
The different types of securities, investments, and investment
techniques used by the Portfolio involve risks of varying degrees. These risks
are described in greater detail, under "Investment Methods and Risks" and in the
Statement of Additional Information. The Portfolio is subject to certain
investment restrictions that are described under the caption "Investment
Restrictions" in the Statement of Additional Information.
The investment objective of the Portfolio as well as the investment
policies that are not fundamental may be changed by the Fund's Board of
Directors without shareholder approval. Certain of the investment restrictions
of the Portfolio are fundamental, however, and may not be changed without the
approval of a majority of the votes attributable to the outstanding shares of
the Portfolio. See "Investment Restrictions" in the Statement of Additional
Information.
The Growth Portfolio's investment objective is long-term capital
growth. Common stock, listed and unlisted, is the basic form of investment. The
Growth Portfolio invests primarily in common stocks of growth companies that are
considered by the manager to be premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
dominant market share; leading brand recognition; proprietary products or
technology; low-cost production capability; and excellent management with
shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements.
Although the Portfolio invests the majority of its assets in common stocks, the
Portfolio may also invest in debt securities and preferred stocks (both having a
call on common stocks by means of a conversion privilege or attached warrants)
and warrants or other rights to purchase common stocks. When in the judgment of
Investment Services market conditions warrant, the Growth Portfolio may, for
temporary defensive purposes, hold part or all of its assets in cash, debt or
money market instruments.
The Portfolio may invest up to 10% of the Portfolio's assets in debt
securities having a call on common stocks that are rated below investment grade.
Those securities are rated Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if
unrated, deemed to be of comparable quality by Investment Services.
If a security that was originally rated "investment grade" is
downgraded by a ratings service, it may or may not be sold. This depends on
Investment Services' assessment of the issuer's prospects. However, Investment
Services will not purchase below-investment-grade securities if that purchase
would increase their representation in the Portfolio to more than 10%.
The Portfolio may invest up to 10% of its net assets in the securities
of foreign issuers that are in the form of American Depository Receipts
("ADRs"). ADRs are registered stocks of foreign companies that are typically
issued by an American bank or trust company evidencing ownership of the
underlying securities. ADRs are designed for use on the U.S. stock exchanges.
With respect to 75% of total assets, the Portfolio may not purchase
more than 10% of the voting securities of any one issuer. The Portfolio may not
invest in companies for the purposes of exercising control or management.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the salability of which is
otherwise conditioned, including real estate and certain repurchase agreements
or time deposits maturing in more than seven days ("restricted securities"), as
long as any such purchase or acquisition will not immediately result in the
value of all such restricted securities exceeding 15% of the value of the
Portfolio's net assets.
INVESTMENT METHODS AND RISKS
The Growth Portfolio is subject to the risk of changing economic
conditions and fluctuations in the price of securities owned by the Portfolio.
In addition, the different types of securities, investments, and
investment techniques used by the Portfolio involve risks of varying degrees.
For example, with respect to equity securities, there can be no assurance of
capital appreciation and there is a substantial risk of decline in value. With
respect to debt securities, there exists the risk that the issuer of a security
may not be able to meet its obligations on interest or principal payments at the
time required by the investment. Certain risks associated with the types of
investments in which the Portfolio may invest are discussed below. For more
information on investment methods and risks, see "Special Investment Methods and
Risks" in the Statement of Additional Information.
Small Capitalization Companies
The Growth Portfolio may invest in securities of smaller, lesser-known
companies. Such investments involve greater risks than the investments of
larger, more mature, better known issuers, including an increased possibility of
portfolio price volatility. Historically, small capitalization stocks and stocks
of recently organized companies have been more volatile in price than the larger
capitalization stocks included in the S&P 500. Among the reasons for the greater
price volatility of these small company stocks are the less certain growth
prospects of smaller firms, the lower degree of liquidity in the markets for
such stocks and the greater sensitivity of small companies to changing economic
conditions. For example, these companies are associated with higher investment
risk than that normally associated with larger, more mature, better known firms
due to the greater business risks of small size and limited product lines,
markets, distribution channels and financial and managerial resources.
The values of small company stocks may fluctuate independently of
larger company stock prices. Small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should therefore expect that to the extent the Portfolio
invests in stock of small capitalization companies, the net asset value of the
Portfolio's shares may be more volatile than, and may fluctuate independently
of, broad stock market indices such as the S&P 500. Furthermore, the securities
of companies with small stock market capitalizations may trade less frequently
and in limited volume.
Convertible Securities
The Growth Portfolio may invest in convertible securities. Convertible
securities may include corporate notes or preferred stock but are ordinarily a
long-term debt obligation of the issuer convertible at a stated exchange rate
into common stock of the issuer. Convertible securities have general
characteristics similar to both fixed-income and equity securities. As with all
debt securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
In addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock, and therefore, will react to variations in the general market for
equity securities. As the market price of the underlying common stock declines,
the convertible security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common stock.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Like all fixed-income securities, there is no assurance of current
income as the issuer might default in its obligations. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, rank senior to common stocks
in an issuer's capital structure and are consequently of higher quality and
entail less risk of declines in market value than the issuer's common stock.
However, the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed-income security.
High-Yield ("Junk") Bonds
High-yield bonds (commonly called "junk" bonds) are lower-rated bonds
that involve higher current income but are predominantly speculative because
they present a higher degree of credit risk than higher-rated bonds. Credit risk
is the risk that the issuer of the bonds will not be able to make interest or
principal payments on time. The prices of junk bonds tend to be more reflective
of prevailing economic and industry conditions, the issuer's unique financial
situation, and the bond's coupon than to small changes in the market level of
interest rates. During an economic downturn or a period of rising interest
rates, highly leveraged companies may experience difficulties in making
principal and interest payments, meeting projected business goals, and obtaining
additional financing. See "Summary of Bond Ratings" on page 10 and the Statement
of Additional Information for a description of bond rating categories.
Repurchase Agreements
The Growth Portfolio may enter into repurchase agreements with Federal
Reserve System member banks or U.S. securities dealers. A repurchase agreement
occurs when the Portfolio purchases an interest-bearing debt obligation and the
seller agrees to repurchase the debt obligation on a specified date in the
future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Portfolio's money is invested in the security.
Since the security constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a collateralized loan. The Portfolio's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller is unable to make a timely repurchase, the Portfolio's
expected proceeds could be delayed, or the Portfolio could suffer a loss in
principal or current interest, or incur costs in liquidating the collateral. In
evaluating whether to enter into a repurchase agreement, Investment Services
will carefully consider the creditworthiness of the seller pursuant to
procedures established by the Fund's Board of Directors.
The Growth Portfolio will not invest in repurchase agreements maturing
in more than seven days if that would constitute more than 10% of the
Portfolio's net assets when taking into account the remaining days to maturity
of the Portfolio's existing repurchase agreements.
State Insurance Regulation
The Portfolio is intended to be a funding vehicle for variable annuity
contracts and variable life policies to be offered by insurance companies and
will seek to be offered in as many jurisdictions as possible. Certain states
have regulations or guidelines concerning concentration of investments and other
investment techniques. If such regulations and guidelines are applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its portfolio with the flexibility provided herein. It
is the Portfolio's intention that it operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
PORTFOLIO TURNOVER
The Growth Portfolio will not consider portfolio turnover to be a
limiting factor in making investment decisions. Changes will be made in the
Portfolio if such changes are considered advisable to better achieve the
Portfolio's investment objective. The portfolio turnover rate is calculated by
dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of the portfolio securities, excluding
debt securities having a maturity at the date of purchase of one year or less.
Investment Services anticipates that the annual turnover rate for the Growth
Portfolio will generally not exceed 75%.
High rates of portfolio turnover involve correspondingly greater
expenses which must be borne by the Portfolio and its shareholders, including
higher brokerage commissions, dealer mark-ups and other transaction costs on the
sale of securities and reinvestment of other securities. High rate of turnover
may result in the acceleration of taxable gains and may under certain
circumstances make it more difficult for a Portfolio to qualify as a regulated
investment company under the Internal Revenue Code.
See "Federal Tax Matters" in the Statement of Additional Information.
MANAGEMENT
Directors and Officers
The Fund's Board of Directors is responsible for deciding matters of
general policy and reviewing the actions of the Investment Adviser and
Investment Sub-Adviser, the custodian, the accounting and administrative
services providers and other providers of services to the Portfolio. The
officers of the Fund supervise its daily business operations. The Statement of
Additional Information contains information as to the identity of, and other
information about, the directors and officers of the Fund.
Investment Adviser
Transamerica Occidental Life Insurance Company ("Transamerica"), 1150
South Olive Street, Los Angeles, California 90015, is the investment adviser of
the Portfolio. Transamerica is a stock life insurance company incorporated in
the state of California on June 30, 1906. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. Transamerica acted as
investment adviser to Transamerica Occidental's Separate Account Fund C
("Separate Account Fund C"), the Fund's predecessor.
The Fund has entered into an Investment Advisory Agreement with
Transamerica under which the Transamerica assumes overall responsibility,
subject to the supervision of the Fund's Board of Directors, for administering
all operations of the Fund and for monitoring and evaluating the management of
the assets of the Portfolio by Investment Services on an ongoing basis.
Transamerica provides or arranges for the provision of the overall business
management and administrative services necessary for the Fund's operations and
furnishes or procures any other services and information necessary for the
proper conduct of the Fund's business. Transamerica also acts as liaison among,
and supervisor of, the various service providers to the Fund.
For its services to the Portfolio, Transamerica receives an annual
advisory fee of 0.75% of the average daily net assets of the Growth Portfolio.
The fee is deducted daily from the assets of the Portfolio. This fee may be
higher than the average advisory fee paid to the investment advisers of other
growth portfolios. Transamerica may waive some or all of its fee from time to
time at its discretion.
Sub-Adviser
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services" or "Sub-Adviser" or "Manager"), a wholly-owned subsidiary
of Transamerica Corporation, to render investment services to the Portfolio.
Investment Services has been in existence since 1967 and has provided investment
services to investment companies since 1968 and to the Transamerica Life
Companies since 1981. Investment Services is located at 1150 South Olive Street,
Los Angeles, California 90015-2211. Transamerica has agreed to pay Investment
Services a monthly fee at the annual rate of 0.30% of the first $50 million of
the Portfolio's average daily net assets, 0.25% of the next $150 million, and
0.20% of assets in excess of $200 million. Investment Services will provide
recommendations on the management of Portfolio assets, provide investment
research reports and information, supervise and manage the investments of the
Portfolio, and direct the purchase and sale of Portfolio investments.
Investment Services is also responsible for the selection of brokers
and dealers to execute transactions for the Fund. Some of these brokers or
dealers may be affiliated persons of Transamerica and Investment Services,
although presently none are. Although it is the policy of Investment Services to
seek the best price and execution for each transaction, Investment Services may
give consideration to brokers and dealers who provide Investment Services with
statistical information and other services in addition to transaction services.
Additional information about the selection of brokers and dealers is provided in
the Statement of Additional Information.
The transactions and performance of the Growth Portfolio are
reviewed continuously by the
senior officers of Investment Services. The portfolio manager for the
Growth Portfolio is Jeffrey S.
Van Harte, C.F.A., Vice President and Senior Fund Manager at Investment
Services. Mr. Van Harte is a
member of the San Francisco Society of Financial Analysts and received a
B.A. from California State
University at Fullerton in 1980. Mr. Van Harte has been managing
the portfolio of the Fund's
predecessor, Separate Account Fund C, since 1984.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return
figures for the Portfolio in advertisements and communications to shareholders
or sales literature.
Average annual total return is determined by computing the annual
percentage change in value of $1,000 invested for specified periods ending with
the most recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The average annual total return calculation
assumes a complete redemption of the investment at the end of the relevant
period.
The Fund also may from time to time disseminate year-by-year total
return, cumulative total return and yield information for the Portfolio in
advertisements, communications to shareholders or sales literature. These may be
provided for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a specified
period are each derived by calculating the percentage rate required to make a
$1,000 investment in the Portfolio (assuming all distributions are reinvested)
at the beginning of such period equal to the actual total value of such
investment at the end of such period.
In addition, the Fund may from time to time publish performance of the
Portfolio relative to certain performance rankings and indices.
As the successor to Separate Account Fund C, the Growth Portfolio
treats the historical performance data of Separate Account Fund C as its own for
periods prior to the reorganization. The performance data for the Growth
Portfolio prior to the reorganization does not reflect any sales or insurance
charges, or any other separate account or contract level charges, that were
imposed under the annuity contracts issued through Separate Account Fund C.
Since the Fund is not available directly to the public, its performance
data is not advertised unless accompanied by comparable data for the applicable
variable annuity or variable life insurance policy. The Portfolio's performance
data does not reflect separate account or contract level charges.
The investment results of the Portfolio will fluctuate over time and
any presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the
Portfolio's performance may be in any future period. In addition to information
provided in shareholder reports, the Fund may, in its discretion, from time to
time make a list of the Portfolio's holdings available to investors upon
request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is normally determined
once daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open, except as noted below. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year, except for certain holidays. The
net asset value of the Portfolio's shares will not be calculated on the Friday
following Thanksgiving, the Friday following Christmas if Christmas falls on a
Thursday and the Monday before Christmas if Christmas falls on a Tuesday. The
net asset value of the Portfolio is determined by dividing the value of the
Portfolio's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the
Portfolio outstanding.
The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. The short-term debt securities
having remaining maturities of sixty days or less held by the Growth Portfolio
(if any) are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Fund's Board of Directors. See "Determination of Net Asset
Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to a participation agreement between the Fund and
Transamerica, shares of the Portfolio are sold in a continuous offering and are
authorized to be offered to Separate Account C to support its variable annuity
contracts (the "Contracts"). Net purchase payments under the Contracts are
placed in Separate Account C and the assets of the Separate Account C are
invested in the shares of the Growth Portfolio. Separate Account C purchases and
redeems shares of the Portfolio at net asset value without sales or redemption
charges.
For each day on which the Portfolio's net asset value is calculated,
Separate Account C will transmit to the Fund any orders to purchase or redeem
shares of the Portfolio based on the purchase payments, redemption (surrender)
requests, and transfer requests from Contract owners, annuitants and
beneficiaries that have been processed on that day. Shares of the Portfolio are
purchased and redeemed at the Portfolio's net asset value per share calculated
as of that same day although such purchases and redemptions may be executed the
next morning.
In the future, the Fund may offer shares of the Portfolio (including
new Portfolios that might be added to the Fund) to other separate accounts of
various insurance companies, whether or not affiliated with Transamerica, to
support variable annuity contracts or variable life insurance contracts.
Likewise, the Fund may also, in the future, offer shares of the Portfolio
directly to qualified pension and retirement plans.
In the event that shares of the Portfolio are offered to a separate
account supporting variable life insurance or to qualified pension and
retirement plans, a potential for certain conflicts may exist between the
interests of variable annuity contract owners, variable life insurance contract
owners and plan participants. The Fund currently does not foresee any
disadvantage to owners of the Contracts arising from the fact that shares of the
Portfolio might be held by such entities. However, in such an event, the Fund's
Board of Directors will monitor the Portfolio in order to identify any material
irreconcilable conflicts of interest which may possibly arise, and to determine
what action, if any, should be taken in response to such conflicts.
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Growth Portfolio distributes substantially all of its net
investment income in the form of dividends to its shareholders. The Growth
Portfolio declares its dividends and capital gain distributions at least
annually.
TAXES
The Fund believes that the Portfolio qualifies as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Portfolio intends to distribute substantially all
of its net income and net capital gains to its shareholders. As a result, under
the provisions of subchapter M, there should be little or no income or gains
taxable to the Portfolio. In addition, the Portfolio intends to comply with
certain other distribution rules specified in the Code so that it will not incur
a 4% nondeductible federal excise tax that otherwise would apply.
See "Federal Tax Matters" in the Statement of Additional Information.
The shareholders of the Portfolio are currently limited to Separate
Account C and Transamerica. For more information regarding the tax implications
for the purchaser of a Contract who allocates investments to the Portfolio,
please refer to the prospectus for Separate Account C.
OTHER INFORMATION
Preparing For Year 2000
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem." This issue could adversely impact the Fund if
the computer systems used by the Fund's Investment Adviser, Sub-Adviser,
Custodian, transfer agent and other service providers do not accurately process
date information after January 1, 2000. The Investment Adviser and Sub-Adviser
are addressing this issue by testing the computer systems they use to ensure
that those systems will operate properly after January 1, 2000, and they are
also seeking assurances from the Custodian, transfer agent and other service
providers they use that their computer systems will be adapted to address the
Year 2000 Problem in time to prevent adverse consequences after January 1, 2000.
However, especially when taking into account interaction with other systems, it
is difficult to predict with precision that there will be no disruption of
services in connection with the year 2000.
<PAGE>
Reports
Annual Reports containing audited financial statements of the Fund and
Semi-Annual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Fund at the telephone number or
address set forth on the cover page of this Prospectus.
Voting and Other Rights
Each share outstanding is entitled to one vote on all matters submitted
to a vote of shareholders (of the Portfolio or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolio and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of the Portfolio), when issued, is nonassessable and
has no preemptive or conversion rights. The shares have noncumulative voting
rights.
As a Maryland corporation, the Fund is not required to hold regular
annual shareholder meetings and does not intend to do so. The Fund is, however,
required to hold shareholder meetings for the following purposes: (i) approving
certain agreements as required by the 1940 Act; (ii) changing fundamental
investment objectives, policies and restrictions of the Portfolio; and (iii)
filling vacancies on the Board of Directors in the event that less than a
majority of the members of the Board of Directors were elected by shareholders.
Directors may also be removed by shareholders by a vote of two-thirds of the
outstanding votes attributable to shares at a meeting called at the request of
holders of 10% or more of such votes. The Fund has the obligation to assist in
shareholder communications.
Transamerica currently owns more than 25% of the outstanding shares of
the Portfolio which may result in it being deemed a controlling person of the
Portfolio, as that term is defined in the 1940 Act.
Custody of Assets and Administrative Services
Pursuant to a custody agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian"), 225 Franklin Street, Boston,
Massachusetts 02110, will hold all securities and cash assets of the Fund,
provide recordkeeping and certain accounting services and serve as the custodian
of the Fund's assets. The custodian will be authorized to deposit securities in
securities depositories and to use the services of sub-custodians.
Summary of Bond Ratings
Following is a summary of the grade indicators used by two of the most
prominent, independent rating agencies (Moody's Investors Service, Inc. and
Standard & Poor's Corporation) to rate the quality of bonds. The first four
categories are generally considered investment quality bonds. Those below that
level are of lower quality, commonly referred to as "junk bonds."
<TABLE>
<CAPTION>
Investment Grade Moody's Standard & Poor's
- --------------------------------------------------------------------------- -----------------
<S> <C> <C> <C>
Highest quality Aaa AAA
High quality Aa AA
Upper medium A A
Medium, speculative features Baa BBB
Lower Quality
Moderately speculative Ba BB
Speculative B B
Very speculative Caa CCC
Very high risk Ca CC
Highest risk, may not be
paying interest C C
In arrears or default D D
</TABLE>
For more information on bond ratings, including gradations within each
category of quality, see the Statement of Additional Information.
FOR MORE INFORMATION
The Statement of Additional Information ("SAI") contains more detailed
information on the Portfolios. The current SAI has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
prospectus (is legally part of this prospectus).
To request a free copy of the SAI, please write or call the Fund at:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-258-4260
<PAGE>
5
STATEMENT OF ADDITIONAL INFORMATION
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the May 1, 1998,
Prospectus write to the Fund at the Transamerica Annuity Service Center, 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202, or by calling
800-258-4260.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
ADDITIONAL INVESTMENT POLICY INFORMATION 1
SPECIAL INVESTMENT METHODS AND RISKS 2
Restricted and Illiquid Securities
2
Borrowing 2
Other Investment Companies 2
Options on Securities and Securities Indices
3
Warrants and Rights
4
Repurchase Agreements 4
High-Yield ("Junk") Bond 5
Foreign Securities 5
INVESTMENT RESTRICTIONS 5
Fundamental Restrictions
5
Non-Fundamental Restrictions
7
Interpretive Rules
7
INVESTMENT ADVISER 8
Investment Advisory Agreement
8
Investment Sub-Advisory Agreement 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE 9
DETERMINATION OF NET ASSET VALUE 10
PERFORMANCE INFORMATION 11
FEDERAL TAX MATTERS 13
SHARES OF STOCK 14
CUSTODY OF ASSETS 15
DIRECTORS AND OFFICERS 15
Compensation 16
LEGAL PROCEEDINGS 17
OTHER INFORMATION 17
Legal Counsel
17
Other Information 17
Independent Auditors 18
Financial Statements
18
APPENDIX A
19
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio") and the Money Market
Portfolio. This Statement of Additional Information sets forth information about
the Growth Portfolio only. By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
The Fund currently offers shares of the Growth Portfolio to insurance
companies as an underlying funding vehicle for variable annuity and variable
life insurance contracts (the "Contracts"). The Contracts are registered with
the Securities and Exchange Commission ("SEC"), and have separate prospectuses
and Statements of Additional Information.
The Fund may, in the future, offer its stock to qualified pension and
retirement plans. The Fund does not offer its stock directly to the general
public.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares were owned by Transamerica Life Insurance and Annuity
Company on behalf of Separate Account VA-6.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage. Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase options that are traded on United
States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price and that the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgment may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" means the lesser of: (a) 67% or more of the votes
attributable to shares of the Portfolio present at a meeting, if the holders of
more than 50% of such votes are present or represented by proxy; or (b) more
than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the Portfolio
may not purchase more than 10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than 25% of the
value of its total assets in securities issued by companies engaged in any one
industry. This limitation does not apply to investments in Government
Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets in real properties, including property acquired in
satisfaction of obligations previously held or received in part payment on the
sale of other real property owned. The purchase and sale of real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell commodities or
commodities contracts.
9. Senior Securities The Portfolio may not issue senior securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities Purchases or acquisitions may be
made of securities which are not readily marketable by reason of the fact that
they are subject to the registration requirements of the Securities Act of 1933
or the salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio to own securities of any one investment company that have a
total value greater than 5% of the value of the total assets of the Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns an equal amount of such securities or securities currently
exchangeable, without payment of any further consideration, for securities of
the same issue as, and at least equal in amount to, the securities sold short
(generally called a "short sale against the box") and unless not more than 10%
of the value of the Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain any short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
INVESTMENT ADVISER
Transamerica is the investment adviser of the Fund and its Portfolio.
It will oversee the management of the assets of the Portfolio by Investment
Services. In turn, Investment Services is responsible for the day-to-day
management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of the Portfolio and paid to Transamerica periodically.
Transamerica or its affiliates pays the salaries and fees, if any, of all
officers and directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of Transamerica and of all personnel of Transamerica performing
services relating to research, statistical and investment activities and the
fees of the Sub-Adviser.
The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, registration fees and
expenses, and fees and expenses of directors unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed 0.10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The total dollar amounts paid by the Portfolio, and/or its predecessor
Separate Account Fund C, to Transamerica under the applicable investment
advisory contract for the last three fiscal years are as follows: Separate
Account Fund C paid $67,198 in 1995; Separate Account Fund C and the Portfolio
together paid $66,831 in 1996; and the Portfolio paid $313,749 in 1997.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and by the Contract Owners of Separate Account Fund C at a
Contract Owners meeting held on October 30, 1996. The investment advisory
agreement will remain in effect from year to year provided such continuance is
specifically approved as to the Portfolio at least annually by: (a) the Board of
Directors or the vote of a majority of the votes attributable to shares of the
Portfolio; and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Portfolio at any time by the Board of Directors or by vote of a
majority of the votes attributable to outstanding voting securities of the
applicable Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica.
Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services is located at 1150 South Olive Street, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. Investment Services will provide recommendations on the
management of Fund assets, provide investment research reports and information,
supervise and manage the investments of the Portfolio, and direct the purchase
and sale of Portfolio investments. Investment decisions regarding the
composition of the Portfolio and the nature and timing of changes in the
Portfolio are subject to the control of the Board of Directors of the Fund.
The sub-advisory agreement was approved for the Portfolio by the Board
of Directors, including a majority of the Directors who are not parties to the
sub-advisory agreement or "interested persons" (as such term is defined in the
1940 Act) of any party thereto (the "non-interested Directors"), on July 24,
1996, and by the Contract Owners of Separate Account Fund C at a Contract Owners
meeting held on October 30, 1996. The sub-advisory agreement will remain in
effect from year to year provided such continuance is specifically approved as
to the Portfolio at least annually by: (a) the Board of Directors or the vote of
a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The sub-advisory agreement
will terminate automatically if assigned (as defined in the 1940 Act). The
sub-advisory agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 30 days written
notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
activities, and some of such services obtained in connection with the execution
of transactions for the Portfolio may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of the Portfolio, and the services furnished by such brokers
may be used by Investment Services in providing investment sub-advisory services
for the Portfolio. The aggregate dollar amounts of the brokerage commissions
paid with respect to portfolio transactions of the Portfolio by Investment
Services as sub-adviser to Separate Account Fund C (the Portfolio's predecessor)
were $7,253 for fiscal year 1995, and $19,115 for the first ten months of 1996.
The aggregate dollar amount of brokerage commissions paid by the Portfolio after
the reorganization, during November and December 1996, was $5,550, so that the
total paid by Investment Services and the Portfolio during fiscal year 1996 was
$24,665. The total paid by the Portfolio during fiscal year 1997 was $16,312.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Portfolio's
predecessor) for 1995 was 30.84%. The portfolio turnover rate for 1996, when
combining the experience of Separate Account Fund C through October 31, 1996,
and the Portfolio's experience for November and December 1996 was 34.58%. The
Portfolio's portfolio turnover rate for 1997 was 20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments
("Equities") listed on any U.S. stock market or the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last sale price on that exchange
or NASDAQ on the valuation day; if no sale occurs, Equities
traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices; (b)
over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; (c)
debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors; (d) options and futures contracts
are valued at the last sale price on the market where any such
option contracts are principally traded; (e) over-the-counter
options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; (f) all
other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not
deemed by Investment Services to be representative of market
values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and (g) debt securities with a
remaining maturity of 60 days or less will be valued at their
amortized cost which approximates market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the price will be determined in good faith by or under procedures
established by the Board of Directors.
PERFORMANCE INFORMATION
The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C, as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, its investment performance for periods prior to the reorganization
reflect total mutual fund fees and expenses of 0.98% per year.
In computing its standardized total returns for periods prior to the
reorganization, the Portfolio assumes that the charges currently imposed by the
Portfolio were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data does not reflect
any sales or insurance charges, or any other separate account or contract level
charges, that were imposed under the annuity contracts issued through Separate
Account Fund C.
Any performance data quoted for the Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio does not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Portfolio recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 5000 Index; (k) the Salomon Brothers
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of the Portfolio varies based
on market conditions, portfolio expenses, portfolio investments and other
factors. The value of the Portfolio's shares fluctuates and an investor's shares
may be worth more or less than their original cost upon redemption. The Fund may
also, at its discretion, from time to time make a list of the Portfolio's
holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. The Portfolio must have, at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United States
Government securities, securities of other regulated investment companies, and
other securities which, in respect of any one issuer, do not exceed 5% of the
value of the Portfolio's total assets and that do not represent more than 10% of
the outstanding voting securities of the issuer. In addition, not more than 25%
of the value of the Portfolio's total assets may be invested in securities
(other than United States Government securities or the securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian") 225 Franklin Street, Boston,
Massachusetts 02110 holds the cash and portfolio securities of the Fund as
custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald E. Cantlay (76) Board of Directors Director, Managing General Partner of Cee
'n' Tee Company; Director of California
Trucking Association and Western Highway
Institute; Director of FPA Capital Fund
and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and
Director of Transamerica Investment
Services, Inc.; Senior Vice President and
Chief Investment Officer of Transamerica
Corporation. Director and Chief
Investment Officer of Transamerica
Occidental Life Insurance Company.
Jon C. Strauss (58) Board of Directors President of Harvey Mudd College;
Previously Vice President and Chief
Financial Officer of Howard Hughes Medical
Institute; President of Worcester
Polytechnic Institute; Vice President and
Professor of Engineering at University of
Southern California; Vice President Budget
and Finance, Director of Computer
Activities and Professor of Computer and
Decision Sciences at University of
Pennsylvania.
Gary U. Rolle (57)* Chairman, Board of Director,
Directors Executive Vice President and Chief
Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company.
Peter J. Sodini (57) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive
Officer and Director, The Pantry, Inc. (a
supermarket). Director Pamida Holdings
Corp. (a retail merchandiser) and Buttrey
Food and Drug Co. (a supermarket).
Barbara A. Kelley (45) President President, Chief Operating Officer and
Director of Transamerica Financial
Resources, Inc. and President and Director
of Transamerica Securities Sales
Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica
Product, Inc. I, Transamerica Product,
Inc. II, Transamerica Product, Inc. IV,
and Transamerica Leasing Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of
the Institutional Marketing Services
Division of Transamerica Life Insurance
and Annuity Company and prior to 1994,
Vice President and National Sales Manager
of the Dreyfus Service Organization .
Sally S. Yamada (47) Assistant Secretary Vice President and Treasurer of
Transamerica
Occidental Life Insurance Company
and Treasurer of Transamerica Life
Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life
Insurance Company and prior to 1994
Counsel and Vice President for Colonial
Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams
& Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief Financial
Officer, Transamerica Investment Services,
Inc., since 1997; Independent Financial
Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940
Act.
** Except as otherwise noted, the mailing address of each Board member and
officer is 1150 South Olive, Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same or similar position with Transamerica Occidental's Separate Account Fund B.
The members of the Board of Directors are also members of the Board of Directors
of Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ended December 31, 1997, to all Directors of
the Fund.
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Total Pension or From Registrant
Aggregate Retirement Benefits and Fund Complex
Compensation Accrued As Part of Fund Paid to Directors3/
Name of Person From Fund1/ Expenses2/
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini -$1500- -0- $4,750
Jon C. Strauss $500 -0- $500
---------------------
</TABLE>
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent auditors.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for the fiscal year ended December 31, 1997.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1A. Moody's Investors Service, Inc. Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
a medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or maybe
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements and their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Unrated:
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following:1. An application
for rating was not received or accepted.2. The issue or issuer belongs to a
group of securities or companies that are not rated as a matter of policy.3.
There is a lack of essential data pertaining to the issue or issuer.4.The issue
was privately placed, in which case the rating is not published in Moody's
publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.Note: Those
bonds in the Aa, A and Baa groups which Moody's believe possess the strongest
investment attributes are designated by the symbols Aa1, A1 and Baa1.B. Standard
& Poor's Corporations AAA: Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong. AA: Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. A: Bonds rated A have
a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. BBB: Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than in
higher rated categories. BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.Notes: Bonds which are
unrated expose the investor to risks with respect to capacity to pay interest or
repay principal which are similar to the risks of lower-rated speculative
obligations. Investment Services'
uses its judgment, analysis and experience to evaluate such bonds.
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1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement of Additional
Information for the securities listed. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligations to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these securities on
the date of the Fund's fiscal year end.
