485BPOS 1 d485bpos.txt FORM 485BPOS As filed with the Securities and Exchange Commission on April 29, 2002 Registration No. 33-49998 811-7042 --------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. __ [ ] Post-Effective Amendment No. 21 [x] -- and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 23 [x] -- SEPARATE ACCOUNT VA-2L ---------------------- (Exact Name of Registrant) TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY ---------------------------------------------- (Name of Depositor) 4333 Edgewood Road NE, Cedar Rapids, IA 52499 --------------------------------------------- (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including Area Code: (319) 297-8121 Name and Address of Agent for Service: Copy to: Frank A. Camp, Esquire Frederick R. Bellamy, Esquire Transamerica Occidental Life Insurance Co. Sutherland, Asbill & Brennan, LLP 4333 Edgewood Road, N.E. 1275 Pennsylvania Avenue, N.W. Cedar Rapids, Iowa 52499-0001 Washington, D.C. 20004-2402 Approximate date of proposed sale to the public: As soon as practicable after effectiveness of the Registration Statement. Title of Securities being registered: Variable Annuity Contracts It is proposed that this filing will become effective: [_] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2002 pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(i) [_] on _________ pursuant to paragraph (a)(1) If appropriate, check the following box: [_] This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R) VARIABLE ANNUITY Issued Through SEPARATE ACCOUNT VA-2L by TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY Prospectus - May 1, 2002 This flexible purchase payment deferred variable annuity contract has many investment choices. There is a variable account that currently offers twenty- seven underlying fund portfolios. There is also a fixed account, which offers interest at rates that are guaranteed by Transamerica Occidental Life Insurance Company (Transamerica). You can choose any combination of these investment choices. You bear the entire investment risk for all amounts you put in the variable account. This prospectus and the underlying fund prospectuses give you important information about the contracts and the underlying funds. Please read them carefully before you invest and keep them for future reference. If you would like more information about the Dreyfus/Transamerica Triple Advantage(R) Variable Annuity, you can obtain a free copy of the Statement of Additional Information (SAI) dated May 1, 2002. Please call us at (877) 717- 8861 or write us at: Transamerica Occidental Life Insurance Company, Annuity Service Center, 4333 Edgewood Road NE, Cedar Rapids, Iowa, 52499-0111. A registration statement, including the SAI, has been filed with the Securities and Exchange Commission (SEC) and the SAI is incorporated herein by reference. Information about the variable annuity contract can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You may obtain information about the operation of the public reference room by calling the SEC at 1-800- SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that contains the prospectus, the SAI, material incorporated by reference, and other information. The table of contents of the SAI is included at the end of this prospectus. Please note that the contracts and the variable account investment choices: .. are not bank deposits .. are not federally insured .. are not endorsed by any bank or government agency .. are not guaranteed to achieve their goal .. are subject to risks, including loss of purchase payments AEGON/TRANSAMERICA SERIES FUND, INC. Managed by Transamerica Investment Management, LLC Transamerica Equity DREYFUS VARIABLE INVESTMENT FUND -SERVICE CLASS Managed by The Dreyfus Corporation Appreciation Portfolio Balanced Portfolio Disciplined Stock Portfolio Growth and Income Portfolio International Equity Portfolio International Value Portfolio Limited Term High Income Portfolio Quality Bond Portfolio Small Cap Portfolio Small Company Stock Portfolio Special Value Portfolio DREYFUS VARIABLE INVESTMENT FUND Managed by The Dreyfus Corporation Money Market Portfolio DREYFUS STOCK INDEX FUND - SERVICE CLASS Managed by The Dreyfus Corporation and Mellon Equity Associates THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. - SERVICE CLASS Managed by The Dreyfus Corporation and NCM Capital Management Group DREYFUS INVESTMENT PORTFOLIOS -SERVICE CLASS Managed by The Dreyfus Corporation Core Bond Portfolio Core Value Portfolio Emerging Leaders Portfolio Emerging Markets Portfolio European Equity Portfolio Founders Discovery Portfolio Founders Growth Portfolio Founders International Equity Portfolio Founders Passport Portfolio Japan Portfolio MidCap Stock Portfolio Technology Growth Portfolio The Securities and Exchange Commission has not approved or disapproved these securities, or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS
Page GLOSSARY OF TERMS.......................................................... 3 SUMMARY.................................................................... 4 ANNUITY CONTRACT FEE TABLE................................................. 9 EXAMPLES................................................................... 12 1. THE ANNUITY CONTRACT.................................................... 16 2. PURCHASE................................................................ 16 Contract Issue Requirements.............................................. 16 Purchase Payments........................................................ 16 Initial Purchase Payment Requirements.................................... 16 Additional Purchase Payments............................................. 17 Maximum Total Purchase Payments.......................................... 17 Allocation of Purchase Payments.......................................... 17 Account Value............................................................ 17 3. INVESTMENT CHOICES...................................................... 17 The Variable Account..................................................... 17 The Fixed Account........................................................ 18 Transfers................................................................ 19 4. PERFORMANCE............................................................. 20 5. EXPENSES................................................................ 20 Surrender Charges........................................................ 20 Excess Interest Adjustment............................................... 21 Mortality and Expense Risk Fees.......................................... 22 Administrative Charges................................................... 22 Premium Taxes............................................................ 22 Federal, State and Local Taxes........................................... 22 Transfer Fee............................................................. 22 Guaranteed Minimum Income Benefit........................................ 22 Initial Payment Guarantee................................................ 23 Tax Relief Rider......................................................... 23 Portfolio Fees and Expenses.............................................. 23 6. ACCESS TO YOUR MONEY.................................................... 23 Surrenders............................................................... 23 Delay of Payment and Transfers........................................... 23 Excess Interest Adjustment............................................... 24 7. ANNUITY PAYMENTS (THE INCOME PHASE)..................................................... 24 Annuity Payment Options.................................................. 24 8. DEATH BENEFIT........................................................... 26 When We Pay A Death Benefit.............................................. 26 When We Do Not Pay A Death Benefit....................................... 27 Death After the Annuity Date............................................. 27 Succession of Ownership.................................................. 27 Amount of Death Benefit.................................................. 27 Guaranteed Minimum Death Benefit......................................... 27 Adjusted Partial Surrender............................................... 28
Page 9. TAXES.................................................................. 28 Annuity Contracts in General............................................ 28 Qualified and Nonqualified Contracts.................................... 29 Surrenders - Qualified Contracts........................................ 29 Surrenders - 403(b) Contracts........................................... 29 Diversification and Distribution Requirements........................... 30 Surrenders - Nonqualified Contracts..................................... 30 Taxation of Death Benefit Proceeds...................................... 30 Annuity Payments........................................................ 30 Annuity Contracts Purchased by Nonresident Aliens and Foreign Corporations........................................................... 31 Transfers, Assignments or Exchanges of Contracts........................ 31 Possible Tax Law Changes................................................ 31 Variable Account Charges................................................ 31 10. ADDITIONAL FEATURES................................................... 32 Systematic Withdrawal Option............................................ 32 Guaranteed Minimum Income Benefit....................................... 32 Initial Payment Guarantee............................................... 35 Tax Relief Rider........................................................ 35 Nursing Care and Terminal Condition Withdrawal Option................... 36 Unemployment Waiver..................................................... 37 Telephone Transactions.................................................. 37 Dollar Cost Averaging Program........................................... 37 Asset Rebalancing....................................................... 39 11. OTHER INFORMATION..................................................... 39 Ownership............................................................... 39 Assignment.............................................................. 39 Transamerica Occidental Life Insurance Company.......................... 39 The Variable Account.................................................... 39 Mixed and Shared Funding................................................ 39 Exchanges and Reinstatements............................................ 40 Voting Rights........................................................... 40 Distributor of the Contracts............................................ 40 IMSA.................................................................... 41 Legal Proceedings....................................................... 41 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.............. 41 APPENDIX A Condensed Financial Information........................................... 42 APPENDIX B Historical Performance Data............................................... 49 APPENDIX C Contract Variations....................................................... 54
2 GLOSSARY OF TERMS Account Value - On or before the annuity date, the account value is equal to the owner's: .. purchase payments; minus .. partial surrenders (including the net effect of any applicable excess interest adjustments and/or surrender charges on such surrenders); plus .. interest credited in the fixed account; plus .. accumulated gains in the variable account; minus .. losses in the variable account; minus .. service charges, rider fees, premium taxes, and transfer fees, and any other charges, if any. Adjusted Account Value - The account value increased or decreased by any excess interest adjustment. Annuitant - The person during whose life any annuity payments involving life contingencies will be based on. Annuity Date - The date upon which annuity payments are to commence. This date may be any date at least thirty days after the contract date and may not be later than the last day of the contract month starting after the annuitant attains age 85, except as expressly allowed by Transamerica. In no event will this date be later than the last day of the month following the month in which the annuitant attains age 95. The annuity date may have to be earlier for qualified contracts and may be earlier if required by state law. Annuity Payment - An amount paid by Transamerica at regular intervals to the annuitant and/or any other payee specified by the owner. It may be on a variable or fixed basis. Cash Value - The adjusted contract value less any applicable surrender charge and any rider fees (imposed upon surrender). Contract Year - A contract year begins on the date in which the contract becomes effective and on each contract anniversary. Excess Interest Adjustment - A positive or negative adjustment to amounts surrendered (both partial or full surrenders and transfers) or applied to annuity payment options from the fixed account guaranteed period options prior to the end of the guaranteed period. The adjustment reflects changes in the interest rates declared by Transamerica since the date any payment was received by (or an amount was transferred to) the guaranteed period option. The excess interest adjustment can either decrease or increase the amount to be received by the owner upon surrender (either full or partial) or commencement of annuity payments, depending upon whether there has been an increase or decrease in interest rates, respectively. Fixed Account - One or more investment choices under the contract that are part of Transamerica's general assets and are not in the variable account. Guaranteed Period Options - The various guaranteed interest rate periods of the fixed account which Transamerica may offer and into which purchase payments may be paid or amounts transferred. Owner (you, your) - The person who may exercise all rights and privileges under the contract. The owner during the lifetime of the annuitant and prior to the annuity date is the person designated as the owner or a successor owner in the information provided to us to issue a contract. Subaccount - A subdivision within the variable account, the assets of which are invested in specified portfolios of the underlying funds. Variable Account - Separate Account VA-2L, a separate account established and registered as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"), to which purchase payments under the contracts may be allocated. Variable Accumulation Unit - An accounting unit of measure used in calculating the account value in the variable account before the annuity date. (Note: The SAI contains a more extensive Glossary.) 3 SUMMARY The sections in this summary correspond to sections in this prospectus, which discuss the topics in more detail. 1. THE ANNUITY CONTRACT The flexible premium deferred variable annuity contract offered by Transamerica Occidental Life Insurance Company (Transamerica, we, us, or our) provides a way for you to invest on a tax-deferred basis in the following investment choices: twenty-seven subaccounts of the variable account and the fixed account of Transamerica. The contract is intended to accumulate money for retirement or other long-term investment purposes. This contract currently offers twenty-seven subaccounts in the variable account that are listed in Section 3. Each subaccount invests exclusively in shares of one of the portfolios of the underlying funds. The account value may depend on the investment experience of the selected subaccounts. Therefore, you bear the entire investment risk with respect to all account value in any subaccount. You could lose the amount that you invest. The fixed account offers an interest rate that Transamerica guarantees. We guarantee to return your investment with interest credited for all amounts allocated to the fixed account. The contract, like all deferred annuity contracts, has two phases: the "accumulation phase" and the "income phase." During the accumulation phase, earnings accumulate on a tax-deferred basis and are taxed as ordinary income when you take them out of the contract. The income phase occurs when you begin receiving regular payments from your contract. The money you can accumulate during the accumulation phase will largely determine the income payments you receive during the income phase. 2. PURCHASE You can buy a nonqualified contract with $5,000 or more, and a qualified contract with $1,000 or more, under most circumstances. You can add as little as $50 at any time during the accumulation phase. 3. INVESTMENT CHOICES You can allocate your purchase payments to one or more of the following underlying fund portfolios described in the underlying fund prospectuses: Transamerica Equity(/1/) Appreciation Portfolio Balanced Portfolio Disciplined Stock Portfolio Growth and Income Portfolio International Equity Portfolio International Value Portfolio Limited Term High Income Portfolio Quality Bond Portfolio Small Cap Portfolio Small Company Stock Portfolio Special Value Portfolio Money Market Portfolio Stock Index Socially Responsible Growth Fund Core Bond Portfolio Core Value Portfolio Emerging Leaders Portfolio Emerging Markets Portfolio European Equity Portfolio Founders Discovery Portfolio Founders Growth Portfolio Founders International Equity Portfolio Founders Passport Portfolio Japan Portfolio MidCap Stock Portfolio Technology Growth Portfolio (/1/)As of May 1, 2002, Transamerica Variable Insurance Funds, Inc. merged with AEGON/Transamerica Series Fund, Inc. Therefore, the following fund was moved into AEGON/Transamerica Series Fund, Inc. trust and renamed as follows: Transamerica VIF Growth Portfolio is now Transamerica Equity. As of January 22, 2001, new contract owners may only invest in the Service Class sub-accounts, with the exception of the Money Market Sub-Account and the Transamerica Equity Sub-account. The Initial Class sub-accounts (other than the Money Market Sub-account and Transamerica Equity Sub-account) are only 4 available to contract owners that purchased the contract before January 22, 2001. The Service Class has a Rule 12b-1 Plan and the Initial Class does not. Depending upon their investment performance, you can make or lose money in any of the subaccounts. You can also allocate your purchase payments to the fixed account. We currently allow you to transfer money between any of the investment choices. While we currently do not charge for transfers, we reserve the right to impose a $10 fee for each transfer in excess of 18 transfers per contract year and to impose restrictions and limitations on transfers. 4. PERFORMANCE The value of the contract will vary up or down depending upon the investment performance of the subaccounts you choose. We provide past performance information in Appendix B and in the SAI. This data does not indicate future performance. 5. EXPENSES Note: The following section on expenses and the Annuity Contract Fee Table only apply to contracts issued after May 1, 2002. See Appendix C for older contracts. No deductions are made from purchase payments at the time you buy the contract so that the full amount of each purchase payment is invested in one or more of your investment choices. We may deduct a surrender charge of up to 7% of purchase payments surrendered within seven years after the purchase payment is paid. We will calculate surrender charges by taking the earnings, if any, out before purchase payments. Full surrenders, partial surrenders, and transfers from a guaranteed period option of the fixed account may also be subject to an excess interest adjustment, which may increase or decrease the amount you receive. This adjustment may also apply to amounts applied to an annuity payment from a guaranteed period option of the fixed account. We deduct daily mortality and expense risk fees and administrative charges at an annual rate of 1.30% (if you choose the "Return of Premium Death Benefit") or 1.45% (if you choose the "Double Enhanced Death Benefit") from the assets in each subaccount. During the accumulation phase, we deduct an annual service charge of no more than $35 from the account value on each contract anniversary and at the time of surrender. The charge is waived if either the account value or the sum of all purchase payments, minus all partial surrenders, is at least $50,000. Upon total surrender, payment of a death benefit, or when annuity payments begin, we will deduct state premium taxes, which currently range from 0% to 3.50%. If you elect the "Guaranteed Minimum Income Benefit" rider, there is an annual fee during the accumulation phase of 0.45% of the minimum annuitization value. If you receive annuity payments under the rider and elect the guaranteed minimum payment option, then there is a daily guaranteed payment fee at an annual rate of 1.25% of the daily net asset value in the subaccounts. If you elect the Initial Payment Guarantee, when you annuitize there is a daily fee equal to an annual rate of 1.25% of the daily net asset value in the subaccounts. If you elect the Tax Relief Rider, there is an annual fee during the accumulation phase of 0.25% of the account value. The value of the net assets of the subaccounts will reflect the management fee and other expenses incurred by the underlying portfolios. 6. ACCESS TO YOUR MONEY You can take out $500 or more anytime during the accumulation phase (except under certain qualified contracts). After one year, you may, free 5 of surrender charges once each contract year, take out up to the greater of: .. 10% of your purchase payments less surrenders deemed to be from purchase payments; or .. any gains in the contract. Amounts surrendered in the first year, or in excess of this free amount, may be subject to a surrender charge and/or excess interest adjustment. You may have to pay income tax and a tax penalty on any money you take out. The gains in the contract are the amount equal to the account value, minus the sum of all purchase payments, reduced by all prior partial surrenders deemed to be from purchase payments. If you have account value in the fixed account, you may also take out cumulative interest credited free of excess interest adjustments. Access to amounts held in qualified contracts may be restricted or prohibited. Unless you elect the Life with Emergency CashSM annuity payment option, you can not take money out during the income phase (although you will be receiving annuity payments). 7. ANNUITY PAYMENTS (THE INCOME PHASE) The contract allows you to receive income under one of several annuity payment options. You may choose from fixed payment options, variable payment options, or a combination of both. If you select a variable payment option, the dollar amount of your payments may go up or down. However, the Guaranteed Minimum Income Benefit and Initial Payment Guarantee are available as optional riders and they guarantee a minimum amount for each payment. 8. DEATH BENEFIT If you are both the owner and the annuitant and you die before the income phase begins, then your beneficiary will receive a death benefit. Naming different persons as owner and annuitant can affect whether the death benefit is payable and to whom amounts will be paid. Use care when naming owners, annuitants and beneficiaries, and consult your agent if you have questions. When you purchase a policy you generally may choose one of the following guaranteed minimum death benefits: .. Double Enhanced; or .. Return of Premium. Charges are lower for the Return of Premium Death Benefit than they are for the other death benefit. If the owner is not the annuitant, no death benefit is paid if the owner dies. 9. TAXES Your earnings, if any, are generally not taxed until you take them out. If you take money out of a nonqualified contract during the accumulation phase, earnings come out first for federal tax purposes, and are taxed as ordinary income. Under qualified contracts, surrenders are prorated between taxable and nontaxable amounts. If you are younger than 59 1/2 when you take money out, you may be charged a 10% federal penalty tax on the earnings. For nonqualified contracts, payments during the income phase may be considered partly a return of your original investment so that part of each payment may not be taxable as income. 10. ADDITIONAL FEATURES This contract has additional features that might interest you. These include the following: .. You can arrange to have money automatically sent to you monthly, quarterly, semi-annually or annually while your contract is in the accumulation phase. This feature is referred to as the "Systematic Withdrawal Option" or "SWO." Amounts you receive may be included in your gross income, and in certain circumstances, may be subject to penalty taxes. 6 .. You can elect an optional rider that guarantees you a minimum annuitization value. This feature is called the "Guaranteed Minimum Income Benefit" or "GMIB." There is an extra charge for this rider. .. You can elect an optional rider at the time of annuitization that guarantees your variable annuity payments will never be less than 80% of the initial variable annuity payment. This feature is called the "Initial Payment Guarantee." There is an extra charge for this rider. .. You can elect an optional rider that pays an amount in addition to the contract death benefit in certain circumstances. This feature is called the "Tax Relief Rider" or "TRR." There is an extra charge for this rider. .. Under certain medically related circumstances, you may surrender all or part of the account value without a surrender charge and excess interest adjustment. This feature is called the "Nursing Care and Terminal Withdrawal Option." .. Under certain unemployment circumstances, you may surrender all or a portion of the account value free of surrender charges and excess interest adjustments. This feature is called the "Unemployment Waiver." .. You may generally make transfers and/or change the allocation of additional purchase payments by telephone. We may restrict or eliminate this feature. .. You can arrange to automatically transfer money (at least $250 per transfer) monthly or quarterly from certain investment options into one or more subaccounts. This feature is known as "Dollar Cost Averaging" or "DCA." .. We will, upon your request, automatically transfer amounts among the subaccounts on a regular basis to maintain a desired allocation of the account value among the various subaccounts. This feature is called "Asset Rebalancing." These features may not be available in all states, may vary by state and may not be suitable for your particular situation. 11. OTHER INFORMATION Right to Cancel Period. You may return your contract for a refund, but only if you return it within a prescribed period, which is generally 10 days (after you receive the contract), or whatever longer time may be required by state law. The amount of the refund will generally be the account value. We will pay the refund within 7 days after we receive written notice of cancellation and the returned contract within the applicable time period. The contract will then be deemed void. No Probate. Usually, the person receiving the death benefit under this policy will not have to go through probate. State laws vary on how the amount that may be paid is treated for estate tax purposes. Who should purchase the Contract? This contract is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes; and for persons who have maximized their use of other retirement savings methods, such as 401(k) plans. The tax-deferred feature is most attractive to people in high federal and state tax brackets. The tax deferral features of variable annuities are unnecessary when purchased to fund a qualified plan. You should not buy this contract if you are looking for a short-term investment, market timing, or if you cannot take the risk of losing money that you put in. There are various fees and charges associated with variable annuities. You should consider whether the features and benefits of this contract, unique to variable annuities, such as the opportunity for lifetime income payments, a guaranteed death benefit, the guaranteed level of certain charges, the Guaranteed Minimum Income Benefit, Tax Relief Rider and the Initial Payment Guarantee, make this contract appropriate for your needs. Older Contracts. This prospectus generally describes contracts issued after May 1, 2002. See Appendix C for information on how older contracts have different features and requirements, and sometimes different fees and deductions. 7 State Variations. Certain provisions of the contracts may be different than the general description in this prospectus, and certain riders and options may not be available, because of legal restrictions in your state. See your contract for specific variations since any such state variations will be included in your contract or in riders or endorsements attached to your contract. See your agent or contact us for specific information that may be applicable to your state. Financial Statements. Financial Statements for Transamerica and the subaccounts are in the SAI. Condensed financial information for the subaccounts (those in operation before January 1, 2002) is in Appendix A to this prospectus. 12. INQUIRIES If you need more information, please contact us at: Transamerica Annuity Service Center 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001 1-877-717-8861 You may check your contract at www.transamericaservice.com. Follow the logon procedures. You will need your pre-assigned Personal Identification Number ("PIN") to access information about your contract. We cannot guarantee that you will be able to access this site. You should protect your PIN, because on-line (or telephone) options may be available and could be made by anyone that knows your PIN. We may not be able to verify that the person providing instructions using your PIN is you or someone authorized by you. 8
ANNUITY CONTRACT FEE TABLE --------------------------------------------------------------------------------------------------------------------------- Variable Account Annual Expenses Contract Owner Transaction Expenses (as a percentage of average account value) --------------------------------------------------------------------------------------------------------------------------- Sales Load On Purchase Mortality and Expense Payments............... 0 Risk Charges(/6/)....... 1.15% Maximum Surrender Charge Administrative Charge.... 0.15% (as a % of purchase -------- payments TOTAL VARIABLE ACCOUNT surrendered)(/1/)..... 7% ANNUAL EXPENSES......... 1.30% Annual Service $0 - $35 Charge(/2/)............ Per Contract Optional Separate Account Expenses: Transfer Fee(/3/)....... $0 - $10 Double Enhanced Death Benefit(/7/)............ 0.15% Optional Rider Fees: -------- Guaranteed Minimum TOTAL SEPARATE ACCOUNT Income Benefit ANNUAL EXPENSES WITH Rider(/4/)............. 0.45% HIGHEST OPTIONAL (as an annual % of the SEPARATE ACCOUNT minimum annuitization EXPENSES(/8/)........... 1.45% value on each contract -------- anniversary) Tax Relief Rider(/5/)... 0.25% (as an annual % of the account value on each rider anniversary)
-------------------------------------------------------------------------------- Portfolio Annual Expenses(/9/) (as a percentage of average net assets and after fee waivers and/or expense reimbursements) --------------------------------------------------------------------------------
Total Portfolio Management Other Rule 12b-1 Annual Fees Expenses Fees(/10/)(/11/) Expenses -------------------------------------------------------------------------------- Transamerica Equity 0.75% 0.10% -- 0.85% Appreciation 0.75% 0.10% 0.25% 1.10% Balanced(/12/) 0.75% 0.16% 0.09% 1.00% Disciplined Stock(/12/) 0.75% 0.13% 0.12% 1.00% Growth and Income(/12/) 0.75% 0.12% 0.14% 1.01% International Equity 0.75% 0.47% 0.25% 1.47% International Value(/12/) 0.80% 0.60% 0.00% 1.40% Limited Term High Income(/12/) 0.65% 0.25% 0.01% 0.91% Money Market 0.50% 0.08% -- 0.58% Quality Bond 0.65% 0.11% 0.25% 1.01% Small Cap 0.75% 0.11% 0.25% 1.11% Small Company Stock 0.75% 0.39% 0.25% 1.39% Special Value(/12/) 0.74% 0.24% 0.02% 1.00% Stock Index 0.25% 0.07% 0.25% 0.57% Socially Responsible Growth 0.75% 0.09% 0.25% 1.09% Core Bond(/12/) 0.43% 0.30% 0.07% 0.80% Core Value(/12/) 0.73% 0.27% 0.00% 1.00% Emerging Leaders(/12/) 0.74% 0.65% 0.11% 1.50% Emerging Markets(/12/) 0.00% 2.00% 0.00% 2.00% European Equity(/12/) 0.81% 0.44% 0.00% 1.25% Founders Discovery(/12/) 0.79% 0.62% 0.08% 1.49% Founders Growth(/12/) 0.65% 0.35% 0.00% 1.00% Founders International Equity(/12/) 0.28% 1.22% 0.00% 1.50% Founders Passport(/12/) 0.00% 1.50% 0.00% 1.50% Japan(/12/) 0.00% 1.50% 0.00% 1.50% MidCap Stock(/12/) 0.75% 0.17% 0.08% 1.00% Technology Growth 0.75% 0.20% 0.25% 1.20%
9 (/1/)The surrender charge, if any is imposed, applies to each contract, regardless of how account value is allocated among the variable account and the fixed account. The surrender charge is decreased based on the number of years since the purchase payment was made, from 7% in the year in which the purchase payment was made, to 0% in the seventh year after the purchase payment was made. If applicable a surrender charge will only be applied to surrenders that exceed the amount available under certain listed exceptions. (/2/)The service charge applies to the fixed account and the variable account, and is assessed on a pro rata basis relative to each account's account value as a percentage of the contract's total account value. The service charge is deducted on each contract anniversary and at the time of surrender. (/3/)The transfer fee, if any is imposed, applies to each contract, regardless of how account value is allocated among the variable account and the fixed account. There is no fee for the first 18 transfers per year. For additional transfers, Transamerica may charge a fee of $10 per transfer, but currently does not charge for any transfers. (/4/)The annual Guaranteed Minimum Income Benefit fee is 0.45% of the minimum annuitization value (as defined under "Guaranteed Minimum Income Benefit") and is deducted only during the accumulation phase. If you annuitize under the rider, a guaranteed payment fee is deducted at an annual rate of 1.25%. See Section 5, Expenses. (/5/)The annual Tax Relief Rider fee is 0.25% of the account value and is deducted only during the accumulation phase. (/6/)The mortality and expense risk fee shown (1.15%) is for the "Return of Premium Death Benefit." (/7/)The fee for the "Double Enhanced Death Benefit" is in addition to the mortality and expense risk fee of (1.15%). (/8/)The Double Enhanced Death Benefit fee is included herein. The "Total Separate Account Annual Expenses" shown does not include optional rider fees. The mortality and expense risk fee and the administrative charge are applicable during the income phase of the Contract. (/9/)The fee table information relating to the underlying funds is for the year 2001 (unless otherwise noted) and was provided to Transamerica by the underlying funds, their investment advisers or managers, and Transamerica has not and cannot independently verify the accuracy or completeness of such information. Actual expenses of the portfolios in future years and the current year may be greater or less than those shown in the Table. (/10/)The Fees shown are for the Service Class Shares, except for the Money Market Portfolio and Transamerica Equity. Contracts purchased before January 22, 2001 generally are invested only in the Initial Class Shares. If you are invested in the Initial Class Shares of each portfolio, the Total Portfolio Annual Expenses would be lower, since the Initial Class Shares are not subject to a Rule 12b-1 Fee. Consult the portfolio prospectuses for more information. (/11/)The Rule 12b-1 Fees deducted from the Service Class Shares of these portfolios cover certain distribution and shareholder support services provided by Transamerica Occidental Life Insurance Company selling contracts investing in those portfolios. The amount of the Rule 12b-1 Fee is 0.25% per year before any fee waivers and/or expense reimbursements. 10 (/12/)Total Portfolio Annual Expenses shown are net of any fee waiver and/or expense reimbursement. Without such waivers or reimbursement of expenses, the management fee, other expenses, 12b-1 fee, and Total Portfolio Annual Expenses would be as follows: 0.75%, 0.16%, 0.25%, 1.16% - Balanced; 0.75%, 0.13%, 0.25%, 1.13% - Disciplined Stock; 0.75%, 0.12%, 0.25%, 1.12% - Growth & Income; 1.00%, 0.74%, 0.25%, 1.99% - International Value; 0.65%, 0.25%, 0.25%, 1.15% - Limited Term High Income; 0.75%, 0.24%, 0.25%, 1.24% - Special Value; 0.60%, 0.30%, 0.25%, 1.15% - Core Bond; 0.75%, 0.27%, 0.25%, 1.27% - Core Value; 0.90%, 0.65%, 0.25%, 1.80% - Emerging Leaders; 1.25%, 4.14%, 0.25%, 5.64% - Emerging Markets; 1.00%, 0.52%, 0.25%, 1.77% - European Equity; 0.90%, 0.62%, 0.25%, 1.77% - Founders Discovery; 0.75%, 0.40%, 0.25%, 1.40% - Founders Growth; 1.00%, 1.30%, 0.25%, 2.55% - Founders International Equity; 1.00%, 2.81%, 0.25%, 4.06% - Founders Passport; 1.00%, 3.54%, 0.25%, 4.79% - Japan; and 0.75%, 0.17%, 0.25%, 1.17% - MidCap. 11 EXAMPLES - TABLE A You would pay the following expenses on a $1,000 investment, assuming a hypothetical 5% annual return on assets, assuming the entire account value is in the applicable subaccount, and assuming no optional riders or features have been selected: The expenses reflect different mortality and expense risk fees depending on which death benefit you select: A = Return of Premium Death Benefit B = Double Enhanced Death Benefit
If the Contract is annuitized at If the Contract is surrendered the end of the applicable time at the end of the applicable period or if the Contract is simply time period. kept in the accumulation phase. -------------------------------------------------------------------------- 10 Subaccounts 1 Year 3 Years 5 Years Years 1 Year 3 Years 5 Years 10 Years ----------------------------------------------------------------------------------------------------- Transamerica Equity A $ 90 $ 119 $ 160 $ 252 $ 22 $ 68 $ 117 $ 252 ------------------------------------------------------------------------------- B $ 92 $ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ----------------------------------------------------------------------------------------------------- Appreciation A $ 93 $ 127 $ 173 $ 278 $ 25 $ 76 $ 130 $ 278 ------------------------------------------------------------------------------- B $ 95 $ 132 $ 180 $ 292 $ 26 $ 81 $ 138 $ 292 ----------------------------------------------------------------------------------------------------- Balanced A $ 92 $ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ------------------------------------------------------------------------------- B $ 93 $ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 ----------------------------------------------------------------------------------------------------- Disciplined Stock A $ 92 $ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ------------------------------------------------------------------------------- B $ 93 $ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 ----------------------------------------------------------------------------------------------------- Growth and Income A $ 92 $ 124 $ 168 $ 269 $ 24 $ 73 $ 126 $ 269 ------------------------------------------------------------------------------- B $ 94 $ 129 $ 176 $ 284 $ 25 $ 78 $ 133 $ 284 ----------------------------------------------------------------------------------------------------- International Equity A $ 97 $ 138 $ 191 $ 314 $ 28 $ 87 $ 148 $ 314 ------------------------------------------------------------------------------- B $ 98 $ 143 $ 198 $ 328 $ 30 $ 92 $ 156 $ 328 ----------------------------------------------------------------------------------------------------- International Value A $ 96 $ 136 $ 187 $ 307 $ 28 $ 85 $ 145 $ 307 ------------------------------------------------------------------------------- B $ 98 $ 140 $ 195 $ 321 $ 29 $ 89 $ 152 $ 321 ----------------------------------------------------------------------------------------------------- Limited Term High Income A $ 91 $ 121 $ 163 $ 258 $ 23 $ 70 $ 120 $ 258 ------------------------------------------------------------------------------- B $ 92 $ 126 $ 171 $ 274 $ 24 $ 75 $ 128 $ 274 ----------------------------------------------------------------------------------------------------- Money Market A $ 87 $ 111 $ 146 $ 224 $ 19 $ 60 $ 104 $ 224 ------------------------------------------------------------------------------- B $ 89 $ 116 $ 154 $ 240 $ 21 $ 65 $ 111 $ 240 ----------------------------------------------------------------------------------------------------- Quality Bond A $ 92 $ 124 $ 168 $ 269 $ 24 $ 73 $ 126 $ 269 ------------------------------------------------------------------------------- B $ 94 $ 129 $ 176 $ 284 $ 25 $ 78 $ 133 $ 284 ----------------------------------------------------------------------------------------------------- Small Cap A $ 93 $ 127 $ 173 $ 279 $ 25 $ 76 $ 131 $ 279 ------------------------------------------------------------------------------- B $ 95 $ 132 $ 181 $ 293 $ 26 $ 81 $ 138 $ 293 ----------------------------------------------------------------------------------------------------- Small Company Stock A $ 96 $ 136 $ 187 $ 306 $ 28 $ 85 $ 144 $ 306 ------------------------------------------------------------------------------- B $ 98 $ 140 $ 194 $ 320 $ 29 $ 89 $ 152 $ 320 ----------------------------------------------------------------------------------------------------- Special Value A $ 92 $ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ------------------------------------------------------------------------------- B $ 93 $ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 ----------------------------------------------------------------------------------------------------- Stock Index A $ 87 $ 111 $ 146 $ 223 $ 19 $ 60 $ 103 $ 223 ------------------------------------------------------------------------------- B $ 89 $ 116 $ 153 $ 239 $ 21 $ 65 $ 111 $ 239
12 EXAMPLES - TABLE A continued . . .
If the Contract is annuitized at If the Contract is surrendered the end of the applicable time at the end of the applicable period or if the Contract is simply time period. kept in the accumulation phase. ------------------------------------------------------------------------ 10 Subaccounts 1 Year 3 Years 5 Years Years 1 Year 3 Years 5 Years 10 Years --------------------------------------------------------------------------------------------------- Socially Responsible Growth Fund A $ 93$ 127 $ 172 $ 277 $ 25 $ 76 $ 130 $ 277 ----------------------------------------------------------------------------- B $ 94$ 131 $ 180 $ 291 $ 26 $ 80 $ 137 $ 291 --------------------------------------------------------------------------------------------------- Core Bond A $ 90$ 118 $ 157 $ 247 $ 22 $ 67 $ 115 $ 247 ----------------------------------------------------------------------------- B $ 91$ 123 $ 165 $ 262 $ 23 $ 72 $ 122 $ 262 --------------------------------------------------------------------------------------------------- Core Value A $ 92$ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ----------------------------------------------------------------------------- B $ 93$ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 --------------------------------------------------------------------------------------------------- Emerging Leaders A $ 97$ 139 $ 97 $ 139 $ 29 $ 88 $ 150 $ 317 ----------------------------------------------------------------------------- B $ 99$ 143 $ 200 $ 331 $ 30 $ 92 $ 157 $ 331 --------------------------------------------------------------------------------------------------- Emerging Markets A $ 102$ 154 $ 217 $ 363 $ 34 $ 103 $ 174 $ 363 ----------------------------------------------------------------------------- B $ 104$ 158 $ 224 $ 376 $ 35 $ 107 $ 181 $ 378 --------------------------------------------------------------------------------------------------- European Equity A $ 95$ 132 $ 180 $ 292 $ 26 $ 81 $ 138 $ 292 ----------------------------------------------------------------------------- B $ 96$ 136 $ 187 $ 307 $ 28 $ 85 $ 145 $ 307 --------------------------------------------------------------------------------------------------- Founders Discovery A $ 97$ 139 $ 192 $ 316 $ 29 $ 88 $ 149 $ 316 ----------------------------------------------------------------------------- B $ 99$ 143 $ 199 $ 330 $ 30 $ 92 $ 157 $ 330 --------------------------------------------------------------------------------------------------- Founders Growth A $ 92$ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ----------------------------------------------------------------------------- B $ 93$ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 --------------------------------------------------------------------------------------------------- Founders International Equity A $ 97$ 139 $ 192 $ 317 $ 29 $ 88 $ 150 $ 317 ----------------------------------------------------------------------------- B $ 99$ 143 $ 200 $ 331 $ 30 $ 92 $ 157 $ 331 --------------------------------------------------------------------------------------------------- Founders Passport A $ 97$ 139 $ 192 $ 317 $ 29 $ 88 $ 150 $ 317 ----------------------------------------------------------------------------- B $ 99$ 143 $ 200 $ 331 $ 30 $ 92 $ 157 $ 331 --------------------------------------------------------------------------------------------------- Japan A $ 97$ 139 $ 192 $ 317 $ 29 $ 88 $ 150 $ 317 ----------------------------------------------------------------------------- B $ 99$ 143 $ 200 $ 331 $ 30 $ 92 $ 157 $ 331 --------------------------------------------------------------------------------------------------- MidCap Stock A $ 92$ 124 $ 168 $ 268 $ 24 $ 73 $ 125 $ 268 ----------------------------------------------------------------------------- B $ 93$ 129 $ 175 $ 283 $ 25 $ 78 $ 133 $ 283 --------------------------------------------------------------------------------------------------- Technology Growth A $ 94$ 130 $ 178 $ 287 $ 26 $ 79 $ 135 $ 287 ----------------------------------------------------------------------------- B $ 96$ 135 $ 185 $ 302 $ 27 $ 84 $ 142 $ 302
13 EXAMPLES - TABLE B You would pay the following expenses on a $1,000 investment, assuming a hypothetical 5% annual return on assets, assuming the entire account value is in the applicable subaccount, assuming both the Guaranteed Minimum Income Benefit and the Tax Relief Rider have been selected: The expenses reflect different mortality and expense risk fees depending on which death benefit you select: A = Return of Premium Death Benefit B = Double Enhanced Death Benefit
If the Contract is annuitized at If the Contract is surrendered the end of the applicable time at the end of the applicable period or if the Contract is simply time period. kept in the accumulation phase. -------------------------------------------------------------------------------------- 10 Subaccounts 1 Year 3 Years 5 Years Years 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------------------------------------------- Transamerica Equity A $98 $142 $198 $333 $29 $91 $155 $333 ---------------------------------------------------------------------------------------------- B $100 $146 $205 $347 $31 $95 $163 $347 -------------------------------------------------------------------------------------------------------------------- Appreciation A $101 $149 $210 $357 $32 $98 $168 $357 ---------------------------------------------------------------------------------------------- B $102 $154 $217 $371 $33 $103 $175 $371 -------------------------------------------------------------------------------------------------------------------- Balanced A $100 $146 $205 $347 $31 $95 $163 $347 ---------------------------------------------------------------------------------------------- B $101 $151 $213 $362 $32 $100 $170 $362 -------------------------------------------------------------------------------------------------------------------- Disciplined Stock A $100 $146 $205 $347 $31 $95 $163 $347 ---------------------------------------------------------------------------------------------- B $101 $151 $213 $362 $32 $100 $170 $362 -------------------------------------------------------------------------------------------------------------------- Growth and Income A $100 $146 $205 $348 $31 $95 $163 $348 ---------------------------------------------------------------------------------------------- B $101 $151 $213 $362 $33 $100 $170 $362 -------------------------------------------------------------------------------------------------------------------- International Equity A $105 $160 $228 $391 $36 $109 $185 $391 ---------------------------------------------------------------------------------------------- B $106 $164 $235 $404 $37 $113 $193 $404 -------------------------------------------------------------------------------------------------------------------- International Value A $104 $158 $225 $385 $35 $107 $182 $385 ---------------------------------------------------------------------------------------------- B $105 $162 $232 $398 $36 $111 $189 $398 -------------------------------------------------------------------------------------------------------------------- Limited Term High Income A $99 $143 $201 $339 $30 $92 $158 $339 ---------------------------------------------------------------------------------------------- B $100 $148 $208 $353 $32 $97 $166 $353 -------------------------------------------------------------------------------------------------------------------- Money Market A $95 $134 $184 $307 $27 $83 $142 $307 ---------------------------------------------------------------------------------------------- B $97 $138 $192 $321 $28 $87 $149 $321 -------------------------------------------------------------------------------------------------------------------- Quality Bond A $100 $146 $206 $348 $31 $95 $163 $348 ---------------------------------------------------------------------------------------------- B $101 $151 $213 $362 $33 $100 $170 $362 -------------------------------------------------------------------------------------------------------------------- Small Cap A $101 $149 $211 $358 $32 $98 $168 $358 ---------------------------------------------------------------------------------------------- B $102 $154 $218 $372 $34 $103 $175 $372 -------------------------------------------------------------------------------------------------------------------- Small Company Stock A $104 $158 $224 $384 $35 $107 $182 $384 ---------------------------------------------------------------------------------------------- B $105 $162 $231 $397 $36 $111 $189 $397 -------------------------------------------------------------------------------------------------------------------- Special Value A $100 $146 $205 $347 $31 $95 $163 $347 ---------------------------------------------------------------------------------------------- B $101 $151 $213 $362 $32 $100 $170 $362 -------------------------------------------------------------------------------------------------------------------- Stock Index A $95 $133 $184 $305 $27 $82 $141 $305 ---------------------------------------------------------------------------------------------- B $97 $138 $191 $320 $28 $87 $149 $320 -------------------------------------------------------------------------------------------------------------------- Socially Responsible A $101 $149 $210 $356 $32 $98 $167 $356 Growth Fund ---------------------------------------------------------------------------------------------- B $102 $153 $217 $370 $33 $102 $174 $370 -------------------------------------------------------------------------------------------------------------------- Core Bond A $97 $140 $195 $328 $29 $89 $153 $328 ---------------------------------------------------------------------------------------------- B $99 $145 $203 $343 $30 $94 $160 $343
14 EXAMPLES - TABLE B continued . . .
If the Contract is annuitized at If the Contract is surrendered the end of the applicable time at the end of the applicable period or if the Contract is simply time period. kept in the accumulation phase. ------------------------------------------------------------------------------- 10 Subaccounts 1 Year 3 Years 5 Years Years 1 Year 3 Years 5 Years 10 Years ---------------------------------------------------------------------------------------------------------- Core Value A $100 $146 $205 $347 $31 $95 $163 $347 ------------------------------------------------------------------------------------ B $101 $151 $213 $362 $32 $ 100 $170 $362 ---------------------------------------------------------------------------------------------------------- Emerging Leaders A $105 $161 $229 $394 $36 $ 110 $187 $394 ------------------------------------------------------------------------------------ B $106 $165 $237 $407 $37 $ 114 $194 $407 ---------------------------------------------------------------------------------------------------------- Emerging Markets A $110 $175 $253 $438 $41 $ 124 $210 $438 ------------------------------------------------------------------------------------ B $112 $180 $280 $450 $42 $ 129 $217 $450 ---------------------------------------------------------------------------------------------------------- European Equity A $102 $154 $217 $371 $33 $ 103 $175 $371 ------------------------------------------------------------------------------------ B $104 $158 $225 $385 $35 $ 107 $182 $385 ---------------------------------------------------------------------------------------------------------- Founders Discovery A $105 $161 $229 $393 $36 $ 110 $186 $393 ------------------------------------------------------------------------------------ B $106 $165 $236 $406 $37 $ 114 $194 $406 ---------------------------------------------------------------------------------------------------------- Founders Growth A $100 $146 $205 $347 $31 $ 95 $163 $347 ------------------------------------------------------------------------------------ B $101 $151 $213 $362 $32 $ 100 $170 $362 ---------------------------------------------------------------------------------------------------------- Founders International Equity A $105 $161 $229 $394 $36 $110 $187 $394 ------------------------------------------------------------------------------------ B $106 $165 $237 $407 $37 $ 114 $194 $407 ---------------------------------------------------------------------------------------------------------- Founders Passport A $105 $161 $229 $394 $ 36 $ 110 $187 $394 ------------------------------------------------------------------------------------ B $106 $165 $237 $407 $ 37 $ 114 $194 $407 ---------------------------------------------------------------------------------------------------------- Japan A $105 $161 $229 $394 $ 36 $ 110 $187 $394 ------------------------------------------------------------------------------------ B $106 $165 $237 $407 $ 37 $ 114 $194 $407 ---------------------------------------------------------------------------------------------------------- MidCap Stock A $100 $146 $205 $347 $ 31 $ 95 $163 $347 ------------------------------------------------------------------------------------ B $101 $151 $213 $362 $ 32 $ 100 $170 $362 ---------------------------------------------------------------------------------------------------------- Technology Growth A $102 $152 $215 $366 $ 33 $ 101 $172 $366 ------------------------------------------------------------------------------------ B $103 $156 $222 $380 $ 34 $ 105 $180 $380
Table A and Table B will assist you in understanding the costs and expenses that you will bear, directly or indirectly. These include the year 2001 expenses of the underlying portfolios, including any fee waivers and/or expense reimbursements (said fee waivers and expense reimbursements are assumed to continue throughout the periods shown in the examples). In addition to the expenses listed above, premium taxes may be applicable. These examples should not be considered a representation of past or future expenses, and actual expenses may be greater or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual returns, which may be greater or less than the assumed rate. In the examples, the $35 annual service charge is reflected as a charge of 0.0388% based on average account value of $90,209.00 (as of December 31, 2001). 15 1. THE ANNUITY CONTRACT This prospectus describes the Dreyfus/Transamerica Triple Advantage(R) Variable Annuity contract offered by Transamerica Occidental Life Insurance Company. This prospectus generally describes contracts issued after May 1, 2002. Contracts issued before that date may have different features (such as different death benefits or annuity payments) and different charges. These differences are noted in Appendix C. An annuity is a contract between you, the owner, and an insurance company (in this case Transamerica), where the insurance company promises to pay you an income in the form of annuity payments. These payments begin on a designated date, referred to as the annuity date. Until the annuity date, your annuity is in the accumulation phase and the earnings (if any) are tax deferred. Tax deferral means you generally are not taxed until you take money out of your annuity. After the annuity date, your annuity switches to the income phase. The contract is a flexible premium variable annuity. You can use the contract to accumulate funds for retirement or other long-term financial planning purposes. Your individual investment and your rights are determined primarily by your own contract. The contract is a "flexible premium" annuity because after you purchase it, you can generally make additional investments of $50 or more until the annuity date. You are not required to make any additional investments. The contract is a "variable" annuity because the value of your investments can go up or down based on the performance of your investment choices. If you invest in the variable account, the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the performance of your investment choices. You could lose the amount you allocate to the variable account. The amount of annuity payments you receive during the income phase from the variable account also depends upon the investment performance of your investment choices for the income phase. However, if you annuitize under the Guaranteed Minimum Income Benefit or the Initial Payment Guarantee, then Transamerica will guarantee a minimum amount of your annuity payments. There is an extra charge for these riders. The contract also contains a fixed account. The fixed account offers interest at rates that we guarantee will not decrease during the selected guaranteed period. There may be different interest rates for each different guaranteed period that you select. 2. PURCHASE Contract Issue Requirements Transamerica will not issue a contract unless: .. Transamerica receives all information needed to issue the contract; .. Transamerica receives a minimum initial purchase payment; and .. The annuitant, owner, and any joint owner are age 90 or younger (age may be lower for qualified contracts). We reserve the right to reject any application or purchase payment. Purchase Payments You should make checks for purchase payments payable only to Transamerica Occidental Life Insurance Company and send them to the Transamerica Annuity Service Center. Your check must be honored in order for Transamerica to pay any associated payments and benefits due under the contract. Initial Purchase Payment Requirements The initial purchase payment for nonqualified contracts must be at least $5,000, and at least $1,000 for qualified contracts. There is generally no minimum initial purchase payment for contracts issued under section 403(b) of the Internal Revenue Code; however, your purchase payments must be received within 90 days of the contract date or your contract will be canceled. We will credit your initial purchase payment to your contract within two business days after the day we receive it and your complete contract information. If we are unable to credit your initial 16 purchase payment, we will contact you within five business days and explain why. We will also return your initial purchase payment at that time unless you let us keep it and credit it as soon as possible. The date on which we credit your initial purchase payment to your contract is generally the contract date. The contract date is used to determine contract years, contract months and contract anniversaries. There may be delays in our receipt of applications that are outside of our control (for example, because of the failure of the selling broker/dealer or sales agent to forward the application to us promptly, or because of delays in determining that the contract is suitable for you). Any such delays will affect when your contract can be issued and when your purchase payment is allocated among your investment choices. Additional Purchase Payments You are not required to make any additional purchase payments. However, you can make additional purchase payments as often as you like during the accumulation phase. Additional purchase payments must be at least $50. We will credit additional purchase payments to your contract as of the business day we receive your purchase payment and required information. Additional purchase payments must be received before the New York Stock Exchange closes to get same-day pricing of the additional purchase payment. Maximum Total Purchase Payments Cumulative purchase payments for issue ages 0 to 80 cannot exceed $1,000,000 without prior approval by Transamerica. For issue ages over 80, we allow cumulative purchase payments up to $500,000. Allocation of Purchase Payments When you purchase a contract, we will allocate your purchase payment to the investment choices you select. Your allocation must be in whole percentages and must total 100%. We will allocate additional purchase payments the same way, unless you request a different allocation. If you allocate purchase payments to the Dollar Cost Averaging program, you must give us instructions regarding the subaccount(s) to which transfers are to be made or we cannot accept your purchase payment. You may change allocations for future additional purchase payments by sending us written instructions or by telephone, subject to the limitations described under "Telephone Transactions." The allocation change will apply to purchase payments received on or after the date we receive the change request. Account Value You should expect your account value to change from valuation period to valuation period. The account value varies based on the performance of the variable accumulation units. A valuation period begins at the close of regular trading on the New York Stock Exchange on each business day and ends at the close of regular trading on the next succeeding business day. A business day is each day that the New York Stock Exchange is open. The New York Stock Exchange generally closes at 4:00 p.m. eastern time. Holidays are generally not business days. 3. INVESTMENT CHOICES The Variable Account There are currently twenty-seven variable subaccounts available under the contract for new investors. The subaccounts invest in shares of the various underlying fund portfolios. The companies that provide investment advice and administrative services for the underlying fund portfolios offered through this contract are listed below. The following variable investment choices are currently offered through this contract: AEGON/TRANSAMERICA SERIES FUND, INC. Managed by Transamerica Investment Management, LLC Transamerica Equity 17 DREYFUS VARIABLE INVESTMENT FUND - SERVICE CLASS Managed by The Dreyfus Corporation Appreciation Portfolio Balanced Portfolio Disciplined Stock Portfolio Growth and Income Portfolio International Equity Portfolio International Value Portfolio Limited Term High Income Portfolio Quality Bond Portfolio Small Cap Portfolio Small Company Stock Portfolio Special Value Portfolio DREYFUS VARIABLE INVESTMENT FUND Managed by The Dreyfus Corporation Money Market Portfolio DREYFUS STOCK INDEX FUND - SERVICE CLASS Managed by The Dreyfus Corporation and Mellon Equity Associates THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. - SERVICE CLASS Managed by The Dreyfus Corporation DREYFUS INVESTMENT PORTFOLIOS - SERVICE CLASS Managed by The Dreyfus Corporation Core Bond Portfolio Core Value Portfolio Emerging Leaders Portfolio Emerging Markets Portfolio European Equity Portfolio Founders Discovery Portfolio Founders Growth Portfolio Founders International Equity Portfolio Founders Passport Portfolio Japan Portfolio MidCap Stock Portfolio Technology Growth Portfolio As of January 22, 2001, new contract owners may only invest in the Service Class sub-accounts, with the exception of the Money Market Sub-account and the Transamerica Equity Sub-account. The Initial Class sub-accounts (other than the Money Market Sub-account and Transamerica Equity Sub-account) are only available to contract owners that purchased the contract before January 22, 2001. The general public may not purchase shares of these underlying fund portfolios. The name and investment objectives and policies may be similar to other portfolios and underlying funds managed by the same investment adviser or manager that are sold directly to the public. You should not expect the investment results of the underlying fund portfolios to be the same as those of other portfolios or underlying funds. More detailed information, including an explanation of the portfolio's investment objectives, may be found in the current prospectus for the underlying fund portfolios, which accompany this prospectus. You should read the prospectuses for the underlying fund portfolios carefully before you invest. We may receive expense reimbursements or other revenues from the underlying funds or their managers. The amount of these reimbursements or revenues, if any, may be substantial and may be different for different portfolios and may be based on the amount of assets that Transamerica or the variable account invests in the underlying fund portfolios. We do not guarantee that any of the subaccounts will always be available for purchase payments, allocations, or transfers. See the SAI for more information concerning the possible addition, deletion, or substitution of investments. The Fixed Account Purchase payments allocated and amounts transferred to the fixed account become part of Transamerica's general account. 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 or 1940 Acts. We guarantee that the interest credited to the fixed account will not be less than 2% per year. We determine credited rates, which are guaranteed for at least one year, in our sole discretion. You bear the risk that we will not 18 credit interest greater than 2% per year. At the end of the guaranteed period option you selected, the value in that guaranteed period option will automatically be transferred into a new guaranteed period option of the same length (or the next shorter period if the same period is no longer offered) at the current interest rate for that period. You can transfer to another investment choice by giving us notice within 30 days before the end of the expiring guaranteed period. Full and partial surrenders and transfers from a guaranteed period option of the fixed account are generally subject to an excess interest adjustment (except at the end of the guaranteed period). This adjustment will also be made to amounts that you apply to an annuity payment. This adjustment may increase or decrease the amount of interest credited to your contract. The excess interest adjustment will not decrease the interest credited to your contract below 2% per year, however. We also guarantee that upon full surrender your cash value attributable to the fixed account will not be less than 90% of your fixed account purchase payments accumulated at 3% interest annually less prior surrenders and transfers. If you select the fixed account, your money will be placed with Transamerica's other general assets. The amount of money you are able to accumulate in the fixed account during the accumulation phase depends upon the total interest credited. The amount of annuity payments you receive during the income phase from the fixed portion of your contract will remain level for the entire income phase. Transfers During the accumulation phase, you may make transfers to or from any subaccount or to the fixed account as often as you wish within certain limitations. Transfers out of a guaranteed period option of the fixed account are limited to the following: .. Transfers at the end of a guaranteed period. No excess interest adjustment will apply. .. Transfers of amounts equal to interest credited. This may affect your overall interest-crediting rate, because transfers are deemed to come from the oldest purchase payment first. .. Other than at the end of a guaranteed period, transfers of amounts from the guaranteed period option in excess of amounts equal to interest credited, are subject to an excess interest adjustment. If it is a negative adjustment, the maximum amount you can transfer in any one contract year is 25% of the amount in that guaranteed period option, less any previous transfers during the current contract year. If it is a positive adjustment, we do not limit the amount that you can transfer. Each transfer must be at least $500, or the entire subaccount value. Transfers of interest from a guaranteed period option of the fixed account, must be at least $50. If less than $500 remains as a result of the transfer, then we reserve the right to include that amount in the transfer. Transfers must be received while the New York Stock Exchange is open to get same-day pricing of the transaction. We reserve the right to prohibit transfers to the fixed account if we are crediting an effective annual interest rate of 2.0% (the guaranteed minimum). Currently, there is no charge for transfers and no limit on the number of transfers during the accumulation phase. However, in the future, the number of transfers permitted may be limited and a $10 charge per transfer may apply. During the income phase, you may transfer values out of any subaccount; however, you cannot transfer values out of the fixed account. The minimum amount that can be transferred during this phase is the lesser of $10 of monthly income, or the entire monthly income of the annuity units in the subaccount from which the transfer is being made. Transfers may be made by telephone, subject to the limitations described below under "Telephone Transactions." 19 Market Timing. The contract you are purchasing was not designed for professional market timing organizations or other persons that use programmed, large, or frequent transfers. The use of such transfers may be disruptive to an underlying fund portfolio and increase transfer costs. We reserve the right to reject any purchase payment or transfer request from any person, if, in our judgment, the payment or transfer or series of transfers would have a negative impact on a portfolio's operations or if a portfolio would reject our purchase order or because of a history of frequent transfers. We may impose other restrictions on transfers or even prohibit them for any owner who, in our view, has abused or appears likely to abuse the transfer privilege. We may, at any time, discontinue transfer privileges, modify our procedures, or limit the number of transfers we permit. We do not permit market timing. Do not invest with us if you are a market timer. 4. PERFORMANCE Transamerica periodically advertises performance of the various subaccounts. Performance figures might not reflect charges for options, riders, or endorsements. We may disclose at least three different kinds of performance. First, we may calculate performance by determining the percentage change in the value of an variable accumulation unit by dividing the increase (decrease) for that unit by the value of the variable accumulation unit at the beginning of the period. This performance number reflects the deduction of the mortality and expense risk fees and administrative charges. It does not reflect the deduction of any applicable premium taxes, surrender charges, or fees for any optional riders or endorsements. The deduction of any applicable premium taxes, surrender charges, or rider fees would reduce the percentage increase or make greater any percentage decrease. Second, advertisements may also include total return figures, which reflect the deduction of the mortality and expense risk fees and administrative charges. These figures may also include or exclude surrender charges. Third, in addition, for certain investment portfolios, performance may be shown for the period commencing from the inception date of the investment portfolio (i.e. before commencement of subaccount operations). These figures should not be interpreted to reflect actual historical performance of the subaccounts. We also may, from time to time, include in our advertising and sales materials, the performance of other funds or accounts managed by the subadviser, the performance of predecessors to the underlying fund portfolios, tax deferred compounding charts and other hypothetical illustrations, which may include comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets. Appendix B to this prospectus contains past performance information that you may find useful. It is divided into various parts, depending upon the type of performance information shown. Past performance is no indication of future performance; future performance will vary and future results will not be the same as the results shown. 5. EXPENSES There are charges and expenses associated with your contract that reduce the return on your investment in the contract. Surrender Charges During the accumulation phase, you can surrender part or all of the cash value (restrictions may apply to qualified contracts). We may apply a surrender charge to compensate us for expenses relating to sales, including commissions to registered representatives and other promotional expenses. After the first year, you can surrender up to the greater of 10% of your purchase payments (less partial surrenders deemed to be from purchase payments) or any gains in the contract once each year free of surrender charges. This amount is referred to as the free percentage and is determined at the time of surrender. (The free percentage is not cumulative, so not surrendering anything in one year does not increase the 20 surrender charge free amount in subsequent years.) If you surrender money in excess of this free amount, you might have to pay a surrender charge, which is a contingent deferred sales charge, on the excess amount. The following schedule shows the surrender charges that apply during the seven years following payment of each purchase payment:
Surrender Charge Number of Years (as a percentage of Since Purchase purchase payment Payment Date surrendered) ------------------------------------------------------------------------------ 0 - 1 7% ------------------------------------------------------------------------------ 1 - 2 7% ------------------------------------------------------------------------------ 2 - 3 6% ------------------------------------------------------------------------------ 3 - 4 6% ------------------------------------------------------------------------------ 4 - 5 5% ------------------------------------------------------------------------------ 5 - 6 4% ------------------------------------------------------------------------------ 6 - 7 3% ------------------------------------------------------------------------------ 7 or more 0
For example, assume your purchase payment is $100,000 and your account value is $106,000 at the beginning of the second contract year and you surrender $30,000. Since that amount is more than your free amount ($10,000), you would pay a surrender charge of $1,400 on the remaining $20,000 (7% of $30,000 - $10,000). Likewise, assume your account value is $80,000 (purchase payments $100,000) at the beginning of the second contract year and you surrender your contract. You would pay a surrender charge of $6,300 [7% of ($100,000 - ($100,000 x 10%))]. You can generally choose to receive the full amount of a requested partial surrender by directing us to deduct any applicable surrender charge (and any applicable excess interest adjustment) from your remaining account value. You receive your cash value upon full surrender. For surrender charge purposes, earnings are considered to be surrendered first, then the oldest purchase payment is considered to be surrendered next. Surrender charges are waived under the Nursing Care and Terminal Withdrawal Option or the Unemployment Waiver. Keep in mind that surrenders may be taxable, and if made before age 59 1/2 may be subject to a 10% federal penalty tax. For tax purposes, surrenders from nonqualified contracts are considered to come from earnings first. Under qualified contracts, surrenders may be prorated between taxable and nontaxable amounts. Life with Emergency Cash/SM/ Surrender Charge If you select the Life with Emergency Cash/SM/ annuity payment option, then you can surrender your contract even after annuity payments have begun. However, there is a surrender charge during the first four years after the annuity date. The following schedule shows the current surrender charge:
Surrender Charge (as a percentage Number of Years of adjusted Since Annuity Date account value) ------------------------------------------------------------------------------ 0 - 1 4% ------------------------------------------------------------------------------ 1 - 2 3% ------------------------------------------------------------------------------ 2 - 3 2% ------------------------------------------------------------------------------ 3 - 4 1% ------------------------------------------------------------------------------ 4 or more 0%
Note carefully the following three things about this surrender charge: .. this surrender charge is measured from the annuity date and not from the purchase payment date; .. this surrender charge is a percentage of the adjusted account value applied to the Life with Emergency CashSM annuity payment option, and not a percentage of purchase payment; and .. under this payment option, there is no surrender charge free amount. Excess Interest Adjustment Surrenders of cash value from the fixed account may be subject to an excess interest adjustment. 21 This adjustment could retroactively reduce the interest credited in the fixed account to the guaranteed minimum of 2% per year or increase the amount credited. This adjustment may also apply to amounts applied to an annuity payment. See "The Fixed Account" in Section 3. Mortality and Expense Risk Fees We charge a fee as compensation for bearing certain mortality and expense risks under the contract. This fee is assessed daily based on the net asset value of each subaccount. Examples of such risks include a guarantee of annuity rates, the death benefits, certain expenses of the contract, and assuming the risk that the current charges will be insufficient in the future to cover costs of administering the contract. We may also pay distribution expenses out of this charge. During the accumulation phase, for the Return of Premium Death Benefit the daily mortality and expense risk fee is at an annual rate of 1.15%; for the Double Enhanced Death Benefit, the mortality and expense risk fee is at an annual rate of 1.30%. During the income phase, the mortality and expense risk fee is always at an annual rate of 1.10%. If this charge does not cover our actual costs, we absorb the loss. Conversely, if the charge more than covers actual costs, the excess is added to our surplus. We expect to profit from this charge. We may use any profit for any proper purpose, including distribution expenses. Administrative Charges We deduct a daily administrative charge to cover the costs of administering the contract (including certain distribution-related expense). This charge is equal to an annual rate of 0.15% per year of the daily net asset value of the variable account during both the accumulation phase and the income phase. In addition, an annual service charge of $35 (but not more than 2% of the account value) is charged on each contract anniversary and at surrender. The service charge is waived if your account value or the sum of your purchase payments, less all partial surrenders, is at least $50,000. Premium Taxes Some states assess premium taxes on the purchase payments you make. We currently do not deduct for these taxes at the time you make a purchase payment. However, we will deduct the total amount of premium taxes, if any, from the account value when: .. you begin receiving annuity payments; .. you surrender the contract; or .. a death benefit is paid. Generally, premium taxes range from 0% to 3.50%, depending on the state. Federal, State and Local Taxes We may in the future deduct charges from the contract for any taxes we incur because of the contract. However, no deductions are being made at the present time. Transfer Fee You are allowed to make 18 free transfers per year before the annuity date. If you make more than 18 transfers per year, we reserve the right to charge $10 for each additional transfer. Purchase payments, Asset Rebalancing and Dollar Cost Averaging transfers do not count as one of your 18 free transfers per year. All transfer requests made at the same time are treated as a single request. Guaranteed Minimum Income Benefit If you elect the Guaranteed Minimum Income Benefit, there is an annual rider fee during the accumulation phase of 0.45% of the minimum annuitization value. If you receive annuity payments under the rider and you elect the guaranteed minimum payment option, then there is a guaranteed payment fee at an annual rate of 1.25% of the daily net asset value. The annual rider fee is also deducted if you surrender the contract. 22 Initial Payment Guarantee If you elect the Initial Payment Guarantee at the time of annuitization, there is a daily rider fee currently at an annual rate of 1.25% of the daily net asset value. This fee may be higher or lower at the time you annuitize and elect the rider. Tax Relief Rider If you elect the Tax Relief Rider, there is an annual rider fee during the accumulation phase of 0.25% of the account value. The rider fee will be deducted on each rider anniversary and upon termination of the rider (once we have received all necessary regulatory approvals) during the accumulation phase. Portfolio Fees and Expenses The value of the assets in each subaccount will reflect the fees and expenses paid by the underlying fund portfolio. A list of these expenses is found in the "Fee Table" section of this prospectus. See the prospectuses for the underlying fund portfolios for more information. 6. ACCESS TO YOUR MONEY During the accumulation phase, you can have access to the money in your contract in the following ways: .. by making a surrender (either a complete or partial surrender); or .. by taking systematic payouts. Surrenders If you take a complete surrender, you will receive your cash value. If you want to take a partial surrender, in most cases it must be for at least $500. Unless you tell us otherwise, we will take the surrender from each of the investment choices in proportion to the account value. After one year, you may take up to the greater of 10% of your purchase payments (less partial surrenders deemed to be from purchase payments) or any gains in the contract free of surrender charges once each contract year. Remember that any surrender you take will reduce the account value, and the amount of the death benefit. See Section 8, Death Benefit, for more details. A surrender may also reduce other benefits. Surrenders may be subject to a surrender charge. Surrenders from the fixed account may also be subject to an excess interest adjustment. Income taxes, federal tax penalties and certain restrictions may apply to any surrenders you make. Surrenders from qualified contracts may be restricted or prohibited. During the income phase, you will receive annuity payments under the annuity payment you select; however, you generally may not take any other surrenders, either complete or partial, unless you elect a Life With Emergency CashSM payment option. Delay of Payment and Transfers Payment of any amount due from the variable account for a surrender, a death benefit, or the death of the owner of a nonqualified contract, will generally occur within seven business days from the date we receive all required information. We may defer such payment from the variable account if: .. the New York Stock Exchange is closed other than for usual weekends or holidays or trading on the Exchange is otherwise restricted; .. an emergency exists as defined by the SEC or the SEC requires that trading be restricted; or .. the SEC permits a delay for the protection of owners. In addition, transfers of amounts from the subaccounts may be deferred under these circumstances. Federal laws designed to counter terrorism and prevent money laundering by criminals might in certain circumstances require us to reject a purchase payment and/or freeze a contract owner's account. If these laws apply in a particular situation, we would not be allowed to 23 pay any request for withdrawals, surrenders, or death benefits, make transfers, or continue making annuity payments absent instructions from the appropriate federal regulator. Pursuant to the requirements of certain state laws, we reserve the right to defer payment of the cash value from the fixed account for up to six months. We may defer payment of any amount until your purchase payment check has cleared your bank. Excess Interest Adjustment Money that you transfer out of or surrender from a guaranteed period option of the fixed account before the end of its guaranteed period (the number of years you specified the money would remain in the guaranteed period option) may be subject to an excess interest adjustment. At the time you request a transfer or surrender (either full or partial), if interest rates set by Transamerica have risen since the date of the initial guarantee, the excess interest adjustment will result in a lower cash value on surrender. However, if interest rates have fallen since the date of the initial guarantee, the excess interest adjustment will result in a higher cash value on surrender or transfer. Any amount surrendered in excess of the cumulative interest credited is generally subject to an excess interest adjustment. An excess interest adjustment may also be made on amounts applied to an annuity payment option. There will be no excess interest adjustment on any of the following: .. surrenders or transfers of cumulative interest credited; .. Nursing Care and Terminal Condition Withdrawal Option surrenders; .. Unemployment Waiver surrenders; .. surrenders to satisfy any minimum distribution requirements; and .. Systematic Withdrawal Option payments, which do not exceed cumulative interest credited divided by the number of payouts made per year. Please note that in these circumstances you will not receive a higher cash value if interest rates have fallen nor will you receive a lower cash value if interest rates have risen. The excess interest adjustment may vary by state and may not be applicable in all states. 7. ANNUITY PAYMENTS (THE INCOME PHASE) You choose the annuity date. You can change this date by giving us written notice 30 days before the current annuity date. The new annuity date must be at least 30 days after we receive notice of the change. The latest annuity date generally cannot be after the contract month following the month in which the annuitant attains age 85 (in certain cases, we may allow the date to be up to the last day of the month following the month in which the annuitant attains age 95). The earliest annuity date is 30 days after you purchase your contract. Before the annuity date, if the annuitant is alive, you may choose an annuity payment option or change your election. If the annuitant dies before the annuity date, the death benefit is payable in a lump sum or under one of the annuity payment options (unless the surviving spouse continues the contract). Unless you specify otherwise, the annuitant will receive the annuity payments. After the annuitant's death, the beneficiary will receive any remaining guaranteed payments. Annuity Payment Options The contract provides several annuity payments that are described below (these options are not available under the Guaranteed Minimum Income Benefit). You may choose any combination of annuity payments. We will use your adjusted account value to provide these annuity payments. If the adjusted account value on the annuity date is less than $2,000, we reserve the right to pay it in one lump sum in lieu of applying it under an annuity payment. You can receive annuity payments monthly, quarterly, semi-annually, or annually. (We reserve the right to change the frequency if payments would be less than $50.) 24 Unless you choose to receive variable payments, the amount of each payment will be set on the annuity date and will not change. You may, however, choose to receive variable payments. The dollar amount of the first variable payment will be determined in accordance with the annuity payment rates set forth in the applicable table contained in the contract. The dollar amount of additional variable payments will vary based on the investment performance of the subaccount(s). The dollar amount of each variable payment after the first may increase, decrease, or remain constant. If the actual investment performance (net of fees and expenses) exactly matched the assumed investment return of 5% at all times, the amount of each variable annuity payment would remain equal. If actual investment performance (net of fees and expenses) exceeds the assumed investment return, the amount of the variable annuity payments would increase. Conversely, if actual investment performance (net of fees and expenses) is lower than the assumed investment return, the amount of the variable annuity payments would decrease. Please note that these changes only occur annually under the Guaranteed Minimum Income Benefit and Initial Payment Guarantee. A charge for premium taxes and an excess interest adjustment may be made when annuity payments begin. The annuity payments are explained below. Options 1, 2, and 4 are fixed only. Options 3 and 5 can be fixed or variable. Payment Option 1 - Interest Payments. We will pay the interest on the amount we use to provide annuity payments in equal payments, or this amount may be left to accumulate for a period of time to which you and Transamerica agree. You and Transamerica will agree on surrender rights when you elect this option. Payment Option 2 - Income for a Specified Period. We will make level payments only for the fixed period you choose. No funds will remain at the end of the period. Payment Option 3 - Life Income. You may choose between: .. No Period Certain (fixed or variable) - Payments will be made only during the annuitant's lifetime. .. 10 Years Certain (fixed or variable) - Payments will be made for the longer of the annuitant's lifetime or ten years. .. Guaranteed Return of Contract Proceeds (fixed only) - Payments will be made for the longer of the annuitant's lifetime or until the total dollar amount of payments we made to you equals the amount applied to this option. Life with Emergency Cash/SM/ (fixed or variable) - Payments will be made during the annuitant's lifetime. With the Life with Emergency Cash/SM/ feature, you are able to surrender all or a portion of the Life with Emergency Cash/SM/ benefit. The amount you surrender must be at least $2,500. We will provide you with a Life with Emergency Cash/SM/ benefit schedule that will assist you in estimating the amount you have available to surrender. A partial surrender will reduce all future payments pro rata. A surrender charge may apply and there may be tax consequences (consult a tax advisor before requesting a full or partial surrender). The maximum surrender charge is 4% of the annuitized purchase payment (see "Expenses" for the surrender charge schedule). The Life with Emergency Cash/SM/ benefit will continue through age 100 of the annuitant. The Life with Emergency Cash/SM/ benefit is also a death benefit that is paid upon the death of the annuitant. (For qualified contracts the death benefit ceases at the date the annuitant reaches the IRS age limitation.) Payment Option 4 - Income of a Specified Amount. Payments are made for any specified amount until the amount applied to this option, with interest, is exhausted. This will be a series of level payments followed by a smaller final payment. Payment Option 5 - Joint and Survivor Annuity. You may choose between: .. No Period Certain (fixed or variable) - Payments are made during the joint lifetime of the annuitant and a joint annuitant of your selection. Payments will be made as long as either person is living. 25 .. Life with Emergency Cash/SM/ (fixed or variable) - Payments will be made during the joint lifetime of the annuitant and a joint annuitant of your selection. Payments will be made as long as either person is living. With the Life with Emergency Cash/SM/ feature, you are able to surrender all or a portion of the Life with Emergency Cash/SM/ benefit. The amount you surrender must be at least $2,500. We will provide you with a Life with Emergency Cash/SM/ benefit schedule that will assist you in estimating the amount you have available to surrender. A partial surrender will reduce all future payments pro rata. A surrender charge may apply and there may be tax consequences (consult a tax advisor before requesting a full or partial surrender). The maximum surrender charge is 4% of the annuitized purchase payment (see "Expenses for the surrender charge schedule). The Life with Emergency Cash/SM/ benefit will continue through age 100 of the annuitant. The Life with Emergency Cash/SM/ benefit is also a death benefit that is paid upon the death of the last annuitant. (For qualified contracts the death benefit ceases at the date the annuitant reaches the IRS joint age limitation.) Other annuity payments may be arranged by agreement with Transamerica. Certain annuity payments may not be available in all states. NOTE CAREFULLY: IF: .. you choose Life Income with No Period Certain or a Joint and Survivor Annuity with No Period Certain; and .. the annuitant dies before the due date of the second (third, fourth, etc.) annuity payment; THEN: .. we may make only one (two, three, etc.) annuity payments. IF: .. you choose Income for a Specified Period, Life Income with 10 years Certain, Life Income with Guaranteed Return of Contract Proceeds, or Income of a Specified Amount; and .. the person receiving payments dies prior to the end of the guaranteed period; THEN: .. the remaining guaranteed payments will be continued to that person's beneficiary, or their present value may be paid in a single sum. However, IF: .. You choose Life with Emergency Cash/SM/; and .. The annuitant dies before age 100; THEN: .. A Life with Emergency Cash/SM/ death benefit will be paid. We will not pay interest on amounts represented by uncashed annuity payment checks if the postal or other delivery service is unable to deliver checks to the payee's address of record. The person receiving payments is responsible for keeping Transamerica informed of their current address. 8. DEATH BENEFIT We will pay a death benefit to your beneficiary, under certain circumstances, if the annuitant dies during the accumulation phase. If there is a surviving owner(s) when the annuitant dies, the surviving owner(s) will receive the death benefit instead of the listed beneficiary. The person receiving the death benefit may choose an annuity payment option, or may choose to receive a lump sum. When We Pay A Death Benefit We will pay a death benefit IF: .. you are both the annuitant and sole owner of the contract; and .. you die before the annuity date. We will pay a death benefit to you (owner) IF: .. you are not the annuitant; and .. the annuitant dies before the annuity date. If the only person receiving the death benefit is the surviving spouse, then he or she may elect to 26 continue the contract as the new annuitant and owner, instead of receiving the death benefit. All current surrender charges will be waived. When We Do Not Pay A Death Benefit We will not pay a death benefit IF: .. you are not the annuitant; and .. you die prior to the annuity date; Please note the new owner (unless it is the deceased owner's spouse) must generally surrender the contract within five years of your death for the adjusted account value minus any applicable rider fees. Distribution requirements apply to the account value upon the death of any owner. These requirements are detailed in the SAI. Deaths After the Annuity Date The death benefit payable, if any, on or after the annuity date depends on the annuity payment option selected. IF: .. you are not the annuitant; and .. you die on or after the annuity date; and .. the entire interest in the contract has not been paid to you; THEN: .. the remaining portion of such interest in the contract will be distributed at least as rapidly as under the method of distribution being used as of the date of your death. IF: .. You are receiving annuity payments under the Life with Emergency Cash/SM/; and .. The annuitant dies before age 100. THEN: .. A Life with Emergency Cash/SM/ death benefit will be paid. Succession of Ownership If any owner dies during the accumulation phase, the annuitant will become the new owner. Amount of Death Benefit Death benefit provisions may differ from state to state. The death benefit may be paid as a lump sum or as annuity payments. The amount of the death benefit depends on the guaranteed minimum death benefit option you chose when you bought the contract. The death benefit will generally be the greatest of: .. account value on the date we receive the required information; or .. cash value on the date we receive the required information (this will be more than the account value if there is a positive excess interest adjustment that exceeds the surrender charge); or .. guaranteed minimum death benefit (discussed below), plus purchase payments, less gross partial surrenders from the date of death to the date the death benefit is paid. Guaranteed Minimum Death Benefit NOTE: The following generally applies, depending on the state of issue, to contracts issued after May 1, 2002. For other contracts, see Appendix C. On the contract application, you generally may choose one of the guaranteed minimum death benefit options listed below (age limitations may apply). After the contract is issued, you cannot make an election and the death benefit cannot be changed. A.Double Enhanced Death Benefit The death benefit under this option is the greater of 1 or 2 below: 1. The 6% Annually Compounding through age 80 Death Benefit is: . the total purchase payments; less . any adjusted partial surrenders; plus . interest at an effective annual rate of 6% from the purchase payment date or surrender date to (a) the earlier of the annuitant's date of death or the annuitant's 81st birthday; or (b) the date the total purchase payments, less any adjusted partial surrenders and any applicable premium taxes, 27 has grown to two times its original amount as a result of the 6% interest accumulation. 2. The Monthly Step-Up through age 80 Death Benefit is equal to: . the largest account value on the contract date or on any monthly anniversary prior to the earlier of the annuitant's date of death or the annuitant's 81st birthday; plus . any purchase payments subsequent to the date of the monthly anniversary with the largest account value; minus . any adjusted partial surrenders subsequent to the date of the monthly anniversary with the largest account value. This benefit is not available if the owner or annuitant is age 81 or older on the contract date. There is an extra charge for this death benefit (an extra 0.15% annually). B. Return of Premium Death Benefit The Return of Premium Death Benefit is: . total purchase payments; less . any adjusted partial surrenders (discussed below) as of the date of death. The Return of Premium Death Benefit will be in effect if you do not choose the other death benefit option on the contract application. The charges are lower for this option than for the other. Spousal Continuation NOTE, IF, under either death benefit option: .. the surviving spouse (as beneficiary or sole surviving owner) elects to continue the contract instead of receiving the death benefit; and .. the guaranteed minimum death benefit is greater than the account value; THEN: .. we will increase the account value to be equal to the guaranteed minimum death benefit. This increase is made only at the time the surviving spouse elects to continue the contract and the guaranteed minimum death benefit will continue as applicable. Adjusted Partial Surrender When you request a partial surrender, your guaranteed minimum death benefit will be reduced by an amount called the adjusted partial surrender. Under certain circumstances, the adjusted partial surrender may be more than the dollar amount of your surrender request. This will generally be the case if the guaranteed minimum death benefit exceeds the account value at the time of the surrender. It is also possible that if a death benefit is paid after you have made a partial surrender, then the total amount paid could be less than the total purchase payments. We have included a detailed explanation of this adjustment in the SAI. This is referred to as "adjusted partial surrender" in your contract. 9. TAXES NOTE: Transamerica has prepared the following information on federal income taxes as a general discussion of the subject. It is not intended as tax advice to any individual. You should consult your own tax adviser about your own circumstances. Transamerica has included an additional discussion regarding taxes in the SAI. Annuity Contracts in General Deferred annuity contracts are a way of setting aside money for future needs like retirement. Congress recognized how important saving for retirement is and provided special rules in the Internal Revenue Code for annuities. Simply stated, these rules generally provide that you will not be taxed on the earnings, if any, on the money held in your annuity contract until you take the money out. This is referred to as tax deferral. There are different rules as to how you will be taxed depending on how you take the money out and the type of contract - qualified or nonqualified (discussed below). You will generally not be taxed on increases in the value of your contract until a distribution 28 occurs - either as a surrender or as annuity payments and tax deferral will not apply. When a non-natural person (e.g., corporation or certain other entities other than tax-qualified trusts) owns a nonqualified contract, the contract will generally not be treated as an annuity for tax purposes. Qualified and Nonqualified Contracts If you purchase the contract under an individual retirement annuity, a pension plan, or specially sponsored program, your contract is referred to as a qualified contract. Qualified contracts are issued in connection with the following plans: .. Individual Retirement Annuity (IRA): A traditional IRA allows individuals to make contributions, which may be deductible, to the contract. A Roth IRA also allows individuals to make contributions to the contract, but it does not allow a deduction for contributions, and distributions may be tax-free if the owner meets certain rules. .. Tax-Sheltered Annuity (403(b) Plan): A 403(b) Plan may be made available to employees of certain public school systems and tax-exempt organizations and permits contributions to the contract on a pre-tax basis. .. Corporate Pension and Profit-Sharing and H.R. 10 Plan: Employers and self- employed individuals can establish pension or profit-sharing plans for their employees or themselves and make contributions to the contract on a pre-tax basis. .. Deferred Compensation Plan (457 Plan): Certain governmental and tax-exempt organizations can establish a plan to defer compensation on behalf of their employees through contributions to the contract. The contract contains death benefit features that in some cases may exceed the greater of the purchase payments or the account value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan or 403(b) plan. Because the death benefit may exceed this limitation, anyone using the contract in connection with such plans should consult their tax adviser. The Internal Revenue Service has not reviewed the contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether the death benefit provision, such as the provisions in the contract, comports with IRA qualification requirements. If you purchase the contract as an individual and not under an individual retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan, your contract is referred to as a nonqualified contract. Surrenders - Qualified Contracts The information herein describing the taxation of nonqualified contracts does not apply to qualified contracts. There are special rules that govern with respect to qualified contracts. Generally, these rules restrict: .. the amount that can be contributed to the contract during any year; .. the time when amounts can be paid from the contract; and .. the amount of any death benefit that may be allowed. In addition, a penalty tax may be assessed on amounts surrendered from the contract prior to the date you reach age 59 1/2, unless you meet one of the exceptions to this rule. You may also be required to begin taking minimum distributions from the contract by a certain date. The terms of the plan may limit the rights otherwise available to you under the contract. We have provided more information in the SAI. You should consult your legal counsel or tax adviser if you are considering purchasing a contract for use with any retirement plan. Surrenders - 403(b) Contracts The Internal Revenue Code limits surrenders from certain 403(b) contracts. Surrenders can generally only be made when an owner: .. reaches age 59 1/2; .. leaves his/her job; 29 .. dies; .. becomes disabled (as that term is defined in the Internal Revenue Code); or .. declares hardship. However, in the case of hardship, the owner can only surrender the purchase payments and not any earnings. Diversification and Distribution Requirements The Internal Revenue Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity. The contract must also meet certain distribution requirements at the death of an owner in order to be treated as an annuity. These diversification and distribution requirements are discussed in the SAI. Transamerica may modify the contract to attempt to maintain favorable tax treatment. Surrenders - Nonqualified Contracts If you make a surrender (including Systematic Payouts) from a nonqualified contract before the annuity date, the Internal Revenue Code treats that surrender as first coming from earnings and then from your purchase payments. When you make a surrender you are taxed on the amount of the surrender that is earnings. (The excess interest adjustment resulting from the surrender may affect the amount on which you are taxed, but the tax treatment of excess interest adjustments is uncertain. You should consult a tax advisor if a surrender results in an excess interest adjustment.) If you make a full surrender, you are generally taxed on the amount that your surrender proceeds exceeds the "investment in the contract," which is generally your purchase payments paid (adjusted for any prior surrenders or portions thereof that were not taxable). Different rules apply for annuity payments. See "Annuity Payments" below. The Internal Revenue Code also provides that surrendered earnings may be subject to a penalty tax. The amount of the penalty tax is equal to 10% of the amount that is includable in income. Some surrenders will be exempt from the penalty tax. They include any amounts: .. paid on or after the taxpayer reaches age 59 1/2; .. paid after an owner dies; .. paid if the taxpayer becomes totally disabled (as that term is defined in the Internal Revenue Code); .. paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; .. paid under an immediate annuity; or .. which come from purchase payments made prior to August 14, 1982. All nonqualified deferred annuity contracts that are issued by Transamerica (or its affiliates) to the same owner during any calendar year are treated as one annuity for purposes of determining the amount includable in the owner's income when a taxable distribution occurs. Taxation of Death Benefit Proceeds Amounts may be distributed from the contract because of the death the annuitant. Generally, such amounts should be includable in the income of the recipient: .. if distributed in a lump sum, these amounts are taxed in the same manner as a full surrender; or .. if distributed under an annuity payment, these amounts are taxed in the same manner as annuity payments. Annuity Payments Although the tax consequences may vary depending on the annuity payment you select, in general, for nonqualified contracts, only a portion of the annuity payments you receive will be includable in your gross income. In general, the excludable portion of each annuity payment you receive will be determined as follows: .. Fixed payments - by dividing the "investment in the contract" on the annuity date by the total expected value of the annuity payments for the term of the payments. This is the percentage of each annuity payment that is excludable. .. Variable payments - by dividing the "investment in the contract" on the annuity date by the total number of expected 30 periodic payments. This is the amount of each annuity payment that is excludable. The remainder of each annuity payment is includable in gross income. Once the "investment in the contract" has been fully recovered, the full amount of any additional annuity payments is includable in gross income. If you select more than one annuity payment, special rules govern the allocation of the contract's entire "investment in the contract" to each such option, for purposes of determining the excludable amount of each payment received under that option. We advise you to consult a competent tax adviser as to the potential tax effects of allocating amounts to any particular annuity payment. If, after the annuity date, annuity payments stop because an annuitant died, the excess (if any) of the "investment in the contract" as of the annuity date over the aggregate amount of annuity payments received that was excluded from gross income may possibly be allowable as a deduction for your last taxable year. It is unclear whether stabilized annuity payments under the Guaranteed Minimum Income Benefit or the Initial Payment Guarantee should be treated as fixed annuity payments or variable annuity payments for federal income tax purposes. In addition, stabilized annuity payments may not qualify as a series of substantially equal payments that would be exempt from any applicable penalty tax. You should consult a tax advisor on these issues. Annuity Contracts Purchased by Nonresident Aliens and Foreign Corporations The discussion above provided general information (but not tax advice) regarding U.S. federal income tax consequences to annuity owners that are U.S. persons. Taxable distributions made to owners who are not U.S. persons will generally be subject to U.S. federal income tax withholding at a 30% rate, unless a lower treaty rate applies. In addition, distributions may be subject to state and/or municipal taxes and taxes that may be imposed by the owner's country of citizenship or residence. Prospective foreign owners are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation for any annuity contract purchase. Transfers, Assignments or Exchanges of Contracts A transfer of ownership or assignment of a contract, the designation of an annuitant or payee or other beneficiary who is not also the owner, the selection of certain annuity dates, or a change of annuitant, may result in certain income or gift tax consequences to the owner that are beyond the scope of this discussion. An owner contemplating any such transfer, assignment, selection, or change should contact a competent tax adviser with respect to the potential tax effects of such a transaction. Possible Tax Law Changes Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the contract could change by legislation or otherwise. You should consult a tax adviser with respect to legal developments and their effect on the contract. Variable Account Charges It is possible that the Internal Revenue Service may take a position that fees for certain optional benefits (e.g., death benefits other than the Return of Premium death benefit) are deemed to be taxable distributions to you. In particular, the Internal Revenue Service may treat fees associated with the Tax Relief Rider as a taxable surrender, which might also be subject to a tax penalty if the surrender occurs prior to age 59 1/2. Although we do not believe that the fees associated with the Tax Relief Rider or any other optional benefit provided under the contract should be treated as taxable surrenders, the tax rules associated with these benefits are unclear, and we advise that you consult your tax advisor prior to selecting any optional benefit under the contract. 31 10. ADDITIONAL FEATURES Systematic Withdrawal Option You can select at any time (during the accumulation phase) to receive regular payments from your contract by using the Systematic Withdrawal Option. Under this option, you can receive the greater of (1) and (2), divided by the number of payouts made per year, where: (1) is up to 10% (annually) of your purchase payments (less partial surrenders deemed to be from purchase payments); and (2) is any gains in the contract. This amount may be taken free of surrender charges. Payments can be made monthly, quarterly, semi-annually, or annually. Each payment must be at least $50. Monthly and quarterly payments must be made by electronic funds transfer directly to your checking or savings account. There is no charge for this benefit. Guaranteed Minimum Income Benefit The optional Guaranteed Minimum Income Benefit assures you of a minimum level of income in the future by guaranteeing a minimum annuitization value (discussed below) after seven years. You may elect to purchase this benefit, which provides a minimum amount you will have to apply to a Guaranteed Minimum Income Benefit payment option and which guarantees a minimum amount for those payments once you begin to receive them. By electing this benefit, you can participate in the gains of the underlying variable investment options you select while knowing that you are guaranteed a minimum level of income in the future, regardless of the performance of the underlying variable investment options. The Guaranteed Minimum Income Benefit rider will not be issued if you are 80 years old or older (earlier if required by state law). You can annuitize under the rider (subject to the conditions described below) at the greater of the adjusted account value or the minimum annuitization value. Minimum Annuitization Value. The minimum annuitization value on the rider date (the date the rider is added to your contract) is equal to the account value. After that, the minimum annuitization value is equal to the greater of the following: 1) the largest account value on the rider date or on any rider anniversary prior to the annuitant's 81st birthday, plus any subsequent purchase payments (less the sum of all subsequent withdrawals adjusted as below and any premium taxes after the date of the largest account value); or 2) the minimum annuitization value on the rider date plus the sum of all purchase payments received after the rider date, less withdrawals (adjusted as below) and premium taxes, plus interest thereon equal to the annual effective interest rate specified on page one of the rider up to: a) the rider anniversary prior to the annuitant's 81st birthday; b) the date the sum of all purchase payments, (less the sum of all adjusted withdrawals and premium taxes), together with credited interest, has grown to two times the amount of all purchase payments (less all adjusted withdrawals and premium taxes) as a result of such interest accumulation, if earlier. You can annuitize under the Guaranteed Minimum Income Benefit (subject to the conditions described in this section) at the greater of the annuity purchase amount or the minimum annuitization value. The annual effective interest rate is 6% per year; we may, at our discretion, change the rate in the future, but the rate will never be less than 3% per year, and once the rider is added to your contract, the annual rate will not vary during the life of that rider. Withdrawals may reduce the minimum annuitization value on a basis greater than dollar-for-dollar. See the SAI for more information. The Guaranteed Minimum Income Benefit does not establish or guarantee account value or guarantee performance of any investment option. 32 The minimum annuitization value may only be used to annuitize using the Guaranteed Minimum Income Benefit payment options provided by the Guarantee Minimum Income Benefit and may not be used with any of the annuity payment options listed in Section 7 of this prospectus. The Guaranteed Minimum Income Benefit payment options are: .. Life Income - An election may be made for "No Period Certain" or "10 Years Certain". In the event of the death of the annuitant prior to the end of the chosen period certain, the remaining period certain payments will be continued to the beneficiary. .. Joint and Full Survivor - An election may be made for "No Period Certain" or "10 Years Certain". Payments will be made as long as either the annuitant or joint annuitant is living. In the event of the death of both the annuitant and joint annuitant prior to the end of the chosen period certain, the remaining period certain payments will be continued to the beneficiary. NOTE CAREFULLY: IF: .. You choose Life Income with No Period Certain or Joint and Full Survivor with No Period Certain; and .. The annuitant(s) dies before the due date of the second (third, fourth, etc.) annuity payment; THEN: .. We will make only one (two, three, etc.) annuity payments. The minimum annuitization value is used solely to calculate the Guaranteed Minimum Income Benefit annuity payments and does not establish or guarantee an account value or guarantee performance of any investment option. Because this benefit is based on conservative actuarial factors (such as the use of a 3.0% assumed investment return, to calculate the first annuity payment, which results in a lower dollar amount for that payment than would result from using the 5.0% assumed investment return that is used with the regular annuity payments options described in Section 7 above), the level of lifetime income that it guarantees may be less than the level that would be provided by application of the adjusted account value at otherwise applicable annuity factors. Therefore, the Guaranteed Minimum Income Benefit should be regarded as a safety net. The costs of annuitizing under the Guaranteed Minimum Income Benefit include the guaranteed payment fee, and also the lower payout levels inherent in the annuity tables used for those minimum payouts (which may include an annuity age factor adjustment). These costs should be balanced against the benefits of a minimum payout level. Moreover, the Initial Payment Guarantee option described below also provides for a minimum payout level, and it uses actuarial factors (such as a 5.0% assumed investment return) that provide for higher payment levels for a given account value than the Guaranteed Minimum Income Benefit (which uses a 3.0% assumed investment return to calculate the first annuity payment and a 5.0% rate to calculate all subsequent payments). You should carefully consider these factors, since electing annuity payments under the Guaranteed Minimum Income Benefit will generally be advantageous only when the minimum annuitization value is sufficiently in excess of the adjusted account value to overcome these disadvantages. In addition to the annual growth rate, other benefits and fees under the rider (the rider fee, the fee waiver threshold, the guaranteed payment fee, and the waiting period before the rider can be exercised) are also guaranteed not to change after the rider is added. However, all of these benefit specifications may change if you elect to upgrade the minimum annuitization value. Minimum Annuitization Value Upgrade. You can upgrade your minimum annuitization value to the account value on a contract anniversary. This may be done within thirty days after any contract anniversary before your 88th birthday (earlier if required by state law). For your convenience, we will put the last date to upgrade on page one of the rider. If you upgrade: .. the current rider will terminate and a new one will be issued with its own specified 33 guaranteed benefits and fees (the new rider will be what is currently offered for new sales); .. the new fees, thresholds and factors may be higher (or lower) than before; .. the new annual growth rate may be lower (or higher) than before; and .. you will have a new waiting period before you can annuitize under the rider. It generally will not be to your advantage to upgrade unless your adjusted account value exceeds your minimum annuitization value at the time you elect to upgrade. Conditions of Exercise of the Guaranteed Minimum Income Benefit. You can only annuitize using the Guaranteed Minimum Income Benefit within the 30 days after the seventh or later contract anniversary after the Guaranteed Minimum Income Benefit is elected or, in the case of an upgrade of the minimum annuitization value, the seventh or later contract anniversary following the upgrade. Transamerica may, at its discretion, change the waiting period before the Guaranteed Minimum Income Benefit can be exercised in the future. You cannot, however, annuitize using the Guaranteed Minimum Income Benefit after the contract anniversary after your 94th birthday (earlier if required by state law). For your convenience, we will put the first and last date to annuitize using the Guaranteed Minimum Income Benefit on page one of the rider. NOTE CAREFULLY: If you annuitize at any time other than indicated above, you cannot use the Guaranteed Minimum Income Benefit. Guaranteed Minimum Payment Option. If you elect the guaranteed minimum payment option at the time of annuitization, annuity payments under the rider are guaranteed to never be less than the initial payment. See the SAI for information concerning the calculation of the initial payment. The payments will also be "stabilized" or held constant during each contract year. During the first contract year after annuitizing using the rider, each stabilized payment will equal the initial payment. On each contract anniversary thereafter, the stabilized payment will increase or decrease depending on the performance of the investment options you selected (but will never be less than the initial payment), and then be held constant at that amount for that contract year. The stabilized payment on each contract anniversary will equal the greater of the initial payment or the payment supportable by the annuity units in the selected investment options. See the SAI for additional information concerning stabilized payments. If you elect not to receive guaranteed minimum payments, your payments: .. are not guaranteed and may be less than the initial payment; .. will vary according to the investment performance of the investment options you select; and .. will not be stabilized. Rider Fee. A rider fee, 0.45% of the minimum annuitization value on the rider anniversary, is charged annually prior to annuitization. We will also charge this fee if you take a complete surrender. The rider fee is deducted from each variable subaccount and the fixed account in proportion to the amount of account value in each variable subaccount and the fixed account. This fee is deducted even if the adjusted account value exceeds the minimum annuitization value. Guaranteed Minimum Payment Fee. If you elect the guaranteed minimum payment option at the time of annuitization, a guaranteed minimum payment fee, equal to an effective annual rate of 1.25% of the daily net asset value in the variable account, is reflected in the amount of the variable payments you receive if you annuitize under the Guaranteed Minimum Income Benefit, in addition to the base product mortality and expense risk fee and administrative charge. The guaranteed minimum payment fee is included on page one of the rider. This option is irrevocable (you can not stop paying the fee once annuity payments begin). Termination. The rider is irrevocable. You have the option not to use the benefit but you will not 34 receive a refund of any fees you have paid. The rider will terminate upon the earliest of the following: .. annuitization (you will still get guaranteed minimum stabilized payments if you annuitize using the minimum annuitization value under the Guaranteed Minimum Income Benefit); .. upgrade of the minimum annuitization value (although a new rider will be issued); .. termination of your contract; or .. 30 days after the contract anniversary after your 94th birthday (earlier if required by state law). The Guaranteed Minimum Income Benefit may vary by state and may not be available in all states. For contracts sold in New Jersey, certain provisions of the Guaranteed Minimum Income Benefit differ from the above description. New Jersey residents should see the separate supplement describing the Guaranteed Minimum Income Benefit for New Jersey. Initial Payment Guarantee You may only elect to purchase the Initial Payment Guarantee at the time you annuitize your contract. The guarantee only applies to variable annuity payments. There is an additional charge for this guarantee. The Initial Payment Guarantee does not establish or guarantee the performance of any subaccount. With the Initial Payment Guarantee, you receive stabilized annuity payments that are guaranteed to never be less than a percentage (currently 80%) of the initial payment (i.e., the guaranteed payment). Once the rider is added, the guaranteed percentage will not change during the life of the rider. Rider Fee. There is a charge for the Initial Payment Guarantee, which is in addition to the base product mortality and expense risk fee and administrative charge. This fee is reflected in the amount of the annuity payments that you receive if you select the Initial Payment Guarantee. It is reflected in the calculation of the annuity unit values. The Initial Payment Guarantee fee is currently equal to an annual rate of 1.25% of the daily net asset value in the subaccounts. Other Terms and Conditions. You may purchase the Initial Payment Guarantee only at the time you annuitize your contract. You cannot delete this payment guarantee (or eliminate the charge for it) after you have selected this option. The Initial Payment Guarantee uses a 5.0% assumed investment return to calculate your annuity payments. This means that the dollar amount of the annuity payments will remain level if the investment return (net of fees and expenses) exactly equals 5.0%. The payments will increase if actual investment performance (net of fees and expenses) exceeds the assumed investment return, and decrease if actual performance is below the assumed investment return (but not below the guaranteed level). Termination. The Initial Payment Guarantee is irrevocable. The Initial Payment Guarantee may vary by state and may not be available in all states. Tax Relief Rider The optional Tax Relief Rider pays an additional amount (based on earnings since the rider was issued) when a death benefit is payable under your contract, in certain circumstances. No benefit is paid under this rider unless (a) the rider is in force, (b) a death benefit is payable on the contract, and (c) there are rider earnings when the death benefit is calculated. The Tax Relief Rider is available for issue ages through age 80. Tax Relief Rider Amount. The Tax Relief Rider is only payable if you elected the rider prior to the death triggering the payment of the contract death benefit and a death benefit is payable under the contract. The Tax Relief Rider is equal to: .. the Tax Relief Rider factor (see below); multiplied by 35 .. the rider earnings on the date the death benefit is calculated. Rider earnings equal: .. the contract death benefit; minus .. account value on the rider date; minus .. purchase payments after the rider date; plus .. surrenders after the rider date that exceed the rider earnings on the date of the surrender. No benefit is payable under the Tax Relief Rider if there are no rider earnings on the date the death benefit is calculated. If you purchase your contract as part of a 1035 exchange or add the Tax Relief Rider after you purchase the contract, rider earnings do not include any gains before the 1035 exchange or the date the Tax Relief Rider is added to your contract. The Tax Relief Rider factor is currently 40% for issue ages under 71 and 25% for issue ages 71-80. For purposes of computing taxable gains, both the death benefit payable under the contract and the Tax Relief Rider will be considered. Please see the SAI for an example which illustrates the Tax Relief Rider payable as well as the effect of a partial surrender on the Tax Relief Rider. Spousal Continuation. If a spouse, as the new owner of the contract, elects to continue the contract instead of receiving a death benefit and Tax Relief Rider, the spouse has the following options: .. Continue the contract and receive a one-time account value increase equal to the Tax Relief Rider. At this time the rider would terminate. The spouse would have the option of immediately re-electing the rider as long as he or she is under the age of 81; however, it would only cover gains from the time of such election going forward; or .. Continue the contract without the one-time account value increase and continue the rider as is. When the next death benefit is payable, the rider will pay the Tax Relief Rider based on gains since the rider was issued, not just since the time of the first death. If the rider is terminated prior to this death, no Tax Relief Rider distribution is payable. Rider Fee. A rider fee, 0.25% of the account value, is deducted annually on each rider anniversary prior to annuitization. We will also deduct this fee upon full surrender of the contract or other termination of the rider (once we have received all necessary regulatory approvals). The rider fee is deducted pro rata from each investment choice. The fee is deducted even during periods when the Tax Relief Rider would not pay any benefit (because there are no rider earnings). Termination. The rider will remain in effect until: .. you cancel it by notifying our service center in writing, .. the contract is annuitized or surrendered, or .. the Tax Relief Rider is paid or added to the account value under a spousal continuation. Once terminated, the Tax Relief Rider may be re-elected, however, a new rider will be issued and the additional death benefit will be re-determined. Please note that if the rider is terminated and then re-elected, it will only cover gains, if any, since it was re-elected and the terms of the new rider may be different than the terminated rider. The tax consequences associated with this rider are not clear. This rider may violate the requirements of certain qualified plans and of IRAs. Consult a tax adviser before electing this rider. The Tax Relief Rider may vary by state and may not be available in all states. Nursing Care and Terminal Condition Withdrawal Option No surrender charges or excess interest adjustment will apply if you make a surrender, under certain circumstances, because you or your spouse has been: .. confined in a hospital or nursing facility for 30 days in a row; or 36 .. diagnosed with a terminal condition (usually a life expectancy of 12 months or less). This benefit is also available to the annuitant or annuitant's spouse if the owner is not a natural person. You may exercise this benefit at any time (during the accumulation phase). There is no charge for this benefit. This benefit may vary by state and may not be available in all states. Unemployment Waiver No surrender charges or excess interest adjustment will apply to surrenders after you or your spouse become unemployed in certain circumstances, because you were terminated, laid off, or otherwise lost your job involuntarily. In order to qualify, you (or your spouse, whichever is applicable) must have been: .. employed full time for at least two years prior to becoming unemployed; .. employed full time on the contract date; .. unemployed for at least 60 days in a row at the time of surrender; .. must have a minimum cash value at the time of surrender of $5,000; and .. you (or your spouse) must be receiving unemployment benefits. You must provide written proof from your State's Department of Labor, which verifies that you qualify for and are receiving unemployment benefits at the time of surrender. You may select this benefit at any time (during the accumulation phase) and there is no charge for this benefit. This benefit is also available to the annuitant or annuitant's spouse if the owner is not a natural person. There is no charge for this benefit. This benefit may vary by state and may not be available in all states. Telephone Transactions You may generally make transfers and change the allocation of additional purchase payments by telephone. If you authorize your registered representative to make transfers and change the allocation of additional purchase payments by telephone: .. select the Owner(s) and Owners Registered Representative box on the "Telephone Transfer Authorization" section of the contract application; or .. later complete an authorization form. You will be required to provide certain information for identification purposes when requesting a transaction by telephone and we may record your telephone call. We may also require written confirmation of your request. We will not be liable for following telephone requests that we believe are genuine. We reserve the right to revoke your telephone transaction privileges at any time without revoking all owners' telephone transfer privileges. Telephone requests must be received while the New York Stock Exchange is open to get same-day pricing of the transaction. We may discontinue this option at any time. We may deny the telephone transaction privileges to market timers. We cannot guarantee that telephone transactions will always be available. For example, our offices may be closed during severe circumstances or other emergencies. There may be interruptions in service beyond our control, and if the volume of calls is unusually high, we might not have anyone available, or lines available, to take your call. Dollar Cost Averaging Program During the accumulation phase, you may instruct us to automatically transfer money (portions of account value) from certain investment options into one or more variable subaccounts in accordance with your instructions. This is known as Dollar Cost Averaging. Dollar Cost Averaging buys more variable accumulation units when prices are low and fewer variable accumulation units when prices are high. It does not guarantee profits or assure that you will not experience a loss. You should consider your ability to continue the Dollar Cost Averaging program during all economic conditions. 37 There are two Dollar Cost Averaging programs available under your contract: Traditional and Special. Traditional Dollar Cost Averaging. During the accumulation phase, you may instruct us to automatically transfer money from the Traditional Dollar Cost Averaging fixed account option, the Money Market Portfolio Subaccount, Quality Bond Portfolio Subaccount or the Limited Term High Income Portfolio Subaccount, into one or more variable subaccounts in the allocations you specified. You may specify the dollar amount to be transferred either monthly or quarterly; however, each transfer must be at least $250. A minimum of 6 monthly or 4 quarterly transfers are required and a maximum of 24 monthly or 8 quarterly transfers are allowed. Transfers will begin as soon as the program is started. NOTE CAREFULLY: .. If you attempt to begin a Traditional Dollar Cost Averaging program with less than the necessary minimum amount, no transfers will be made and any amount allocated to that program will remain where it is at until the minimum amount is reached or you transfer the funds out. .. If you specify the number of transfers, up to two additional transfers may be necessary to complete a Traditional Dollar Cost Averaging program. Special Dollar Cost Averaging. During the accumulation phase, you may elect to allocate purchase payments to either the six or twelve month Special Dollar Cost Averaging accounts of the fixed account. Amounts will then be transferred from the Special Dollar Cost Averaging account to the variable subaccounts on a monthly basis for six or twelve months (depending on the option you select) in the allocations you specified. Each transfer must be at least $250. Dollar Cost Averaging Program Purchase Payments. If you elect Dollar Cost Averaging and have multiple sources funding your contract, the Dollar Cost Averaging program will begin with the first money received. As the money from the other sources is received, the amount of the Dollar Cost Averaging transfers will increase but the length of the program will not. If some of the money from the other sources is not received before the Dollar Cost Averaging program has ended, a new Dollar Cost Averaging program will start when we receive the money (assuming it meets the minimum Dollar Cost Averaging requirements). If you make additional purchase payments while a Dollar Cost Averaging Program is running, absent new instructions to the contrary, the amount of the Dollar Cost Averaging transfers will increase but the length of the program will not. If additional purchase payment is received after a Dollar Cost Averaging program is completed, absent new instructions to the contrary: .. a new Dollar Cost Averaging program will be started using the previous instructions; or .. if the additional purchase payment does not meet the minimum requirements to start a new Dollar Cost Averaging program, then the additional purchase payment will be allocated as identified in the previous Dollar Cost Averaging program. NOTE CAREFULLY: If we do not receive all necessary information to begin a Special Dollar Cost Averaging program within 30 days of allocating purchase payment to the program, that purchase payment will be transferred to the Traditional Dollar Cost Averaging fixed account. If you discontinue a Dollar Cost Averaging program before its completion, then the interest credited on amounts in the Dollar Cost Averaging fixed account may be adjusted downward, but not below the minimum guaranteed effective annual interest rate of 2%. There is no charge for this benefit. The Dollar Cost Averaging program may vary by state and may not be available in all states. See your contract for availability of the fixed account options. 38 Asset Rebalancing During the accumulation phase you can instruct us to automatically rebalance the amounts in your subaccounts to maintain your desired asset allocation. This feature is called Asset Rebalancing and can be started and stopped at any time free of charge. However, we will not rebalance if you are in the Dollar Cost Averaging program or if any other transfer is requested. If a transfer is requested, we will honor the requested transfer and discontinue Asset Rebalancing. New instructions are required to start Asset Rebalancing. Asset Rebalancing ignores amounts in the fixed account. You can choose to rebalance monthly, quarterly, semi-annually, or annually. 11. OTHER INFORMATION Ownership You, as owner of the contract, exercise all rights under the contract. You can change the owner at any time by notifying us in writing. An ownership change may be a taxable event. Assignment You can also assign the contract any time during your lifetime. We will not be bound by the assignment until we receive written notice of the assignment. We will not be liable for any payment or other action we take in accordance with the contract before we receive notice of the assignment. There may be limitations on your ability to assign a qualified contract. An assignment may have tax consequences. Transamerica Occidental Life Insurance Company Transamerica Occidental Life Insurance Company is an Iowa stock life insurance company incorporated on June 30, 1906. It is mainly engaged in the sale of life insurance and annuity contracts. The address for Transamerica is 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499. Transamerica is a wholly owned subsidiary of Transamerica Insurance Corporation, which in turn is a direct subsidiary of Transamerica Corporation. Transamerica Corporation is an indirect subsidiary of AEGON N.V., one of the world's leading international insurance groups. All obligations arising under the contracts, including the promise to make annuity payments, are general corporate obligations of Transamerica. The Variable Account Transamerica established a separate account, called Separate Account VA-2L, under the laws of the State of California on May 22, 1992. The variable account receives and invests the purchase payments that are allocated to it for investment in shares of the underlying fund portfolios. The variable account is registered with the SEC as a unit investment trust under the 1940 Act. However, the SEC does not supervise the management, the investment practices, or the contracts of the variable account or Transamerica. Income, gains and losses (whether or not realized), from assets allocated to the variable account are, in accordance with the contracts, credited to or charged against the variable account without regard to Transamerica's other income, gains or losses. The assets of the variable account are held in Transamerica's name on behalf of the variable account and belong to Transamerica. However, those assets that underlie the contracts are not chargeable with liabilities arising out of any other business Transamerica may conduct. The variable account may include other subaccounts that are not available under these contracts. Mixed and Shared Funding Before making a decision concerning the allocation of purchase payments to a particular subaccount, please read the prospectuses for the underlying fund portfolios. The underlying fund portfolios are not limited to selling their shares to this variable account and can accept investments from any variable account or qualified retirement plan. Since the underlying fund portfolios are available to registered variable accounts offering variable annuity products of Transamerica, as 39 well as variable annuity and variable life products of other insurance companies, and qualified retirement plans, there is a possibility that a material conflict may arise between the interests of this variable account and one or more of the other accounts of another participating insurance company. In the event of a material conflict, the affected insurance companies, including Transamerica, agree to take any necessary steps to resolve the matter. This includes removing their variable accounts from the underlying fund portfolios. See the underlying fund portfolios' prospectuses for more details. Exchanges and Reinstatements You can generally exchange one annuity contract for another in a tax-free exchange' under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both annuities carefully. Remember that if you exchange another annuity for the one described in this prospectus, then you may pay a surrender charge on the other annuity and there will be a new surrender charge period and other charges may be higher (or lower) and the benefits may be different. You should not exchange another annuity for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person trying to sell you this contract (that person will generally earn a commission if you buy this contract through an exchange or otherwise). You may surrender your contract and transfer your money directly to another life insurance company (sometimes referred to as a 1035 Exchange or a trustee- to-trustee transfer). You may also ask us to reinstate your contract after such a transfer by returning the same total dollar amount of funds to the applicable investment choices. The dollar amount will be used to purchase new variable accumulation units at the then current price. Because of changes in market value, your new variable accumulation units may be worth more or less than the units you previously owned. We recommend that you consult a tax professional to explain the possible tax consequences of exchanges and/or reinstatements. Voting Rights Transamerica will vote all shares of the underlying fund portfolios held in the variable account in accordance with instructions we receive from you and other owners that have voting interests in the portfolios. We will send you and other owners written requests for instructions on how to vote those shares. When we receive those instructions, we will vote all of the shares in proportion to those instructions. If, however, we determine that we are permitted to vote the shares in our own right, we may do so. Each person having a voting interest will receive proxy material, reports, and other materials relating to the appropriate portfolio. Distributor of the Contracts AFSG Securities Corporation is the principal underwriter of the policies. Like Transamerica, it is an wholly-owned indirect subsidiary of AEGON USA, Inc. It is located at 4333 Edgewood Road NE, Cedar Rapids, IA 52499-0001. AFSG Securities Corporation is registered as a broker/dealer under the Securities Exchange Act of 1934. It is a member of the National Association of Securities Dealers, Inc. (NASD). Commissions paid to broker/dealers who sell the contracts under the agreements with AFSG Securities Corporation may vary, but will not exceed 7% of purchase payments. These commissions are not deducted from purchase payments. In addition, certain production, persistency and managerial bonuses may be paid. Transamerica may also pay compensation to financial institutions for their services in connection with the sale and servicing of the contracts. To the extent permitted by NASD rules, promotional incentives or payments may also be provided to broker/dealers based on sales volumes, the assumption of wholesaling functions, or other sales-related criteria. Other payments may be made for other services that do not directly involve the sale of the contracts. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. Transamerica 40 intends to recoup commissions and other sales expenses primarily, but not exclusively, through: .. the administrative charge; .. the surrender charge; .. the mortality and expense risk fee; .. revenues, if any, that we receive from the underlying fund portfolios or their managers; and .. investment earnings on amounts allocated to the fixed account. Commissions paid on the contracts, including other incentives or payments, are not charged to the contract owners or the variable account. Pending regulatory approvals, we intend to distribute the contracts in all states, except New York, and in certain possessions and territories. IMSA We are a member of the Insurance Marketplace Standards Association (IMSA). IMSA is an independent, voluntary organization of life insurance companies. It promotes high ethical standards in the sales and advertising of individual life insurance, long-term care insurance, and annuity products. Through its Principles and Code of Ethical Market Conduct, IMSA encourages its member companies to develop and implement policies and procedures to promote sound market practices. Companies must undergo a rigorous self and independent assessment of their practices to become a member of IMSA. The IMSA logo in our sales literature shows our ongoing commitment to these standards. You may find more information about IMSA and its ethical standards at www.imsaethics.org. Legal Proceedings There are no legal proceedings to which the variable account is a party or to which the assets of the variable account are subject. Transamerica, like other life insurance companies, is involved in lawsuits. In some class action and other lawsuits involving other insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, Transamerica believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the variable account or Transamerica. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Glossary of Terms The Contract - General Provisions Certain Federal Income Tax Consequences Investment Experience Guaranteed Minimum Income Benefit - Additional Information Tax Relief Rider - Additional Information Historical Performance Data Published Ratings State Regulation of Transamerica Administration Records and Reports Distribution of the Contracts Voting Rights Other Products Custody of Assets Legal Matters Independent Auditors Other Information Financial Statements 41 APPENDIX A CONDENSED FINANCIAL INFORMATION (For contracts purchased on or after May 1, 2002) The "Return of Premium Death Benefit" with Total Variable Account Annual Expenses of 1.30%, and the "Double Enhanced Death Benefit" with Total Variable Account Annual Expenses of 1.45%, were not offered as of December 31, 2001, therefore condensed financial data is not available that reflects those death benefits. CONDENSED FINANCIAL INFORMATION (For contracts purchased prior to May 1, 2002) The variable accumulation unit values and the number of variable accumulation units outstanding for each subaccount from the date of inception are shown in the following tables. Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step- Up through age 85 Death Benefit* (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) For Service Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- Appreciation(/1/) 2001............................... $37.729 $33.933 731,798.395 -------------------------------------------------------------------------------- Balanced(/1/) 2001............................... $14.533 $12.923 1,100,499.219 -------------------------------------------------------------------------------- Disciplined Stock(/1/) 2001............................... $20.256 $17.049 384,844.742 -------------------------------------------------------------------------------- Growth and Income(/1/) 2001............................... $32.284 $29.595 503,479.557 -------------------------------------------------------------------------------- International Equity(/1/) 2001............................... $20.866 $14.381 110,400.612 -------------------------------------------------------------------------------- International Value(/1/) 2001............................... $13.994 $12.088 170,087.266 -------------------------------------------------------------------------------- Limited Term High Income(/1/) 2001............................... $ 9.609 $ 9.024 271,205.510 -------------------------------------------------------------------------------- Quality Bond(/1/) 2001............................... $17.410 $18.042 1,074,818.006 -------------------------------------------------------------------------------- Small Cap(/1/) 2001............................... $86.109 $80.652 57,268.440 -------------------------------------------------------------------------------- Small Company Stock(/1/) 2001............................... $13.456 $13.551 137,822.098 -------------------------------------------------------------------------------- Special Value(/1/) 2001............................... $17.357 $16.163 148,932.102 -------------------------------------------------------------------------------- Stock Index(/1/) 2001............................... $48.054 $40.797 553,642.667
42 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step- Up through age 85 Death Benefit* (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) continued . . . For Service Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- Socially Responsible Growth(/1/) 2001............................. $40.334 $29.367 247,846.709 -------------------------------------------------------------------------------- Core Bond(/1/) 2001............................. $10.877 $11.086 2,095,855.394 -------------------------------------------------------------------------------- Core Value(/1/) 2001............................. $11.989 $11.703 1,644,988.805 -------------------------------------------------------------------------------- Emerging Leaders(/1/) 2001............................. $11.890 $13.077 302,977.532 -------------------------------------------------------------------------------- Emerging Markets(/1/) 2001............................. $ 7.599 $ 7.291 26,072.327 -------------------------------------------------------------------------------- European Equity(/1/) 2001............................. $12.193 $ 8.850 27,256.201 -------------------------------------------------------------------------------- Founders Discovery(/1/) 2001............................. $ 7.201 $ 5.987 386,833.093 -------------------------------------------------------------------------------- Founders Growth(/1/) 2001............................. $ 9.574 $ 7.320 498,157.518 -------------------------------------------------------------------------------- Founders International Equity(/1/) 2001............................. $11.473 $ 7.867 177,003.733 -------------------------------------------------------------------------------- Founders Passport(/1/) 2001............................. $11.726 $ 8.081 85,056.211 -------------------------------------------------------------------------------- Japan(/1/) 2001............................. $ 7.418 $ 5.469 944.823 -------------------------------------------------------------------------------- MidCap Stock(/1/) 2001............................. $10.832 $10.715 837,658.891 -------------------------------------------------------------------------------- Technology Growth(/1/) 2001............................. $12.401 $ 7.274 967,986.322
(/1/)Sub-Account inception January 22, 2001 * On May 1, 2002 the death benefits available under the contract were changed to (1) Double Enhanced Death Benefit, with Total Separate Account Annual Expenses of 1.45%, and (2) Return of Premium Death Benefit, with Total Separate Account Annual Expenses of 1.30%. 43 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step-Up through age 85 Death Benefit/a/ (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) For Initial Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- Transamerica Equity(/7/)/bc/ 2001.............................. $13.736 $11.157 3,352,423.693 2000.............................. $15.422 $13.736 3,644,221.142 1999.............................. $11.35 $15.422 2,963,758.863 1998.............................. $10.00 $11.35 1,634,054.907 -------------------------------------------------------------------------------- Appreciation(/2/) 2001.............................. $38.077 $34.053 7,366,868.292 2000.............................. $38.862 $38.077 8,193,471.439 1999.............................. $35.36 $38.862 8,513,807.354 1998.............................. $27.532 $35.36 8,121,246.029 1997.............................. $21.802 $27.532 6,447,159.634 1996.............................. $17.610 $21.802 3,665,146.389 1995.............................. $13.373 $17.610 2,077,029.504 1994.............................. $13.160 $13.373 919,622.615 1993.............................. $12.500 $13.160 237,733.021 -------------------------------------------------------------------------------- Balanced(/6/) 2001.............................. $14.450 $12.949 5,964,638.892 2000.............................. $15.101 $14.450 5,776,345.909 1999.............................. $14.16 $15.101 4,426,908.448 1998.............................. $11.738 $14.16 2,280,501.753 1997.............................. $10.000 $11.738 647,855.304 -------------------------------------------------------------------------------- Disciplined Stock(/5/) 2001.............................. $19.977 $17.086 5,890,686.117 2000.............................. $22.295 $19.977 6,539,032.706 1999.............................. $19.09 $22.295 5,856,978.740 1998.............................. $15.272 $19.09 4,753,022.290 1997.............................. $11.776 $15.272 2,278,146.352 1996.............................. $10.00 $11.776 618,809.191 -------------------------------------------------------------------------------- Growth and Income(/4/) 2001.............................. $31.974 $29.686 5,926,304.581 2000.............................. $33.694 $31.974 6,432,258.706 1999.............................. $29.23 $33.694 6,548,394.692 1998.............................. $26.509 $29.23 7,270,897.396 1997.............................. $23.131 $26.509 7,480,387.355 1996.............................. $19.426 $23.131 6,332,649.215 1995.............................. $12.167 $19.426 2,565,038.589 1994.............................. $12.177 $12.167 4,300.380
44 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step-Up through age 85 Death Benefit/a/ (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) continued . . . For Initial Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- International Equity(/4/) 2001............................... $20.643 $14.416 2,253,497.876 2000............................... $25.038 $20.643 2,629,168.557 1999............................... $15.89 $25.038 2,296,712.753 1998............................... $15.422 $15.89 2,456,885.911 1997............................... $14.267 $15.422 2,176,230.247 1996............................... $12.964 $14.267 1,480,395.223 1995............................... $12.240 $12.964 530,374.642 1994............................... $12.247 $12.240 8,552.073 -------------------------------------------------------------------------------- International Value(/5/) 2001............................... $14.101 $12.067 1,164,395.489 2000............................... $14.846 $14.101 1,377,476.194 1999............................... $11.78 $14.846 1,432,408.023 1998............................... $10.982 $11.78 1,380,692.935 1997............................... $10.244 $10.982 1,047,389.002 1996............................... $10.00 $10.244 230,868.491 -------------------------------------------------------------------------------- Limited Term High Income(/6/) 2001............................... $ 9.428 $ 9.028 2,748,955.097 2000............................... $10.422 $ 9.428 3,514,966.504 1999............................... $10.73 $10.422 5,300,351.762 1998............................... $10.852 $10.73 6,458,312.119 1997............................... $10.000 $10.852 2,424,231.798 -------------------------------------------------------------------------------- Money Market(/7/)/c/ 2001............................... $ 1.316 $ 1.349 81,225,135.541 2000............................... $ 1.258 $ 1.316 59,855,370.259 1999............................... $ 1.22 $ 1.258 64,761,299.670 1998............................... $ 1.175 $ 1.22 53,939,642.196 1997............................... $ 1.132 $ 1.175 42,660,950.364 1996............................... $ 1.093 $ 1.132 38,983,053.941 1995............................... $ 1.048 $ 1.093 31,807,563.947 1994............................... $ 1.018 $ 1.048 23,559,789.795 1993............................... $ 1.021 $ 1.018 2,678,280.492 -------------------------------------------------------------------------------- Quality Bond(/1/) 2001............................... $17.199 $18.095 4,966,205.213 2000............................... $15.683 $17.199 4,333,498.116 1999............................... $15.88 $15.683 5,010,813.856 1998............................... $15.260 $15.88 5,030,446.431 1997............................... $14.142 $15.260 4,020,220.452 1996............................... $13.908 $14.142 3,072,774.847 1995............................... $11.710 $13.908 2,052,313.888 1994............................... $12.445 $11.710 931,527.691 1993............................... $12.310 $12.445 86,752.856
45 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step- Up through age 85 Death Benefit/a/ (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) continued . . . For Initial Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- Small Cap(/1/) 2001............................... $87.446 $80.956 1,755,966.852 2000............................... $78.255 $87.446 2,018,390.168 1999............................... $64.44 $78.255 2,096,729.991 1998............................... $67.668 $64.44 2,615,765.058 1997............................... $58.773 $67.668 2,954,842.907 1996............................... $51.121 $58.773 2,736,720.675 1995............................... $40.064 $51.121 2,155,879.198 1994............................... $37.702 $40.064 1,250,237.625 1993............................... $39.620 $37.702 138,557.449 -------------------------------------------------------------------------------- Small Company Stock(/5/) 2001............................... $14.003 $13.597 1,479,035.551 2000............................... $13.083 $14.003 1,666,683.284 1999............................... $11.99 $13.083 1,665,730.260 1998............................... $12.935 $11.99 2,111,028.689 1997............................... $10.772 $12.935 1,604,089.554 1996............................... $10.00 $10.772 543,949.419 -------------------------------------------------------------------------------- Special Value(/1/) 2001............................... $17.848 $16.197 1,678,906.413 2000............................... $17.122 $17.848 1,959,903.631 1999............................... $16.19 $17.122 2,347,756.875 1998............................... $14.185 $16.19 2,764,173.241 1997............................... $11.682 $14.185 2,649,561.005 1996............................... $12.292 $11.682 1,232,530.711 1995............................... $12.496 $12.292 1,288,429.555 1994............................... $12.861 $12.496 1,486,438.137 1993............................... $12.797 $12.861 167,686.797 -------------------------------------------------------------------------------- Stock Index(/1/) 2001............................... $47.264 $40.930 5,101,627.890 2000............................... $52.828 $47.264 5,610,267.635 1999............................... $44.42 $52.828 5,113,716.960 1998............................... $35.128 $44.42 4,443,711.383 1997............................... $26.791 $35.128 3,357,236.245 1996............................... $22.172 $26.791 2,030,280.057 1995............................... $16.437 $22.172 977,271.816 1994............................... $16.521 $16.437 348,937.285 1993............................... $15.310 $16.521 93,536.733
46 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step- Up through age 85 Death Benefit/a/ (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) continued . . . For Initial Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period ------------------------------------------------------------------------------- Socially Responsible Growth(/3/) 2001.............................. $38.602 $29.472 2,795,959.566 2000.............................. $43.996 $38.602 3,085,982.201 1999.............................. $34.30 $43.996 2,399,067.265 1998.............................. $26.879 $34.30 1,744,708.001 1997.............................. $21.221 $26.879 1,335,814.063 1996.............................. $17.752 $21.221 708,680.320 1995.............................. $13.377 $17.752 295,077.936 1994.............................. $13.364 $13.377 135,018.350 1993.............................. $12.490 $13.364 26,089.826 ------------------------------------------------------------------------------- Core Bond(/10/) 2001.............................. $10.762 $11.095 1,854,166.941 2000.............................. $10.00 $10.762 401,440.673 ------------------------------------------------------------------------------- Core Value(/7/) 2001.............................. $12.120 $11.703 2,768,228.725 2000.............................. $10.967 $12.120 1,671,632.569 1999.............................. $ 9.29 $10.967 618,554.557 1998.............................. $10.00 $ 9.29 95,759.521 ------------------------------------------------------------------------------- Emerging Leaders(/10/) 2001.............................. $12.209 $13.091 764,463.997 2000.............................. $10.00 $12.209 237,691.634 ------------------------------------------------------------------------------- Emerging Markets(/10/) 2001.............................. $ 7.149 $ 7.283 101,905.379 2000.............................. $10.00 $ 7.149 68,080.097 ------------------------------------------------------------------------------- European Equity(/9/) 2001.............................. $12.395 $ 8.784 396,158.872 2000.............................. $12.824 $12.395 408,844.616 1999.............................. $10.00 $12.824 71,170.963 ------------------------------------------------------------------------------- Founders Discovery(/10/) 2001.............................. $ 7.474 $ 6.005 1,976,068.628 2000.............................. $10.00 $ 7.474 1,566,915.606 ------------------------------------------------------------------------------- Founders Growth(/8/) 2001.............................. $ 9.299 $ 7.333 2,947,769.953 2000.............................. $12.632 $ 9.299 2,497,719.994 1999.............................. $10.00 $12.632 209,797.215 ------------------------------------------------------------------------------- Founders International Equity(/9/) 2001.............................. $11.317 $ 7.860 988,311.468 2000.............................. $13.894 $11.317 889,774.353 1999.............................. $10.00 $13.894 51,377.647 ------------------------------------------------------------------------------- Founders Passport(/8/) 2001.............................. $11.820 $ 8.081 1,632,394.749 2000.............................. $16.144 $11.820 1,743,018.957 1999.............................. $10.00 $16.144 230,853.270
47 Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step- Up through age 85 Death Benefit/a/ (with a cap of 200%) (Total Variable Account Annual Expenses: 1.40%) continued . . . For Initial Class Shares
Number of Accumulation Accumulation Unit Value Accumulation Units at Beginning Unit Value at Outstanding at Sub-account of Period End of Period End of Period -------------------------------------------------------------------------------- Japan(/11/) 2001............................... $ 7.692 $ 5.469 57,853.979 2000............................... $10.00 $ 7.692 42,342.493 -------------------------------------------------------------------------------- MidCap Stock(/7/) 2001............................... $11.244 $10.726 2,863,076.333 2000............................... $10.529 $11.244 2,352,335.934 1999............................... $ 9.63 $10.529 677,575.571 1998............................... $10.00 $ 9.63 467,292.833 -------------------------------------------------------------------------------- Technology Growth(/9/) 2001............................... $11.078 $ 7.305 8,574,826.108 2000............................... $15.383 $11.078 9,024,925.748 1999............................... $10.00 $15.383 2,898,342.133
(/1/)Sub-Account inception January 4, 1993. (/2/)Sub-Account inception April 5, 1993. (/3/)Sub-Account inception October 7, 1993. (/4/)Sub-Account inception December 15, 1994. (/5/)Sub-Account inception May 1, 1996. (/6/)Sub-Account inception May 1, 1997. (/7/)Sub-Account inception May 1, 1998. (/8/)Sub-Account inception May 3, 1999. (/9/)Sub-Account inception October 1, 1999. (/10/)Sub-Account inception May 1,h 2000. /a/ On May 1, 2002 the death benefits available under the contract were changed to (1) Double Enhanced Death Benefit, with Total Separate Account Annual Expenses of 1.45%, and (2) Return of Premium Death Benefit, with Total Separate Account Annual Expenses of 1.30%. /b/ As of May 1, 2002, Transamerica Variable Insurance Funds, Inc. merged with AEGON/Transamerica Series Fund, Inc. Therefore, the following fund was moved into AEGON/Transamerica Series Fund, Inc. trust and renamed as follows: Transamerica VIF Growth Portfolio is now Transamerica Equity. /c/ The Transamerica Equity Subaccount and the Money Market Subaccount are available to all contract owners. 48 APPENDIX B HISTORICAL PERFORMANCE DATA Standard Performance Data Transamerica may advertise historical yields and total returns for the subaccounts of the variable account. In addition, Transamerica may advertise the effective yield of the subaccount investing in the Money Market Portfolio (the "Money Market Subaccount"). These figures are calculated according to standardized methods prescribed by the SEC. They are based on historical earnings and are not intended to indicate future performance. Money Market Subaccount. The yield of the Money Market Subaccount for a contract refers to the annualized income generated by an investment under a contract in the subaccount 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 under a contract in the subaccount is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment. Other Subaccounts. The yield of a subaccount (other than the Money Market Subaccount) for a contract refers to the annualized income generated by an investment under a contract in the subaccount 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 12-month period and is shown as a percentage of the investment. The total return of a subaccount refers to return quotations assuming an investment under a contract has been held in the subaccount for various periods of time including a period measured from the date the subaccount commenced operations. When a subaccount has been in operation for one, five, and ten years, respectively, the total return for these periods will be provided. The total return quotations for a subaccount will represent the average annual compounded rates of return that equate an initial investment of $1,000 in the subaccount to the redemption value of that investment as of the last day of each of the periods for which total return quotations are provided. The yield and total return calculations for a subaccount do not reflect the effect of any premium taxes that may be applicable to a particular contract and they may not reflect the charges for any optional rider. To the extent that any or all of a premium tax is applicable to a particular contract, or one or more riders are elected, the yield and/or total return of that contract will be reduced. For additional information regarding yields and total returns calculated using the standard formats briefly summarized above, please refer to the SAI, a copy of which may be obtained from the administrative and service office upon request. Based on the method of calculation described in the SAI, the average annual total returns for periods from inception of the subaccounts to December 31, 2001, and for the one and five year periods ended December 31, 2001 are shown in Table 1 below. Total returns shown reflect deductions for the mortality and expense risk fee, the administrative charges, including an administration charge of $35 per annum adjusted for average account size. Performance figures may reflect the 1.45% Total Variable Account Annual Expense for the Double Enhanced Death Benefit, or the 1.30% Total Variable Account Annual Expense for the Return of Premium Death Benefit. Standard total return calculations will reflect the effect of surrender charges that may be applicable to a particular period. Table 1 figures do not reflect any charge for riders or other optional features. For periods prior to January 22, 2001, performance figures do not reflect the Rule 12b-1 fees that now apply to the Service Class Shares. Figures would be lower if Rule 12b-1 fees had been in effect. 49 TABLE 1 - A Standard Average Annual Total Returns (Assuming A Surrender Charge and No Guaranteed Minimum Income Benefit or Tax Relief Rider) -------------------------------------------------------------------------------- Double Enhanced Death Benefit (Total Variable Account Annual Expenses: 1.45%) --------------------------------------------------------------------------------
Inception 1 Year 5 Year of the Subaccount Ended Ended Subaccount Inception Subaccount 12/31/01 12/31/01 to 12/31/01 Date ------------------------------------------------------------------------------ Transamerica Equity(/1/).... (23.14%) N/A 1.97% May 1, 1998 Appreciation................ (15.25%) 8.99% 12.07% April 5, 1993 Balanced.................... (14.94%) N/A 4.86% May 1, 1997 Disciplined Stock........... (19.03%) 7.39% 9.56% May 1, 1996 Growth and Income........... (11.81%) 4.68% 13.40% December 15, 1994 International Equity........ (34.69%) (0.31%) 2.37% December 15, 1994 International Value......... (18.65%) 2.95% 3.02% May 1, 1996 Limited Term High Income.... (8.67%) N/A (2.96%) April 30, 1997 Quality Bond................ 0.52% 4.62% 5.64% January 4, 1993 Small Cap................... (12.14%) 6.21% 15.04% January 4, 1993 Small Company Stock......... (7.60%) 4.32% 5.15% May 1, 1996 Special Value............... (13.81%) 6.39% 5.24% January 4, 1993 Stock Index................. (18.05%) 8.51% 11.43% January 4, 1993 Socially Responsible Growth Fund....................... (28.29%) 6.39% 10.86% October 7, 1993 Core Bond................... (1.36%) N/A 3.52% May 1, 2000 Core Value.................. (7.81%) N/A 3.32% May 1, 1998 Emerging Leaders............ 2.74% N/A 14.66% May 1, 2000 Emerging Markets............ (2.39%) N/A (19.31%) May 1, 2000 European Equity............. (32.96%) N/A (7.12%) October 1, 1999 Founders Discovery.......... (24.27%) N/A (28.21%) May 1, 2000 Founders Growth............. (25.64%) N/A (12.46%) May 3, 1999 Founders International Equity..................... (34.85%) N/A (11.81%) October 1, 1999 Founders Passport........... (35.99%) N/A (9.18%) May 3, 1999 Japan....................... (33.26%) N/A (31.95%) May 1, 2000 MidCap Stock................ (9.08%) N/A 0.86% May 1, 1998 Technology Growth........... (38.69%) N/A (14.80%) October 1, 1999
50 TABLE 1 - B Standard Average Annual Total Returns (Assuming A Surrender Charge and No Guaranteed Minimum Income Benefit or Tax Relief Rider) -------------------------------------------------------------------------------- Return of Premium Death Benefit (Total Variable Account Annual Expenses: 1.30%) --------------------------------------------------------------------------------
Inception of 1 Year 5 Year the Subaccount Ended Ended Subaccount to Inception Subaccount 12/31/01 12/31/01 12/31/01 Date ------------------------------------------------------------------------------- Transamerica Equity(/1/).. (23.02)% N/A 1.97% May 1, 1998 Appreciation.............. (15.12%) 9.16% 12.07% April 5, 1993 Balanced.................. (14.80%) N/A 4.86% May 1, 1997 Disciplined Stock......... (18.90%) 7.55% 9.56% May 1, 1996 Growth and Income......... (11.67%) 4.85% 13.40% December 15, 1994 International Equity...... (34.59%) (0.15%) 2.37% December 15, 1994 International Value....... (18.52%) 3.11% 3.02% May 1, 1996 Limited Term High Income.. (8.52%) N/A (2.96%) April 30, 1997 Quality Bond.............. 0.68% 4.79% 5.64% January 4, 1993 Small Cap................. (12.00%) 6.37% 15.04% January 4, 1993 Small Company Stock....... (7.46%) 4.48% 5.15% May 1, 1996 Special Value............. (13.68%) 6.55% 5.24% January 4, 1993 Stock Index............... (17.92%) 8.68% 11.43% January 4, 1993 Socially Responsible Growth Fund.............. (28.17%) 6.56% 10.86% October 7, 1993 Core Bond................. (1.21%) N/A 3.51% May 1, 2000 Core Value................ (7.67%) N/A 3.32% May 1, 1998 Emerging Leaders.......... 2.90% N/A 14.65% May 1, 2000 Emerging Markets.......... (2.23%) N/A (19.32%) May 1, 2000 European Equity........... (32.86%) N/A (7.13%) October 1, 1999 Founders Discovery........ (24.15%) N/A (28.21%) May 1, 2000 Founders Growth........... (25.52%) N/A (12.46%) May 3, 1999 Founders International Equity................... (34.74%) N/A (11.82%) October 1, 1999 Founders Passport......... (35.89%) N/A (9.19%) May 3, 1999 Japan..................... (33.16%) N/A (31.95%) May 1, 2000 MidCap Stock.............. (8.94%) N/A 0.85% May 1, 1998 Technology Growth ........ (38.59%) N/A (14.80%) October 1, 1999
(/1/) As of May 1, 2002, Transamerica Variable Insurance Funds, Inc. merged with AEGON/Transamerica Series Fund, Inc. Therefore, the following fund was moved into AEGON/Transamerica Series Fund, Inc. trust and renamed as follows: Transamerica VIF Growth Portfolio is now Transamerica Equity. The performance information for periods prior to May 1, 2002 has been derived from the financial history of the predecessor portfolio. The performance for periods prior to May 1, 2002 has been derived from the financial history of the predecessor portfolio. The figures in the above tables may reflect waiver of advisory fees and reimbursement of other expenses. In the absence of such waivers, the average annual total return figures above would have been lower. (See the Fee Table.) Non-Standard Performance Data In addition to the standard data discussed above, similar performance data for other periods may also be shown. 51 Transamerica may also advertise or disclose average annual total return or other performance data in non-standard formats for a subaccount of the variable account. The non-standard performance data may assume that no surrender charge is applicable, and may also make other assumptions such as the amount invested in a subaccount, differences in time periods to be shown, or the effect of partial surrenders or annuity payments. All non-standard performance data will be advertised only if the standard performance data is also disclosed. For additional information regarding the calculation of other performance data, please refer to the SAI. The non-standard average annual total return figures shown in Table 2 are based on the assumption that the contract is not surrendered, and therefore the surrender charge is not imposed. Also, Table 2, like Table 1, does not reflect the charge for any optional rider. TABLE 2 - A Non-Standardized Average Annual Total Returns (Assuming No Surrender Charge, Guaranteed Minimum Income Benefit or Tax Relief Rider) -------------------------------------------------------------------------------- Double Enhanced Death Benefit (Total Variable Account Annual Expenses: 1.45%) --------------------------------------------------------------------------------
Inception 1 Year 5 Year of the Subaccount Ended Ended Subaccount Inception Subaccount 12/31/01 12/31/01 to 12/31/01 Date ------------------------------------------------------------------------------- Transamerica Equity(/1/)... (18.81%) N/A 3.10% May 1, 1998 Appreciation .............. (10.93%) 9.20% 12.14% April 5, 1993 Balanced................... (10.61%) N/A 5.64% May 1, 1997 Disciplined Stock.......... (14.70%) 7.63% 9.86% May 1, 1996 Growth and Income.......... (7.49%) 5.00% 13.48% December 15, 1994 International Equity ...... (30.37%) 0.11% 2.45% December 15, 1994 International Value........ (14.32%) 3.31% 3.40% May 1, 1996 Limited Term High Income... (4.34%) N/A (2.17%) April 30, 1997 Quality Bond............... 4.85% 4.94% 5.72% January 4, 1993 Small Cap ................. (7.82%) 6.48% 15.12% January 4, 1993 Small Company Stock ....... (3.28%) 4.65% 5.51% May 1, 1996 Special Value ............. (9.49%) 6.66% 5.32% January 4, 1993 Stock Index................ (13.73%) 8.72% 11.50% January 4, 1993 Socially Responsible Growth Fund...................... (23.96%) 6.66% 10.94% October 7, 1993 Core Bond.................. 2.96% N/A 6.38% May 1, 2000 Core Value................. (3.49%) N/A 4.38% May 1, 1998 Emerging Leaders........... 7.06% N/A 17.45% May 1, 2000 Emerging Markets........... 1.94% N/A (17.25%) May 1, 2000 European Equity............ (28.64%) N/A (5.82%) October 1, 1999 Founders Discovery......... (19.94%) N/A (26.47%) May 1, 2000 Founders Growth............ (21.31%) N/A (11.04%) May 3, 1999 Founders International Equity ................... (30.52%) N/A (10.10%) October 1, 1999 Founders Passport ......... (31.66%) N/A (7.68%) May 3, 1999 Japan ..................... (28.94%) N/A (30.35%) May 1, 2000 MidCap Stock .............. (4.75%) N/A 1.90% May 1, 1998 Technology Growth ......... (34.37%) N/A (13.18%) October 1, 1999
52 TABLE 2 - B Non-Standardized Average Annual Total Returns (Assuming No Surrender Charge, Guaranteed Minimum Income Benefit or Tax Relief Rider) -------------------------------------------------------------------------------- Return of Premium Death Benefit (Total Variable Account Annual Expenses: 1.30%) ------------------------------------------------------------------------------
Inception 1 Year 5 Year of the Subaccount Ended Ended Subaccount Inception Subaccount 12/31/01 12/31/01 to 12/31/01 Date ------------------------------------------------------------------------------ Transamerica Equity(/1/) ... (18.69%) N/A 3.03% May 1, 1998 Appreciation ............... (10.79%) 9.36% 12.14% April 5, 1993 Balanced.................... (10.48%) N/A 5.64% May 1, 1997 Disciplined Stock........... (14.57%) 7.79% 9.86% May 1, 1996 Growth and Income........... (7.35%) 5.16% 13.48% December 15, 1994 International Equity ....... (30.26%) 0.26% 2.45% December 15, 1994 International Value......... (14.19%) 3.47% 3.40% May 1, 1996 Limited Term High Income.... (4.20%) N/A (2.18%) April 30, 1997 Quality Bond................ 5.00% 5.10% 5.72% January 4, 1993 Small Cap .................. (7.68%) 6.64% 15.12% January 4, 1993 Small Company Stock ........ (3.13%) 4.80% 5.50% May 1, 1996 Special Value .............. (9.35%) 6.82% 5.32% January 4, 1993 Stock Index................. (13.60%) 8.88% 11.50% January 4, 1993 Socially Responsible Growth Fund....................... (23.85%) 6.82% 10.93% October 7, 1993 Core Bond................... 3.12% N/A 6.37% May 1, 2000 Core Value.................. (3.34%) N/A 4.38% May 1, 1998 Emerging Leaders............ 7.22% N/A 17.44% May 1, 2000 Emerging Markets............ 2.09% N/A (17.26%) May 1, 2000 European Equity............. (28.53%) N/A (5.28%) October 1, 1999 Founders Discovery.......... (19.82%) N/A (26.47%) May 1, 2000 Founders Growth............. (21.20%) N/A (11.05%) May 3, 1999 Founders International Eq- uity ...................... (30.42%) N/A (10.11%) October 1, 1999 Founders Passport .......... (31.56%) N/A (7.68%) May 3, 1999 Japan ...................... (28.83%) N/A (30.35%) May 1, 2000 MidCap Stock ............... (4.61%) N/A 1.90% May 1, 1998 Technology Growth .......... (34.27%) N/A (13.18%) October 1, 1999
(/1/)As of May 1, 2002, Transamerica Variable Insurance Funds, Inc. merged with AEGON/Transamerica Series Fund, Inc. Therefore, the following fund was moved into AEGON/Transamerica Series Fund, Inc. trust and renamed as follows: Transamerica VIF Growth Portfolio is now Transamerica Equity. The performance information for periods prior to May 1, 2002 has been derived from the financial history of the predecessor portfolio. The performance information for periods prior to May 1, 2002 has been derived from the financial history of the predecessor portfolio. The figures in the above tables may reflect waiver of advisory fees and reimbursement of other expenses. In the absence of such waivers, the average annual total return figures above would have been lower. (See the Fee Table.) 53 APPENDIX C CONTRACT VARIATIONS The dates shown below are the approximate first issue dates of the various versions of the contract. These dates will vary by state in many cases. This Appendix describes certain of the more significant differences in features of the various versions of the contract. There may be additional variations. Please see your actual contract and any attachments for determining your specific coverage.
Contract Form/Endorsement Approximate First Issue Date ----------------------------------------------------------------- GNC-33-194 (Contract Form) January 1993 AV969 101 145 901 (Contract Form) May 1, 2002 RGMI 16 1101 (GMIB Rider) May 1, 2002
Product Feature GNC-33-194 ------------------------------------------------------------------------------ Excess Interest Adjustment Yes ------------------------------------------------------------------------------ Guaranteed Minimum Death Benefit Greater of 5% Annually Compounding Option(s) through age 85 Death Benefit or Annual Step-Up through age 85 Death Benefit (with a cap of 200%) ------------------------------------------------------------------------------ Guaranteed Period Options (available 1, 3, 5 and seven guaranteed periods in the fixed account) available. ------------------------------------------------------------------------------ Minimum effective annual interest 3% rate applicable to the fixed account ------------------------------------------------------------------------------ Asset Rebalancing Yes ------------------------------------------------------------------------------ Death Proceeds Greatest of (1) the account value; or (2) the guaranteed minimum death benefit, plus additional purchase payments received, less any partial withdrawals and any applicable premium taxes from the date of death to the date of payment of the death proceeds. ------------------------------------------------------------------------------ Distribution Financing Charge N/A ------------------------------------------------------------------------------ Is Mortality & Expense Risk Fee No different after the annuity date? ------------------------------------------------------------------------------ Dollar Cost Averaging Fixed Account Yes Option ------------------------------------------------------------------------------ Service Charge Assessed at the end of each contract year before the annuity date and at the time of surrender; Waived if the account value exceeds $50,000 on the last business day of the contract year or at the time of surrender. This service charge is deducted pro-rate from each investment option. ------------------------------------------------------------------------------ Nursing Care and Terminal Condition Yes Withdrawal Option ------------------------------------------------------------------------------ Unemployment Waiver No ------------------------------------------------------------------------------ Guaranteed Minimum Income Benefit Yes ------------------------------------------------------------------------------ Tax Relief Rider Yes
54 THE DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R) VARIABLE ANNUITY Issued by TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY Supplement Dated May 1, 2002 to the Prospectus dated May 1, 2002 FOR NEW JERSEY ONLY For New Jersey residents, the optional guaranteed minimum income benefit is as described in this supplement and not as described in the prospectus. Guaranteed Minimum Income Benefit The optional guaranteed minimum income benefit ("GMIB") rider assures you of a minimum level of income in the future by guaranteeing you a minimum annuitization value (discussed below). You may elect to purchase this benefit, which provides a minimum amount you will have to apply to a GMIB payment option. Furthermore, if you elect the guaranteed minimum payment option, you will be guaranteed a minimum level of payments once you begin to receive them. By electing this benefit, you can participate in the gains of the underlying variable investment options you select while knowing that you are guaranteed a minimum level of income in the future, regardless of the performance of the underlying variable investment options. The GMIB will not be issued if you are 81 years old or older. You can annuitize under the GMIB (subject to the conditions described below) at the greater of the account value or the minimum annuitization value (subject to any applicable adjustment). Minimum Annuitization Value. If you add the GMIB in the first contract year, the minimum annuitization value on the rider date (i.e., the date the rider is added to the contract) is the total purchase payments paid less any prior withdrawals. If you add the GMIB after the first contract year, the minimum annuitization value on the rider date is the account value. After the rider date, the minimum annuitization value is equal to the greater of: .. the greater of the minimum annuitization value on the Rider Date or the largest account value on any rider anniversary, prior to the earlier of any owner's or annuitant's 86th birthday, adjusted for any subsequent purchase payments (less the sum of all subsequent withdrawals adjusted as described below and any premium taxes); or .. the minimum annuitization value on the rider date, plus the sum of all purchase payments received after the rider date, less withdrawals (adjusted as described below) and premium taxes, plus interest thereon, equal to the annual effective interest rate specified on page one of the rider, up to: a) the rider anniversary prior to the earlier of any owner's or annuitant's 86th birthday; or b) the date the sum of all purchase payments, (less the sum of all adjusted withdrawals and premium taxes), together with credited interest, has grown to two times the amount of all purchase payments, (less all adjusted withdrawals and premium taxes) as a result of such interest accumulation, if earlier. Please note that if you annuitize using the GMIB on any date other than the 30-day period following a rider anniversary, there may be a downward adjustment to your minimum annuitization value. However, if you annuitize within the 30-day period following any rider anniversary, no This Prospectus Supplement must be accompanied by the Prospectus for The Dreyfus/Transamerica Triple Advantage(R) Variable Annuity dated May 1, 2002 adjustment will be made. (See "Minimum Annuitization Value Adjustment" below.) Withdrawals may reduce the minimum annuitization value on a basis greater than dollar-for-dollar. (See the SAI for more information.) The minimum annuitization value may only be used to annuitize using the GMIB payment options and may not be used with any of the other annuity payment options listed in the prospectus. The GMIB payment options are: .. Life Income - An election may be made for "No Period Certain" or "10 Years Certain". In the event of the death of the annuitant prior to the end of the chosen period certain, the remaining period certain payments will be continued to the beneficiary. .. Joint and Full Survivor - An election may be made for "No Period Certain" or "10 Years Certain". Payments will be made as long as either the annuitant or joint annuitant is living. In the event of the death of both the annuitant and joint annuitant prior to the end of the chosen period certain, the remaining period certain payments will be continued to the beneficiary. Note Carefully: IF: .. You chose Life Income with No Period Certain or Joint and Full Survivor with No Period Certain; and .. The annuitant(s) dies before the due date of the second (third, fourth, etc.) annuity payment; THEN: .. We will make only one (two, three, etc.) annuity payments. Please note that if you annuitize using the GMIB before the 7th rider anniversary, the first payment will be calculated with an annuity factor age adjustment. (See "Annuity Factor Age Adjustment" below.) Minimum Annuitization Value Adjustment. If you annuitize under the GMIB on any date after a 30-day period following a rider anniversary, the minimum annuitization value will be adjusted downward if your account value (plus any purchase payments made and minus any amounts withdrawn from your account value since the last rider anniversary) is less than the account value on the last rider anniversary or Rider Date (plus any purchase payments made and minus any amounts withdrawn from your account value since the last rider anniversary or Rider Date). The adjusted minimum annuitization value will equal: .. the account value on the date you annuitize; plus .. the minimum annuitization value on the most recent rider anniversary (or the rider date for annuitizations within the first rider year); minus .. the account value on the most recent rider anniversary (or the rider date for annuitizations within the first rider year). The minimum annuitization value will not be adjusted if: .. you annuitize within 30 days following a rider anniversary; or .. your account value (plus any purchase payments made and minus any amounts withdrawn from your account value since the last rider anniversary) is more than the account value on last rider anniversary (or the rider date for annuitizations within the first rider year). Annuity Factor Age Adjustment. If you annuitize using the GMIB before the 7th rider anniversary, the first payment will be calculated with an annuity factor age adjustment resulting in lower payments than if an annuity factor age adjustment was not used. (See the SAI for information concerning the calculation of the initial payment.) The age adjustment shown in the table below should be subtracted from your current age. The age adjustment is as follows:
Number of Years Since the Rider Date Age Adjustment ------------------------------------------------------------------------------ 0-1 7 1-2 6 2-3 5 3-4 4 4-5 3 5-6 2 6-7 1 7 0
2 Please note that the minimum annuitization value is used solely to calculate the GMIB annuity payments. The GMIB does not establish or guarantee account value or guarantee performance of any investment option. Because this benefit is based on conservative actuarial factors, the level of lifetime income that it guarantees may be less than the level that would be provided by application of the account value at otherwise applicable adjusted annuity factors. Therefore, the GMIB should be regarded as a safety net. The costs of annuitizing under the GMIB include the guaranteed minimum payment fee (if the guaranteed minimum payment option is elected), and also the lower payout levels inherent in the annuity tables used for those minimum payouts (which may also include an annuity factor age adjustment). These costs should be balanced against the benefits of a minimum payout level. Benefits and fees under the GMIB rider (the rider fee and the guaranteed minimum payment fee) are guaranteed not to change after the rider is added. However, all of these benefits and fees may change if you elect to upgrade the minimum annuitization value. Minimum Annuitization Value Upgrade. You can upgrade your minimum annuitization value to the account value at any time before your 88th birthday. For your convenience, we will put the last date to upgrade on page one of the rider. If you upgrade: .. the current rider will terminate and a new one will be issued with its own specified guaranteed benefits and fees; and .. the new rider's specified benefits and fees may not be as advantageous as before. It generally will not be to your advantage to upgrade unless your account value exceeds your minimum annuitization value at that time. Conditions of Exercise of the Guaranteed Minimum Income Benefit. You can annuitize using the GMIB at any time. You cannot, however, annuitize using the GMIB after your 95th birthday. For your convenience, we will put the last date to annuitize using the GMIB on page one of the rider. Note Carefully: .. If you annuitize at any time other than within a 30-day period following a rider anniversary, there may be a negative adjustment to your minimum annuitization value. (See "Minimum Annuitization Value Adjustment.") .. If you annuitize before the 7th rider anniversary there will be an annuity factor age adjustment. (See "Annuity Factor Age Adjustment.") Guaranteed Minimum Payment Option. If you choose the guaranteed minimum payment option on the election date, annuity payments are guaranteed to never be less than the initial payment. (See the SAI for information concerning the calculation of the initial payment.) The payments will also be "stabilized" or held constant during each year. During the first year after annuitizing using the guaranteed minimum payment option, each stabilized payment will equal the initial payment. On each anniversary thereafter, the stabilized payment will increase or decrease depending on the performance of the investment options you selected (but will never be less than the initial payment), and then be held constant at that amount for that year. The stabilized payment on each anniversary will equal the greater of the initial payment or the payment supportable by the annuity units in the selected investment options. (See the SAI for additional information concerning stabilized payments.) Guaranteed Minimum Income Benefit Rider Fee. A rider fee, currently 0.45% of the minimum annuitization value on the contract anniversary, is charged annually prior to annuitization. We will also charge this fee if you take a complete withdrawal. The rider fee is deducted from each variable investment option in proportion to the amount of account value in each subaccount. Guaranteed Minimum Payment Option Fee. A guaranteed minimum payment option fee, currently equal to an effective annual rate of 1.25% of the daily net asset value in the separate account, is reflected in the amount of the variable payments you receive if you annuitize under the GMIB rider and choose the guaranteed minimum payment option. The guaranteed payment fee is included on page one of the rider. 3 Termination. The GMIB will terminate upon the earliest of the following: .. the date we receive written notice from you requesting termination of the GMIB; .. annuitization (you will still get guaranteed minimum stabilized payments if you annuitize using the minimum annuitization value under the GMIB and you select the guaranteed minimum payment option); .. upgrade of the minimum annuitization value (although we will issue a new rider to you ); .. termination of your contract; or .. 30 days after the last date to elect the benefit as shown on page 1 of the rider. 4 STATEMENT OF ADDITIONAL INFORMATION DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE(R) VARIABLE ANNUITY Issued through SEPARATE ACCOUNT VA-2L Offered by TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY This statement of additional information expands upon subjects discussed in the current prospectus for the Dreyfus/Transamerica Triple Advantage(R) Variable Annuity offered by Transamerica Occidental Life Insurance Company. You may obtain a copy of the prospectus dated May 1, 2002 by calling 1-877-717-8861, or by writing to the Annuity Service Center, 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499-0001. The prospectus sets forth information that a prospective investor should know before investing in a contract. Terms used in the current prospectus for the contract are incorporated in this Statement of Additional Information. This Statement of Additional Information (SAI) is not a prospectus and should be read only in conjunction with the prospectuses for the contract and the underlying fund portfolios. Dated: May 1, 2002 TABLE OF CONTENTS Page ---- GLOSSARY OF TERMS........................................................... 3 THE CONTRACT--GENERAL PROVISIONS............................................ 5 Owner.................................................................. 5 Entire Contract........................................................ 5 Misstatement of Age or Sex............................................. 5 Addition, Deletion or Substitution of Investments...................... 6 Excess Interest Adjustment............................................. 6 Reallocation of Variable Annuity Units After the Annuity Date.......... 10 Annuity Payment Options................................................ 10 Death Benefit.......................................................... 11 Death of Owner......................................................... 13 Assignment............................................................. 14 Evidence of Survival................................................... 14 Non-Participating...................................................... 14 Amendments............................................................. 14 Employee and Agent Purchases........................................... 14 Present Value of Future Variable Payments.............................. 14 Stabilized Payments.................................................... 15 CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 15 Tax Status of the Contract ............................................ 16 Taxation of Transamerica............................................... 19 INVESTMENT EXPERIENCE....................................................... 19 Variable Accumulation Units............................................ 19 Variable Annuity Unit Value and Annuity Payment Rates.................. 21 GUARANTEED MINIMUM INCOME BENEFIT--ADDITIONAL INFORMATION................... 23 TAX RELIEF RIDER--ADDITIONAL INFORMATION.................................... 25 HISTORICAL PERFORMANCE DATA................................................. 25 Money Market Yields.................................................... 25 Other Subaccount Yields................................................ 26 Total Returns.......................................................... 27 Other Performance Data................................................. 27 Adjusted Historical Performance Data................................... 28 PUBLISHED RATINGS........................................................... 28 STATE REGULATION OF TRANSAMERICA............................................ 28 ADMINISTRATION.............................................................. 28 RECORDS AND REPORTS......................................................... 28 DISTRIBUTION OF THE CONTRACTS............................................... 29 VOTING RIGHTS............................................................... 29 OTHER PRODUCTS.............................................................. 29 CUSTODY OF ASSETS........................................................... 30 LEGAL MATTERS............................................................... 30 INDEPENDENT AUDITORS........................................................ 30 OTHER INFORMATION........................................................... 30 FINANCIAL STATEMENTS........................................................ 30 2 GLOSSARY OF TERMS Account Value--On or before the annuity date, the account value is equal to the owner's: .. purchase payments; minus .. partial surrenders (including the net effect any applicable excess interest adjustments and/or surrender charges on such surrenders); plus .. interest credited in the fixed account; plus .. accumulated gains in the variable account; minus .. losses in the variable account; minus .. service charges, premium taxes, rider fees, and transfer fees and any other charges, if any. Adjusted Account Value--An amount equal to the account value increased or decreased by any excess interest adjustments. Administrative and Service Office--Annuity Service Center, Transamerica Occidental Life Insurance Company, 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499-0001. Annuitant--The person whose life any annuity payments involving life contingencies will continue. Annuity Date--The date upon which annuity payments are to commence. This date may be any date at least thirty days after the contract date and may not be later than the last day of the contract month starting after the annuitant attains age 85, except as expressly allowed by Transamerica. In no event will this date be later than the last day of the month following the month in which the annuitant attains age 95. Annuity Payment--An amount paid by Transamerica at regular intervals to the annuitant and/or any other payee specified by the owner. It may be on a variable or fixed basis. Beneficiary--The person who has the right to the death benefit as set forth in the contract. Business Day--A day when the New York Stock Exchange is open for business. Cash Value--The adjusted account value less any applicable surrender charge and any rider fees (imposed upon surrender). Code--The Internal Revenue Code of 1986, as amended. Contract Year--A contract year begins on the date in which the contract becomes effective and on each contract anniversary thereof. Enrollment form--A written application, order form, or any other information received electronically or otherwise upon which the contract is issued and/or is reflected on the data or specifications page. Excess Interest Adjustment--A positive or negative adjustment to amounts surrendered (both partial and full surrenders and transfers) applied to the annuity payment options from the fixed account guaranteed period options prior to the end of the guaranteed period. The adjustment reflects changes in the interest rates declared by Transamerica since the date any payment was received by (or an amount was transferred to) the guaranteed period option. The excess interest adjustment can either decrease or increase the amount to be received by the owner upon surrender (either full or partial) or commencement of annuity payments, depending upon whether there has been an increase or decrease in interest rates, respectively. Fixed Account--One or more investment choices under the contract that are part of Transamerica's general assets and which are not in the variable account. 3 Guaranteed Period Options--The various guaranteed interest rate periods of the fixed account, which Transamerica may offer, into which purchase payments may be paid or amounts may be transferred. Nonqualified Contract--A contract other than a qualified contract. Owner--The person who may exercise all rights and privileges under the contract. The owner during the lifetime of the annuitant and prior to the annuity date is the person designated as the owner or a successor owner in the information that we require to issue a contract. Purchase Payment--An amount paid to Transamerica by the owner or on the owner's behalf as consideration for the benefits provided by the contract. Qualified Contract--A contract issued in connection with retirement plans that qualify for special federal income tax treatment under the Code. Service Charge--An annual charge on each contract anniversary (and a charge at the time of surrender during any contract year) for contract maintenance and related administrative expenses. This annual charge is $35, but will not exceed 2% of the account value. Subaccount--A subdivision within the variable account, the assets of which are invested in a specified portfolio of the underlying fund portfolios. Surrender Charge--A percentage of each purchase payment in an amount from 7% to 0% depending upon the length of time from the date of each purchase payment. The surrender charge is assessed on full or partial surrenders from the contract. The surrender charge may also be referred to as a "contingent deferred sales charge." Variable Account--Separate Account VA-2L, a separate account established and registered as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"), as amended, to which purchase payments under the contracts may be allocated. Variable Accumulation Unit--An accounting unit of measure used to determine the account value in the variable account before the annuity date. Variable Annuity Payments--Payments made pursuant to an annuity payment option which fluctuate as to dollar amount or payment term in relation to the investment performance of the specified subaccounts within the variable account. Variable Annuity Unit--An accounting unit of measure used in the calculation of the amount of the second and each subsequent variable annuity payment. Valuation Period--The period of time from one determination of variable accumulation unit values and variable annuity unit values to the next subsequent determination of values. Such determination shall be made on each business day. Written Notice--Written notice, signed by the owner, that gives Transamerica the information it requires and is received at the administrative and service office. For some transactions, Transamerica may accept an electronic notice such as telephone instructions. Such electronic notice must meet the requirements Transamerica establishes for such notices. 4 In order to supplement the description in the prospectus, the following provides additional information about Transamerica and the contract, which may be of interest to a prospective purchaser. THE CONTRACT--GENERAL PROVISIONS Owner The contract shall belong to the owner upon issuance of the contract after completion of an enrollment form and delivery of the initial purchase payment. While the annuitant is living, the owner may: (1) assign the contract; (2) surrender the contract; (3) amend or modify the contract with Transamerica's consent; (4) receive annuity payments or name a payee to receive the payments; and (5) exercise, receive and enjoy every other right and benefit contained in the contract. The exercise of these rights may be subject to the consent of any assignee or irrevocable beneficiary; and of your spouse in a community or marital property state. Unless Transamerica has been notified of a community or marital property interest in the contract, it will rely on its good faith belief that no such interest exists and will assume no responsibility for inquiry. Note carefully. If the owner predeceases the annuitant and no joint owner, -------------- primary beneficiary or contingent beneficiary is alive or in existence on the date of death, the owner's estate will become the new owner. If no probate estate is opened because the owner has precluded the opening of a probate estate by means of a trust or other instrument, that trust may not exercise ownership rights to the contract. It may be necessary to open a probate estate in order to exercise ownership rights to the contract. The owner may change the ownership of the contract in a written notice. When this change takes effect, all rights of ownership in the contract will pass to the new owner. A change of ownership may have tax consequences. When there is a change of owner or successor owner, the change will not be effective until it is recorded in our records. Once recorded, it will take effect as of the date the owner signs the written notice, subject to any payment Transamerica has made or action Transamerica has taken before recording the change. Changing the owner or naming a new successor owner cancels any prior choice of successor owner, but does not change the designation of the beneficiary or the annuitant. If ownership is transferred (except to the owner's spouse) because the owner dies before the annuitant, the cash value generally must be distributed to the successor owner within five years of the owner's death, or payments must be made for a period certain or for the successor owner's lifetime so long as any period certain does not exceed that successor owner's life expectancy, if the first payment begins within one year of your death. Entire Contract The contract, any endorsements thereon, the enrollment form, or information provided in lieu thereof, constitute the entire contract between Transamerica and the owner. All statements in the enrollment form are representations and not warranties. No statement will cause the contract to be void or to be used in defense of a claim unless contained in the enrollment form or information provided in lieu thereof. Misstatement of Age or Sex If the age or sex of the annuitant or owner has been misstated, Transamerica will change the annuity benefit payable to that which the purchase payments would have purchased for the correct age or sex. The dollar amount of any underpayment made by Transamerica shall be paid in full with the next payment due such person or the beneficiary. The dollar amount of any overpayment made by Transamerica due to any misstatement shall be deducted from payments subsequently accruing to such person or beneficiary. Any underpayment or overpayment will include interest at 5% per year, from the date of the wrong payment to the date of the adjustment. The age of the annuitant or owner may be established at any time by the submission of proof satisfactory to Transamerica. 5 Addition, Deletion, or Substitution of Investments Transamerica cannot and does not guarantee that any of the subaccounts will always be available for purchase payments, allocations, or transfers. Transamerica retains the right, subject to any applicable law, to make certain changes in the variable account and its investments. Transamerica reserves the right to eliminate the shares of any portfolio held by a subaccount2 and to substitute shares of another underlying fund portfolios, or of another registered open-end management investment company for the shares of any portfolio, if the shares of the portfolio are no longer available for investment or if, in Transamerica's judgment, investment in any portfolio would be inappropriate in view of the purposes of the variable account. To the extent required by the 1940 Act, as amended, substitutions of shares attributable to your interest in a subaccount will not be made without prior notice to you and the prior approval of the Securities and Exchange Commission ("SEC"). Nothing contained herein shall prevent the variable account from purchasing other securities for other series or classes of variable annuity contracts, or from effecting an exchange between series or classes of variable annuity contracts on the basis of your requests. New subaccounts may be established when, in the sole discretion of Transamerica, marketing, tax, investment or other conditions warrant. Any new subaccounts may be made available to existing owners on a basis to be determined by Transamerica. Each additional subaccount will purchase shares in a mutual fund portfolio, or other investment vehicle. Transamerica may also eliminate one or more subaccounts if, in its sole discretion, marketing, tax, investment or other conditions warrant such change. In the event any subaccount is eliminated, Transamerica will notify you and request a reallocation of the amounts invested in the eliminated subaccount. If no such reallocation is provided by you, Transamerica will reinvest the amounts in the subaccount that invests in the Money Market Portfolio (or in a similar portfolio of money market instruments), in another subaccount, or in the fixed account, if appropriate. In the event of any such substitution or change, Transamerica may, by appropriate endorsement, make such changes in the contracts as may be necessary or appropriate to reflect such substitution or change. Furthermore, if deemed to be in the best interests of persons having voting rights under the contracts, the separate account may be (i) operated as a management company under the 1940 Act or any other form permitted by law, (ii) deregistered under the 1940 Act in the event such registration is no longer required or (iii) combined with one or more other separate accounts. To the extent permitted by applicable law, Transamerica also may (1) transfer the assets of the separate account associated with the contracts to another account or accounts, (2) restrict or eliminate any voting rights of owners or other persons who have voting rights as to the separate account, (3) create new separate accounts, (4) add new subaccounts to or remove existing subaccounts from the separate account, or combine subaccounts, or (5) add new underlying fund portfolios, or subatitute a new fund for an existing fund. Excess Interest Adjustment Money that you surrender, transfer out of, or apply to an annuity payment option, from a guaranteed period option of the fixed account before the end of its guaranteed period (the number of years you specified the money would remain in the guaranteed period option) may be subject to an excess interest adjustment. At the time you request a surrender, if interest rates set by Transamerica have risen since the date of the initial guarantee, the excess interest adjustment will result in a lower cash value. However, if interest rates have fallen since the date of the initial guarantee, the excess interest adjustment will result in a higher cash value. Excess interest adjustments will not reduce the adjusted account value for a guaranteed period option below the purchase payments and transfers to that guaranteed period option, less any prior partial surrenders and transfers from the guaranteed period option, plus interest at the contract's minimum guaranteed effective annual interest rate (currently 2% per year). Also, upon full surrender the cash value attributable to the fixed account will not be less than 90% of your fixed account purchase payments and transfers to the fixed account accumulated at 3% per year less surrenders and transfers. This is referred to as the excess interest adjustment floor. The formula that will be used to determine the excess interest adjustment is: S* (G-C)* (M/12) 6 S = Gross amount being surrendered that is subject to the excess interest adjustment G = Guaranteed interest rate in effect for the contract C = Current guaranteed interest rate then being offered on new purchase payments for the next longer option period than "M". If this contract form or such an option period is no longer offered, "C" will be the U.S. Treasury rate for the next longer maturity (in whole years) than "M" on the 25th day of the previous calendar month, plus up to 2%. M = Number of months remaining in the current option period, rounded up to the next higher whole number of months. * = multiplication /\ = exponentiation
Example 1 (Full Surrender, rates increase by 3%): --------------------------------------------------------------------------------------------------------------------------- Single purchase payment: $50,000.00 --------------------------------------------------------------------------------------------------------------------------- Guarantee period: 5 Years --------------------------------------------------------------------------------------------------------------------------- Guarantee rate: 5.50% per annum --------------------------------------------------------------------------------------------------------------------------- Surrender: Middle of annuity year 2 --------------------------------------------------------------------------------------------------------------------------- Policy value at middle of annuity year 2 = 50,000.00 * (1.055) /\ 1.5 = 54,181.21 --------------------------------------------------------------------------------------------------------------------------- Cumulative Earnings = 54,181.21 - 50,000.00 = 4,181.21 --------------------------------------------------------------------------------------------------------------------------- 10% of Purchase Payments = 50,000.00 * .10 = 5,000.00 --------------------------------------------------------------------------------------------------------------------------- Penalty free amount at middle of annuity year 2 = 5,000.00 --------------------------------------------------------------------------------------------------------------------------- Amount free of excess interest adjustment = 4,181.21 --------------------------------------------------------------------------------------------------------------------------- Amount subject to excess interest adjustment = 54,181.21 - 4,181.21 = 50,000.00 --------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment floor = 50,000.00 * (1.02) /\ 1.5 = 51,507.48 --------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment --------------------------------------------------------------------------------------------------------------------------- G = .055 --------------------------------------------------------------------------------------------------------------------------- C = .085 --------------------------------------------------------------------------------------------------------------------------- M = 42 --------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment = S* (G-C)* (M/12) --------------------------------------------------------------------------------------------------------------------------- = 50,000.00 * (.055-.085) * (42/12) --------------------------------------------------------------------------------------------------------------------------- = -5,250.00, but excess interest adjustment cannot cause the adjusted account value to fall below the excess interest adjustment floor, so the adjustment is limited to 51,507.48 - 54,181.21 = -2,673.73 --------------------------------------------------------------------------------------------------------------------------- Adjusted account value = account value + excess interest adjustment = 54,181.21 + (-2,673.73) = 51,507.48 --------------------------------------------------------------------------------------------------------------------------- Portion of penalty-free amount which is deducted from = cumulative earnings cumulative earnings = 4,181.21 --------------------------------------------------------------------------------------------------------------------------- Portion of penalty-free amount which is deducted from = 5,000 - 4,181.21 purchase payments = 818.79 --------------------------------------------------------------------------------------------------------------------------- Surrender charges = (50,000.00 - 818.79)* .07 = 3,442.68 --------------------------------------------------------------------------------------------------------------------------- Net surrender value at middle of contract year 2 = 51,507.48 - 3,442.68 = 48,064.80 --------------------------------------------------------------------------------------------------------------------------- Net surrender value minimum = 90% x 50,000 x 1.03 /\ (l.5) = 47,040.11 --------------------------------------------------------------------------------------------------------------------------- The net surrender value of $48,064.80 is greater than the minimum of $47,040.11 ---------------------------------------------------------------------------------------------------------------------------
7 Example 2 (Full Surrender, rates decrease by 1%):
------------------------------------------------------------------------------------------------------------------------- Single purchase payment: $50,000.00 ------------------------------------------------------------------------------------------------------------------------- Guarantee period: 5 Years ------------------------------------------------------------------------------------------------------------------------- Guarantee rate: 5.50% per annum ------------------------------------------------------------------------------------------------------------------------- Surrender: Middle of contract year 2 ------------------------------------------------------------------------------------------------------------------------- Policy value at middle of contract year 2 = 50,000.00 * (1.055) /\ 1.5 = 54,181.21 ------------------------------------------------------------------------------------------------------------------------- Cumulative Earnings = 54,181.21 - 50,000.00 = 4,181.21 ------------------------------------------------------------------------------------------------------------------------- 10% of Purchase Payment = 50,000.00 * .10 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------- Penalty free amount at middle of contract year 2 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------- Amount free of excess interest adjustment = 4,181.21 ------------------------------------------------------------------------------------------------------------------------- Amount subject to excess interest adjustment = 54,181.21 - 4,181.21 = 50,000.00 ------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment floor = 50,000.00 * (1.02) /\ 1.5 = 51,507.48 ------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment ------------------------------------------------------------------------------------------------------------------------- G = .055 ------------------------------------------------------------------------------------------------------------------------- C = .045 ------------------------------------------------------------------------------------------------------------------------- M = 42 ------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment = S* (G-C)* (M/12) ------------------------------------------------------------------------------------------------------------------------- = 50,000.00 * (.055-.045) * (42/12) = 1,750.00 ------------------------------------------------------------------------------------------------------------------------- Adjusted account value = 54,181.21 + 1,750.00 = 55,931.21 ------------------------------------------------------------------------------------------------------------------------- Portion of penalty-free amount which is deducted from = cumulative earnings cumulative earnings = 4,181.21 ------------------------------------------------------------------------------------------------------------------------- Portion of penalty-free amount which is deducted from = 5,000.00 - 4,181.21 purchase payments = 818.79 ------------------------------------------------------------------------------------------------------------------------- Surrender charges = (50,000.00 - 818.79) * .07 = 3,442.68 ------------------------------------------------------------------------------------------------------------------------- Net surrender value at middle of contract year 2 = 55,931.21 - 3,442.68 = 52,488.53 ------------------------------------------------------------------------------------------------------------------------- Net surrender value minimum = 90% x 50,000 x 1.03 /\ (l.5) = 47,040.11 ------------------------------------------------------------------------------------------------------------------------- The net surrender value of 52,448.53 is greater than the minimum of 47,040.11 -------------------------------------------------------------------------------------------------------------------------
8 On a partial surrender, Transamerica will pay the owner the full amount of surrender requested (as long as the account value is sufficient). Amounts surrendered will reduce the account value by an amount equal to: R - E + SC R = the requested partial surrender; E = the excess interest adjustment; and SC = the surrender charges on (EPW - E); where EPW = the excess partial surrender amount. Example 3 (Partial Surrender, rates increase by 1%):
------------------------------------------------------------------------------------------------------------------------------ Single purchase payment: $50,000.00 ------------------------------------------------------------------------------------------------------------------------------ Guarantee period: 5 Years ------------------------------------------------------------------------------------------------------------------------------ Guarantee rate: 5.50% per annum ------------------------------------------------------------------------------------------------------------------------------ Partial surrender: $20,000 (requested withdrawal amount after penalties); middle of contract year 2 ------------------------------------------------------------------------------------------------------------------------------ Policy value at middle of contract year 2 = 50,000.00 * (1.055) /\ 1.5 = 54,181.21 ------------------------------------------------------------------------------------------------------------------------------ Cumulative Earnings = 54,181.21 - 50,000.00 = 4,181.21 ------------------------------------------------------------------------------------------------------------------------------ 10% of Purchase Payment = 50,000.00 * .10 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------------ Penalty free amount at middle of contract year 2 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------------ Amount free of excess interest adjustment = 4,181.21 ------------------------------------------------------------------------------------------------------------------------------ Excess interest adjustment/surrender charge ------------------------------------------------------------------------------------------------------------------------------ S = 20,000 - 4,181.21 = 15,818.79 ------------------------------------------------------------------------------------------------------------------------------ G = .055 ------------------------------------------------------------------------------------------------------------------------------ C = .065 ------------------------------------------------------------------------------------------------------------------------------ M = 42 ------------------------------------------------------------------------------------------------------------------------------ E = 15,818.79 * (.055 - .065) * (42/12) = -553.66 ------------------------------------------------------------------------------------------------------------------------------ EPW = 20,000.00 - 5,000.00 = 15,000.00 ------------------------------------------------------------------------------------------------------------------------------ To receive the full $20,000 partial surrender amount, we must "gross-up" the EPW amount to account for the surrender charges to be deducted. This is done by dividing the EPW by (1 - surrender charge), New EPW - 15,000/(1 - .07) = 16,129.03 ------------------------------------------------------------------------------------------------------------------------------ SC = .07 * (16,129.03 - (-553.66) = 1,167.79 ------------------------------------------------------------------------------------------------------------------------------ Remaining account value at middle of contract year 2 = 54,181.21 - (R - E + surrender charge) ------------------------------------------------------------------------------------------------------------------------------ = 54,181.21 - (20,000.00 - (-553.66) + 1,167.79) = 32,459.76 ------------------------------------------------------------------------------------------------------------------------------
9 Example 4 (Partial Surrender, rates decrease by 1%):
------------------------------------------------------------------------------------------------------------------------------- Single purchase payment: $50,000.00 ------------------------------------------------------------------------------------------------------------------------------- Guarantee period: 5 Years ------------------------------------------------------------------------------------------------------------------------------- Guarantee rate: 5.50% per annum ------------------------------------------------------------------------------------------------------------------------------- Partial surrender: $20,000; middle of contract year 2 ------------------------------------------------------------------------------------------------------------------------------- Policy value at middle of contract year 2 = 50,000.00 * (1.055) /\ 1.5 = 54,181.21 ------------------------------------------------------------------------------------------------------------------------------- Cumulative Earnings = 54,181.21 - 50,000.00 = 4,181.21 ------------------------------------------------------------------------------------------------------------------------------- 10% of Purchase Payment = 50,000.00 * .10 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------------- Penalty free amount at middle of contract year 2 = 5,000.00 ------------------------------------------------------------------------------------------------------------------------------- Amount free of excess interest adjustment = 4,181.21 ------------------------------------------------------------------------------------------------------------------------------- Excess interest adjustment/surrender charge ------------------------------------------------------------------------------------------------------------------------------- S = 20,000 - 4,181.21 = 15,818.79 ------------------------------------------------------------------------------------------------------------------------------- G = .055 ------------------------------------------------------------------------------------------------------------------------------- C = .045 ------------------------------------------------------------------------------------------------------------------------------- M = 42 ------------------------------------------------------------------------------------------------------------------------------- E = 15,818.79 * (.055 - .045)* (42/12) = 553.66 ------------------------------------------------------------------------------------------------------------------------------- EPW = 20,000.00 - 5,000.00 = 15,000.00 ------------------------------------------------------------------------------------------------------------------------------- To receive the full $20,000 partial surrender amount, we must "gross-up" the EPW amount to account for the surrender charges to be deducted. This is done by dividing the EPW by (1 - surrender charge). New EPW = 15,000/(1 - .07) = 16,129.03 ------------------------------------------------------------------------------------------------------------------------------- SC = .07 * (16,129.03 - 553.66) = 1,090.28 ------------------------------------------------------------------------------------------------------------------------------- Remaining account value at middle of contract year 2 = 54,181.21 - (R - E + surrender charge) ------------------------------------------------------------------------------------------------------------------------------- = 54,181.21 - (20,000.00 - 553.66 + 1,090.28) = 33,644.59 -------------------------------------------------------------------------------------------------------------------------------
Reallocation of Variable Annuity Units After the Annuity Date After the annuity date, you may reallocate the value of a designated number of variable annuity units of a subaccount then credited to a contract into an equal value of variable annuity units of one or more other subaccounts or the fixed account. The reallocation shall be based on the relative value of the variable annuity units of the account(s) or subaccount(s) at the end of the business day on the next payment date. The minimum amount which may be reallocated is the lesser of (1) $10 of monthly income or (2) the entire monthly income of the variable annuity units in the account or subaccount from which the transfer is being made. If the monthly income of the variable annuity units remaining in an account or subaccount after a reallocation is less than $10, Transamerica reserves the right to include the value of those variable annuity units as part of the transfer. The request must be in writing to Transamerica's administrative and service office. There is no charge assessed in connection with such reallocation. A reallocation of variable annuity units may be made up to four times in any given contract year. After the annuity date, no transfers may be made from the fixed account to the variable account. Annuity Payment Options Note: Portions of the following discussion do not apply to annuity payments under the Guaranteed Minimum Income Benefit or Initial Payment Guarantee. See the "Stabilized Payments" section of this SAI. During the lifetime of the annuitant and prior to the annuity date, the owner may choose an annuity payment option or change the election, but written notice of any election or change of election must be received by Transamerica at its administrative and service office at least thirty (30) days prior to the annuity date. If no election is made prior to the annuity date, annuity payments will be made under (i) Payment Option 3, life income with level payments for 10 years certain, using the existing adjusted account value of the fixed account, or (ii) under Payment Option 3, life 10 income with variable payments for 10 years certain using the existing account value of the variable account, or (iii) in a combination of (i) and (ii). The person who elects an annuity payment option can also name one or more successor payees to receive any unpaid amount Transamerica has at the death of a payee. Naming these payees cancels any prior choice of a successor payee. A payee who did not elect the annuity payment option does not have the right to advance or assign payments, take the payments in one sum, or make any other change. However, the payee may be given the right to do one or more of these things if the person who elects the option tells Transamerica in writing and Transamerica agrees. Variable Payment Options. The dollar amount of the first variable annuity ------------------------ payment will be determined in accordance with the annuity payment rates set forth in the applicable table contained in the contract. For annuity payments (other than payments under the Guaranteed Minimum Income Benefit) the tables are based on a 5% effective annual Assumed Investment Return and the "2000 Table", using an assumed annuity date of 2005 (static projection to this point) with dynamic projection using scale G from that point (100% of G for male, 50% of G for females). The dollar amount of additional variable annuity payments will vary based on the investment performance of the subaccount(s) of the variable account selected by the annuitant or beneficiary. Determination of the First Variable Payment. The amount of the first variable ------------------------------------------- payment depends upon the sex (if consideration of sex is allowed under state law) and adjusted age of the annuitant. For regular annuity payments, the adjusted age is the annuitant's actual age nearest birthday, on the annuity date, adjusted as follows: Annuity Commencement Date Adjusted Age ------------------------- ------------ Before 2010 Actual Age 2010-2019 Actual Age minus 1 2020-2026 Actual Age minus 2 2027-2033 Actual Age minus 3 2034-2040 Actual Age minus 4 After 2040 As determined by Transamerica This adjustment assumes an increase in life expectancy, and therefore it results in lower payments than without such an adjustment. Determination of Additional Variable Payments. All variable annuity payments --------------------------------------------- other than the first are calculated using variable annuity units which are credited to the contract. The number of variable annuity units to be credited in respect of a particular subaccount is determined by dividing that portion of the first variable annuity payment attributable to that subaccount by the variable annuity unit value of that subaccount on the annuity date. The number of variable annuity units of each particular subaccount credited to the contract then remains fixed, assuming no transfers to or from that subaccount occur. The dollar value of variable annuity units in the chosen subaccount will increase or decrease reflecting the investment experience of the chosen subaccount. The dollar amount of each variable annuity payment after the first may increase, decrease or remain constant, and is equal to the sum of the amounts determined by multiplying the number of variable annuity units of each particular subaccount credited to the contract by the variable annuity unit value for the particular subaccount on the date the payment is made. Death Benefit Adjusted Partial Surrender. The amount of your guaranteed minimum death benefit -------------------------- is reduced due to a partial surrender called the adjusted partial surrender. The reduction amount depends on the relationship between your guaranteed minimum death benefit and account value. The adjusted partial surrender is equal to (1) multiplied by (2), where: (1) is the amount of the gross partial surrender; 11 (2) is the adjustment factor = current death benefit prior to the surrender divided by the account value prior to the surrender. The following examples describe the effect of a surrender on the guaranteed minimum death benefit and account value.
------------------------------------------------------------------------------------------------------------------------ Example 1 (Assumed Facts for Example) ------------------------------------------------------------------------------------------------------------------------ $75,000 current guaranteed minimum death benefit before surrender ------------------------------------------------------------------------------------------------------------------------ $50,000 current account value before surrender ------------------------------------------------------------------------------------------------------------------------ $75,000 current death benefit (larger of account value, cash value and guaranteed minimum death benefit) ------------------------------------------------------------------------------------------------------------------------ 6% current surrender charge percentage ------------------------------------------------------------------------------------------------------------------------ $15,000 Requested surrender ------------------------------------------------------------------------------------------------------------------------ $ 5,000 Surrender charge-free amount (assumes penalty free surrender is available) ------------------------------------------------------------------------------------------------------------------------ $10,000 excess partial surrender (amount subject to surrender charge) ------------------------------------------------------------------------------------------------------------------------ $ 100 excess interest adjustment (assumes interest rates have decreased since initial guarantee) ------------------------------------------------------------------------------------------------------------------------ $ 594 Surrender charge on (excess partial surrender less excess interest adjustment) = 0.06* (10,000 - 100) ------------------------------------------------------------------------------------------------------------------------ $10,494 Reduction in account value due to excess partial surrender = 10,000 - 100 + 594 ------------------------------------------------------------------------------------------------------------------------ $15,494 Total Gross Partial Surrender = 5,000 + 10,494 ------------------------------------------------------------------------------------------------------------------------ $23,241 adjusted partial surrender = 15,494 * (75,000/50,000) ------------------------------------------------------------------------------------------------------------------------ $51,759 New guaranteed minimum death benefit (after surrender) = 75,000 - 23,241 ------------------------------------------------------------------------------------------------------------------------ $34,506 New account value (after surrender) = 50,000 - 15,494 ------------------------------------------------------------------------------------------------------------------------
Summary: ------- Reduction in guaranteed minimum death benefit = $23,241 Reduction in account value = $15,494 Note, guaranteed minimum death benefit is reduced more than the account value since the guaranteed minimum death benefit was greater than the account value just prior to the surrender.
------------------------------------------------------------------------------------------------------------------------ Example 2 (Assumed Facts for Example) ------------------------------------------------------------------------------------------------------------------------ $50,000 current guaranteed minimum death benefit before surrender ------------------------------------------------------------------------------------------------------------------------ $75,000 current account value before surrender ------------------------------------------------------------------------------------------------------------------------ $75,000 current death benefit (larger of account value, cash value and guaranteed minimum death benefit) ------------------------------------------------------------------------------------------------------------------------ 6% current surrender charge percentage ------------------------------------------------------------------------------------------------------------------------ $15,000 requested surrender ------------------------------------------------------------------------------------------------------------------------ $ 7,500 surrender charge-free amount (assumes penalty free surrender is available) ------------------------------------------------------------------------------------------------------------------------ $ 7,500 excess partial surrender (amount subject to surrender charge) ------------------------------------------------------------------------------------------------------------------------ $ -100 excess interest adjustment (assumes interest rates have increased since initial guarantee) ------------------------------------------------------------------------------------------------------------------------ $ 456 surrender charge on (excess partial surrender less excess interest adjustment) = 0.06*[(7500 - (- 100)] ------------------------------------------------------------------------------------------------------------------------ $ 8,056 reduction in account value due to excess partial surrender = 7500 - (- 100) + 456 = 7500 + 100 + 456 ------------------------------------------------------------------------------------------------------------------------ $15,556 Total Gross Partial Surrender = 7,500 + 8,056 ------------------------------------------------------------------------------------------------------------------------ $15,556 adjusted partial surrender = 15,556 * (75,000/75,000) ------------------------------------------------------------------------------------------------------------------------ $34,444 New guaranteed minimum death benefit (after surrender) = 50,000 - 15,556 ------------------------------------------------------------------------------------------------------------------------ $59,444 New account value (after surrender) = 75,000 - 15,556 ------------------------------------------------------------------------------------------------------------------------
12 Summary: ------- Reduction in guaranteed minimum death benefit = $15,556 Reduction in account value = $15,556 Note, the guaranteed minimum death benefit and account value are reduced by the same amount since the account value was higher than the guaranteed minimum death benefit just prior to the surrender. Due proof of death of the annuitant is proof that the annuitant died prior to the commencement of annuity payments. A certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death, a written statement by the attending physician, or any other proof satisfactory to Transamerica will constitute due proof of death. Upon receipt of this proof and an election of a method of settlement and return of the contract, the death benefit generally will be paid within seven days, or as soon thereafter as Transamerica has sufficient information about the beneficiary to make the payment. The beneficiary may receive the amount payable in a lump sum cash benefit, or, subject to any limitation under any state or federal law, rule, or regulation, under one of the annuity payment options described above, unless a settlement agreement is effective at the death of the owner preventing such election. Distribution Requirements. If the annuitant dies prior to the annuity date, the ------------------------- death benefit must (1) be distributed within five years of the date of the deceased's death, or (2) payments under an annuity payment option must begin no later than one year after the deceased owner's death and must be made for the beneficiary's lifetime or for a period certain (so long as any period certain does not exceed the beneficiary's life expectancy). Death proceeds, which are not paid to or for the benefit of a natural person, must be distributed within five years of the date of the deceased's death. If the sole beneficiary is the deceased's surviving spouse, however, such spouse may elect to continue the contract as the new annuitant and owner instead of receiving the death benefit. If an owner is not an annuitant, and dies prior to the annuity date, the new owner may surrender the contract at any time for the amount of the adjusted account value. If the new owner is not the deceased owner's spouse, however, the adjusted account value must be distributed: (1) within five years after the date of the deceased owner's death, or (2) payments under an annuity payment option must begin no later than one year after the deceased owner's death and must be made for the new owner's lifetime or for a period certain (so long as any period certain does not exceed the new owner's life expectancy). If the sole new owner is the deceased owner's surviving spouse, such spouse may elect to continue the contract as the new owner instead of receiving the death benefit. Beneficiary. The beneficiary designation in the enrollment form will remain in ----------- effect until changed. The owner may change the designated beneficiary by sending written notice to Transamerica. The beneficiary's consent to such change is not required unless the beneficiary was irrevocably designated or law requires consent. (If an irrevocable beneficiary dies, the owner may then designate a new beneficiary.) The change will take effect as of the date the owner signs the written notice, whether or not the owner is living when the notice is received by Transamerica. Transamerica will not be liable for any payment made before the written notice is received. If more than one beneficiary is designated, and the owner fails to specify their interests, they will share equally. If upon the death of the annuitant there is a surviving owner(s), the surviving owner(s) automatically takes the place of any beneficiary designations. Death of Owner Federal tax law requires that if any owner (including any joint owner or any successor owner who has become a current owner) dies before the annuity date, then the entire value of the contract must generally be distributed within five years of the date of death of such owner. Certain rules apply where (1) the spouse of the deceased owner is the sole beneficiary, (2) the owner is not a natural person and the primary annuitant dies or is changed, or (3) any owner dies after the annuity date. See "Certain Federal Income Tax Consequences" for more information about these rules. Other rules may apply to qualified contracts. 13 Assignment During the lifetime of the annuitant you may assign any rights or benefits provided by the contract if your contract is a nonqualified contract. An assignment will not be binding on Transamerica until a copy has been filed at its administrative and service office. Your rights and benefits and those of the beneficiary are subject to the rights of the assignee. Transamerica assumes no responsibility for the validity or effect of any assignment. Any claim made under an assignment shall be subject to proof of interest and the extent of the assignment. An assignment may have tax consequences. Unless you so direct by filing written notice with Transamerica, no beneficiary may assign any payments under the contract before they are due. To the extent permitted by law, no payments will be subject to the claims of any beneficiary's creditors. Ownership under qualified contracts is restricted to comply with the Code. Evidence of Survival Transamerica reserves the right to require satisfactory evidence that a person is alive if a payment is based on that person being alive. No payment will be made until Transamerica receives such evidence. Non-Participating The contract will not share in Transamerica's surplus earnings; no dividends will be paid. Amendments No change in the contract is valid unless made in writing by Transamerica and approved by one of Transamerica's officers. No registered representative has authority to change or waive any provision of the contract. Transamerica reserves the right to amend the contracts to meet the requirements of the Code, regulations or published rulings. You can refuse such a change by giving written notice, but a refusal may result in adverse tax consequences. Employee and Agent Purchases The contract may be acquired by an employee or registered representative of any broker/dealer authorized to sell the contract or their spouse or minor children, or by an officer, director, trustee or bona-fide full-time employee of Transamerica or its affiliated companies or their spouse or minor children. In such a case, Transamerica may credit an amount equal to a percentage of each purchase payment to the contract due to lower acquisition costs Transamerica experiences on those purchases. The credit will be reported to the Internal Revenue Service as taxable income to the employee or registered representative. Transamerica may offer certain employer sponsored savings plans, in its discretion reduced fees and charges including, but not limited to, the annual service charge, the surrender charges, the mortality and expense risk fee and the administrative charge for certain sales under circumstances which may result in savings of certain costs and expenses. In addition, there may be other circumstances of which Transamerica is not presently aware which could result in reduced sales or distribution expenses. Credits to the contract or reductions in these fees and charges will not be unfairly discriminatory against any owner. Present Value of Future Variable Payments The present value of future variable payments is calculated by taking (a) the supportable payment on the business day we receive the surrender request, times (b) the number of payments remaining, discounted using a rate equal to the AIR. 14 Stabilized Payments If you have selected a payout feature that provides for stabilized payments, please note that the stabilized payments remain constant throughout each year and are adjusted on your contract anniversary. Without stabilized payments, each payment throughout the year would fluctuate based on the performance of your selected subaccounts. To reflect the difference in these payments we adjust (both increase and decrease as appropriate) the number of variable annuity units. The units are adjusted when we calculate the supportable payment. Supportable payments are used in the calculation of surrender values, death benefits and transfers. On your contract anniversary we set the new stabilized payment equal to the current supportable payment. In the case of an increase in the number of variable annuity units, your participation in the future investment performance will be increased since more variable annuity units are credited to you. Conversely, in the case of a reduction of the number of variable annuity units, your participation in the future investment performance will be decreased since fewer variable annuity units are credited to you. The following table demonstrates, on a purely hypothetical basis, the changes in the number of variable annuity units. The changes in the variable annuity unit values reflect the investment performance of the applicable subaccounts as well as the separate account charge.
---------------------------------------------------------------------------------------------------------------------- Hypothetical Changes in Variable Annuity Units with Stabilized Payments* ---------------------------------------------------------------------------------------------------------------------- AIR 5.00% ---------------------------------------------------------------------------------------------------------------------- Life & 10 Year Certain ---------------------------------------------------------------------------------------------------------------------- Male aged 65 ---------------------------------------------------------------------------------------------------------------------- First Variable Payment $500 ----------------------------------------------------------------------------------------------------------------------
Monthly Adjustments Cumulative Beginning Annuity Payment Monthly in Adjusted Annuity Unit Without Stabilized Annuity Annuity Units Values Stabilization Payment Units Units ---------------------------------------------------------------------------------------------------------------------- At Issue: January 1 400.0000 1.250000 $500.00 $500.00 0.0000 400.0000 ---------------------------------------------------------------------------------------------------------------------- February 1 400.0000 1.252005 $500.80 $500.00 0.0041 400.0041 ---------------------------------------------------------------------------------------------------------------------- March 1 400.0000 1.252915 $501.17 $500.00 0.0059 400.0100 ---------------------------------------------------------------------------------------------------------------------- April 1 400.0000 1.245595 $498.24 $500.00 (0.0089) 400.0011 ---------------------------------------------------------------------------------------------------------------------- May 1 400.0000 1.244616 $497.85 $500.00 (0.0108) 399.9903 ---------------------------------------------------------------------------------------------------------------------- June 1 400.0000 1.239469 $495.79 $500.00 (0.0212) 399.9691 ---------------------------------------------------------------------------------------------------------------------- July 1 400.0000 1.244217 $497.69 $500.00 (0.0115) 399.9576 ---------------------------------------------------------------------------------------------------------------------- August 1 400.0000 1.237483 $494.99 $500.00 (0.0249) 399.9327 ---------------------------------------------------------------------------------------------------------------------- September 1 400.0000 1.242382 $496.95 $500.00 (0.0150) 399.9177 ---------------------------------------------------------------------------------------------------------------------- October 1 400.0000 1.242382 $496.95 $500.00 (0.0149) 399.9027 ---------------------------------------------------------------------------------------------------------------------- November 1 400.0000 1.249210 $499.68 $500.00 (0.0016) 399.9012 ---------------------------------------------------------------------------------------------------------------------- December 1 400.0000 1.252106 $500.84 $500.00 0.0040 399.9052 ---------------------------------------------------------------------------------------------------------------------- January 1 399.9052 1.255106 $501.92 $501.92 0.0000 399.9052 ----------------------------------------------------------------------------------------------------------------------
* Expenses included in the calculations are 1.10% mortality and expense risk fee, 0.15% administrative expenses, 0.00% rider charge, and 1.00% portfolio expenses (1.00% is a hypothetical figure). If higher expenses were charged, the numbers would be lower. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following summary does not constitute tax advice. It is a general discussion of certain of the expected federal income tax consequences of investment in and distributions with respect to a contract, based on the 15 Code, as amended, proposed and final Treasury Regulations thereunder, judicial authority, and current administrative rulings and practice. This summary discusses only certain federal income tax consequences to "United States Persons," and does not discuss state, local, or foreign tax consequences. United States Persons means citizens or residents of the United States, domestic corporations, domestic partnerships and trusts or estates that are subject to United States federal income tax regardless of the source of their income. Tax Status of the Contract The following discussion is based on the assumption that the contract qualifies as an annuity contract for federal income tax purposes. Diversification Requirements. Section 817(h) of the Code provides that in order ---------------------------- for a variable contract which is based on a segregated asset account to qualify as an annuity contract under the Code, the investments made by such account must be "adequately diversified" in accordance with Treasury regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg. (S)1.817-5) apply a diversification requirement to each of the subaccounts. The variable account, through its underlying fund portfolios, intends to comply with the diversification requirements of the Treasury. Transamerica has entered into agreements with each underlying fund portfolio company which requires the portfolios to be operated in compliance with the Treasury regulations. Owner Control. In certain circumstances, owners of variable annuity contracts ------------- may be considered the owners, for federal income tax purposes, of the assets of the variable account used to support their contracts. In those circumstances, income and gains from the variable account assets would be includable in the variable annuity contract owner's gross income. Several years ago, the IRS stated in published rulings that a variable annuity contract owner will be considered the owner of variable account assets if the contract owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. More recently, the Treasury Department announced in connection with the issuance of regulations concerning investment diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor (i.e., you), 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 contractholders may direct their investments to particular subaccounts without being treated as owners of the underlying assets." The ownership rights under the contract are similar to, but different in certain respects from those described by the IRS in rulings in which it was determined that contract owners were not owners of variable account assets. For example, you have the choice of more subaccounts in which to allocate premiums and account values, and may be able to transfer among these accounts more frequently than in such rulings. These differences could result in you being treated as the owner 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 that the Treasury Department has stated it expects to issue. Transamerica therefore reserves the right to modify the contracts as necessary to attempt to prevent you from being considered the owner of a pro rata share of the assets of the variable account. Distribution Requirements. The Code requires that nonqualified contracts contain ------------------------- specific provisions for distribution of contract proceeds upon the death of any owner. In order to be treated as an annuity contract for federal income tax purposes, the Code requires that such contracts provide that if any owner dies on or after the annuity date and before the entire interest in the contract has been distributed, the remaining portion must be distributed at least as rapidly as under the method in effect on such owner's death. If any owner dies before the annuity date, the entire interest in the contract must generally be distributed within 5 years after such owner's date of death or be used to purchase an immediate annuity under which payments will begin within one year of such owner's death and will be made for the life of the beneficiary or for a period not extending beyond the life expectancy of the "designated beneficiary" as defined in section 72(s) of the Code. However, if upon such owner's death prior to the annuity date, such owner's surviving spouse becomes the sole new owner under the contract, then the contract may be continued with the surviving spouse as the new owner. Under the certificate, the beneficiary is the designated beneficiary of an owner/annuitant and the successor owner is the designated beneficiary of an owner who is not the annuitant. If any owner is not a natural person, then for purposes of these distribution requirements, the primary annuitant shall be 16 treated as an owner and any death or change of such primary annuitant shall be treated as the death of an owner. The nonqualified certificates contain provisions intended to comply with these requirements of the Code. No regulations interpreting these requirements of the Code have yet been issued and thus no assurance can be given that the provisions contained in the certificates satisfy all such Code requirements. The provisions contained in the certificates will be reviewed and modified if necessary to assure that they comply with the Code requirements when clarified by regulation or otherwise. Withholding. The portion of any distribution under a contract that is includable ----------- in gross income will be subject to federal income tax withholding unless the recipient of such distribution elects not to have federal income tax withheld. Election forms will be provided at the time distributions are requested or made. The withholding rate varies according to the type of distribution and the owner's tax status. For qualified contracts, "eligible rollover distributions" from Section 401(a) plans, Section 403(a) annuities, and Section 403(b) tax-sheltered annuities are subject to a mandatory federal income tax withholding of 20%. An eligible rollover distribution is the taxable portion of any distribution from such a plan, except certain distributions such as distributions required by the Code, distributions in a specified annuity form or hardship distributions. The 20% withholding does not apply, however, if the owner chooses a "direct rollover" from the plan to another tax-qualified plan or IRA. Different withholding requirements may apply in the case of non-United States persons. Qualified Contracts. The qualified contract is designed for use with several ------------------- types of tax-qualified retirement plans. The tax rules applicable to participants and beneficiaries in tax-qualified 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. Some retirement plans are subject to distribution and other requirements that are not incorporated into the contracts or our contract administration procedures. Owners, participants and beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the contracts comply with applicable law. For qualified plans under Section 401(a), 403(a), 403(b), and 457, 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 or 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 in which the owner (or plan participant) reaches age 70 1/2. Each owner is responsible for requesting distributions under the contract that satisfy applicable tax rules. Transamerica makes no attempt to provide more than general information about use of the contract with the various types of retirement plans. Purchasers of contracts for use with any retirement plan should consult their legal counsel and tax adviser regarding the suitability of the contract. Individual Retirement Annuities. In order to qualify as a traditional individual ------------------------------- retirement annuity under Section 408(b) of the Code, a contract must contain certain provisions: (i) the owner must be the annuitant; (ii) the contract generally is not transferable by the owner, e.g., the owner may not designate a new owner, designate a contingent owner or assign the contract as collateral security; (iii) the total purchase payments for any calendar year may not exceed $2,000, except in the case of a rollover amount or contribution under Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code; (iv) annuity payments or surrenders must begin no later than April 1 of the calendar year following the calendar year in which the annuitant attains age 70 1/2; (v) an annuity payment option with a period certain that will guarantee annuity payments beyond the life expectancy of the annuitant and the beneficiary may not be selected; (vi) certain payments of death benefits must be made in the event the annuitant dies prior to the distribution of the account value; and (vii) the entire interest of the owner is nonforfeitable. Contracts intended to qualify as traditional individual retirement annuities under Section 408(b) of the Code contain such provisions. Amounts in the IRA (other than nondeductible contributions) are taxed when distributed from the IRA. Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject to a 10% penalty tax. No part of the funds for an individual retirement account (including a Roth IRA) or annuity should be invested in a life insurance contract, but the regulations thereunder allow such funds to be invested in an annuity contract that 17 provides a death benefit that equals the greater of the premiums paid or the cash value for the contract. The contract provides an enhanced death benefit that could exceed the amount of such a permissible death benefit, but it is unclear to what extent such an enhanced death benefit could disqualify the contract as an IRA. The Internal Revenue Service has not reviewed the contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether an enhanced death benefit provision, such as the provision in the contract, comports with IRA qualification requirements. Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section ----------------------------------------------- 408A of the Code, contains many of the same provisions as a traditional IRA. However, there are some differences. First, the contributions are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA may be subject to tax and other special rules may apply to the rollover or conversion and to distributions attributable thereto. 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. The Roth IRA is available to individuals with earned income and whose modified adjusted gross income is under $110,000 for single filers, $160,000 for married filing jointly, and $110,000 for married filing separately. The amount per individual that may be contributed to all IRAs (Roth and traditional) is $2,000. Secondly, the distributions are taxed differently. The Roth IRA offers tax-free distributions when made 5 tax years after the first contribution to any Roth IRA of the individual and made after attaining age 59 1/2, to pay for qualified first time homebuyer expenses (lifetime maximum of $10,000), or due to death or disability. All other distributions are subject to income tax when made from earnings and may be subject to a premature surrender penalty tax unless an exception applies. Unlike the traditional IRA, there are no minimum required distributions during the owner's lifetime; however, required distributions at death are generally the same. Section 403(b) Plans. Under Section 403(b) of the Code, payments made by public -------------------- school systems and certain tax exempt organizations to purchase contracts for their employees are excludable from the gross income of the employee, subject to certain limitations. However, such payments may be subject to FICA (Social Security) taxes. The contract includes a death benefit that in some cases may exceed the greater of the purchase payments or the account value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in any tax-sheltered annuity under Section 403(b). Because the death benefit may exceed this limitation, employers using the contract in connection with such plans should consult their tax adviser. Additionally, 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 attributed 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 the 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. Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Sections 401(a) ------------------------------------------------------------ and 403(a) of the Code permit corporate employers to establish various types of retirement plans for employees and self-employed individuals to establish qualified plans for themselves and their employees. Such retirement plans may permit the purchase of the contracts to accumulate retirement savings. Adverse tax consequences to the plan, the participant or both may result if the contract is assigned or transferred to any individual as a means to provide benefit payments. The contract includes a death benefit that in some cases may exceed the greater of the purchase payments or the account value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in a pension or profit sharing plan. Because the death benefit may exceed this limitation, employers using the contract in connection with such plans should consult their tax adviser. Deferred Compensation Plans. Section 457 of the Code, while not actually --------------------------- providing for a qualified plan as that term is normally used, provides for certain deferred compensation plans with respect to service for state governments, local governments, political sub-divisions, agencies, instrumentalities and certain affiliates of such entities, and tax exempt organizations. The contracts can be used with such plans. Under such plans a participant may specify the form of investment in which his or her participation will be made. For non-governmental Section 457 plans, all such investments, however, are owned by, and are subject to, the claims of the general creditors of the sponsoring employer. Depending on the terms of the particular plan, a non-government employer may be entitled to 18 draw on deferred amounts for purposes unrelated to its Section 457 plan obligations. In general, all amounts received under a Section 457 plan are taxable and are subject to federal income tax withholding as wages. Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity contract ------------------- held by a taxpayer other than a natural person generally will not be treated as an annuity contract under the Code; accordingly, an owner who is not a natural person will recognize as ordinary income for a taxable year the excess of (i) the sum of the account value as of the close of the taxable year and all previous distributions under the contract over (ii) the sum of the purchase payments paid for the taxable year and any prior taxable year and the amounts includable in gross income for any prior taxable year with respect to the contract. For these purposes, the account value at year-end may have to be increased by any positive excess interest adjustment, which could result from a full surrender at such time. There is, however, no definitive guidance on the proper tax treatment of excess interest adjustments, and the owner should contact a competent tax adviser with respect to the potential tax consequences of an excess interest adjustment. Notwithstanding the preceding sentences in this paragraph, Section 72(u) of the Code does not apply to (i) a contract where the nominal owner is not a natural person but the beneficial owner of which is a natural person, (ii) a contract acquired by the estate of a decedent by reason of such decedent's death, (iii) a qualified contract (other than one qualified under Section 457) or (iv) a single-payment annuity where the annuity date is no later than one year from the date of the single purchase payment; instead, such contracts are taxed as described above under the heading "Taxation of Annuities." Taxation of Transamerica Transamerica at present is taxed as a life insurance company under part I of Subchapter L of the Code. The variable account is treated as part of Transamerica and, accordingly, will not be taxed separately as a "regulated investment company" under Subchapter M of the Code. Transamerica does not expect to incur any federal income tax liability with respect to investment income and net capital gains arising from the activities of the variable account retained as part of the reserves under the contract. Based on this expectation, it is anticipated that no charges will be made against the variable account for federal income taxes. If, in future years, any federal income taxes are incurred by Transamerica with respect to the variable account, Transamerica may make a charge to that account. INVESTMENT EXPERIENCE A "net investment factor" is used to determine the value of variable accumulation units and variable annuity units, and to determine annuity payment rates. Variable Accumulation Units Allocations of a purchase payment directed to a subaccount are credited in the form of variable accumulation units. Each subaccount has a distinct variable accumulation unit value. The number of units credited is determined by dividing the purchase payment or amount transferred to the subaccount by the variable accumulation unit value of the subaccount as of the end of the valuation period during which the allocation is made. For each subaccount, the variable accumulation unit value for a given business day is based on the net asset value of a share of the corresponding portfolio of the underlying fund portfolios less any applicable charges or fees. The investment performance of the portfolios, expenses, and deductions of certain charges affect the value of a variable accumulation unit. Upon allocation to the selected subaccount, purchase payments are converted into variable accumulation units of the subaccount. The number of variable accumulation units to be credited is determined by dividing the dollar amount allocated to each subaccount by the value of a variable accumulation unit for that subaccount as next determined after the purchase payment is received at the administrative and service office or, in the case of the initial purchase payment, when the enrollment form is completed, whichever is later. The value of a variable accumulation unit for each subaccount was arbitrarily established at $1 at the inception of each subaccount. Thereafter, the value of a variable accumulation unit is determined as of the close of trading on each day the New York Stock Exchange is open for business. 19 An index (the "net investment factor") which measures the investment performance of a subaccount during a valuation period, is used to determine the value of a variable accumulation unit for the next subsequent valuation period. The net investment factor may be greater or less than or equal to one; therefore, the value of a variable accumulation unit may increase, decrease, or remain the same from one valuation period to the next. You bear this investment risk. The net investment performance of a subaccount and deduction of certain charges affect the variable accumulation unit value. The net investment factor for any subaccount for any valuation period is determined by dividing (a) by (b) and subtracting (c) from the result, where: (a) is the net result of: (1) the net asset value per share of the shares held in the subaccount determined at the end of the current valuation period, plus (2) the per share amount of any dividend or capital gain distribution made with respect to the shares held in the subaccount if the ex-dividend date occurs during the current valuation period, plus or minus (3) a per share credit or charge for any taxes determined by Transamerica to have resulted during the valuation period from the investment operations of the subaccount; (b) is the net asset value per share of the shares held in the subaccount determined as of the end of the immediately preceding valuation period; and (c) is an amount representing the variable account charge and any optional benefit fees, if applicable. Illustration of Variable Account Variable Accumulation Unit Value Calculations (Assumes Double Enhanced Death Benefit) Formula and Illustration for Determining the Net Investment Factor Net Investment Factor = (A + B - C) - E ------------ D Where: A = The net asset value of an underlying fund portfolio share as of the end of the current valuation period. Assume A = $11.57 B = The per share amount of any dividend or capital gains distribution since the end of the immediately preceding valuation period. Assume B = 0 C = The per share charge or credit for any taxes reserved for at the end of the current valuation period. Assume C = 0 D = The net asset value of an underlying fund portfolio share at the end of the immediately preceding valuation period. Assume D = $11.40 E = The daily deduction for the mortality and expense risk fee and the administrative charge, and any optional benefit fees. Assume E totals 1.45% on an annual basis; On a daily basis, this equals .000039442. Then, the net investment factor = (11.57 + 0 - 0) - .000039442 = Z = 1.014872839 --------------- (11.40)
20 Formula and Illustration for Determining Variable Accumulation Unit Value Variable Accumulation Unit Value = A * B Where: A = The variable accumulation unit value for the immediately preceding valuation period. Assume......................................... = $X B = The net investment factor for the current valuation period. Assume......................................... = Y Then, the variable accumulation unit value = $X * Y = $Z Variable Annuity Unit Value and Annuity Payment Rates The amount of variable annuity payments will vary with variable annuity unit values. Annuity unit values rise if the net investment performance of the subaccount exceeds the assumed investment return of 5% annually. Conversely, variable annuity unit values fall if the net investment performance of the subaccount is less than the assumed investment return. The value of a variable annuity unit in each subaccount was established at $1 on the date operations began for that subaccount. The value of a variable annuity unit on any subsequent business day is equal to (a) multiplied by (b) multiplied by (c), where: (a) is the variable annuity unit value for the subaccount on the immediately preceding business day; (b) is the net investment factor for that subaccount for the valuation period; and (c) is the investment result adjustment factor for the valuation period. The investment result adjustment factor for the valuation period is the product of discount factors of .99986634 per day to recognize the 5% effective assumed investment return. The valuation period is the period from the close of the immediately preceding business day to the close of the current business day. The net investment factor for the certificate used to calculate the value of a variable annuity unit in each subaccount for the valuation period is determined by dividing (i) by (ii) and subtracting (iii) from the result, where: (i) is the result of: (1) the net asset value of a fund share held in that subaccount determined at the end of the current valuation period; plus (2) the per share amount of any dividend or capital gain distributions made by the fund for shares held in that subaccount if the ex-dividend date occurs during the valuation period; plus or minus (3) a per share charge or credit for any taxes reserved for, which Transamerica determines to have resulted from the investment operations of the subaccount. (ii) is the net asset value of a fund share held in that subaccount determined as of the end of the immediately preceding valuation period. (iii) is a factor representing the mortality and expense risk fee and administrative charge. This factor is equal, on an annual basis, to 1.25% of the daily net asset value of a fund share held in that subaccount. (For calculating Guaranteed Minimum Income Benefit or Initial Payment Guarantee annuity payments, the factor is 1.25% higher). The dollar amount of subsequent variable annuity payments will depend upon changes in applicable variable annuity unit values. The annuity payment rates vary according to the annuity option elected and the sex and adjusted age of the annuitant at the annuity date. The contract also contains a table for determining the adjusted age of the annuitant. 21 Illustration of Calculations for Variable Annuity Unit Value and Variable Annuity Payments Formula and Illustration for Determining Variable Annuity Unit Value Variable Annuity Unit Value = A * B * C Where: A = variable annuity unit value for the immediately preceding valuation period Assume = $X B = Net investment factor for the valuation period for which the variable annuity unit value is being calculated. Assume = Y C = A factor to neutralize the assumed investment return of 5% built into the Annuity Tables used. Assume = Z Then, the variable annuity unit value is: $X * Y * Z = $Q Formula and Illustration for Determining Amount of First Monthly Variable Annuity Payment First monthly variable annuity payment = A * B ----- $1,000 Where: A = The adjusted account value as of the annuity date. Assume = $X B = The Annuity purchase rate per $1,000 of adjusted account value based upon the option selected, the sex and adjusted age of the annuitant according to the tables contained in the contract. Assume = $Y Then, the first monthly variable annuity payment = $X * $Y = $Z ------- 1,000 Formula and Illustration for Determining the Number of Variable Annuity Units Represented by Each Monthly Variable Annuity Payment Number of variable annuity units = A - B Where: A = The dollar amount of the first monthly variable annuity payment. Assume = $X B = The variable annuity unit value for the valuation date on which the first monthly payment is due. Assume = $Y 22 Then, the number of variable annuity units = $X = Z -- $Y GUARANTEED MINIMUM INCOME BENEFIT -- ADDITIONAL INFORMATION The amounts shown below are hypothetical guaranteed minimum monthly payment amounts under the "Guaranteed Minimum Income Benefit" for a $100,000 purchase payment when annuity payments do not begin until the contract anniversary indicated in the left-hand column. These figures assume the following: .. there were no subsequent purchase payments or surrenders; .. there were no premium taxes; .. the $100,000 premium is subject to the Guaranteed Minimum Income Benefit; .. the annuitant is (or both annuitants are) 60 years old when the rider is issued; .. the annual growth rate is 6.0% (once established, an annual growth rate will not change during the life of the Guaranteed Minimum Income Benefit rider up until the minimum annuitization value reaches 200% of the purchase payments (less withdrawals)); .. there was no upgrade of the minimum annuitization value; and .. the account value did not grow higher than an annual growth rate of 6% (no annual step-ups are factored in). Six different annuity payment options are illustrated: a male annuitant, a female annuitant and a joint and survivor annuity, each on a Life Only and a Life with 10-Year Certain basis. The figures below, which are the amount of the first monthly payment, are based on an assumed investment return of 3%. If the guaranteed minimum payment option is also elected at the time of annuitization, subsequent payments will never be less than the amount of the first payment (although subsequent payments are calculated using a 5% assumed investment return). If the guaranteed minimum payment option is not elected, subsequent payments may fluctuate and may be less than the initial payment.
Life Only = Life Annuity with No Period Certain Life 10 = Life Annuity with 10 Years Certain --------------------------------------------------------------------------------------------------------------------- Rider Anniversary at Exercise Date Male Female Joint & Survivor --------------------------------------------------------------------------------------------------------------------- Life Only Life 10 Life Only Life 10 Life Only Life 10 --------------------------------------------------------------------------------------------------------------------- 7 (age 67) $846 $813 $792 $774 $680 $679 --------------------------------------------------------------------------------------------------------------------- 15 1,492 1,341 1,388 1,291 1,140 1,125 --------------------------------------------------------------------------------------------------------------------- 20 (age 80) 1,846 1,523 1,733 1,492 1,373 1,320 ---------------------------------------------------------------------------------------------------------------------
This hypothetical illustration should not be deemed representative of past or future performance of any underlying variable investment option. Surrenders will affect the minimum annuitization value as follows: Each contract year, surrenders will reduce the minimum annuitization value on a pro rata basis by an amount equal to the minimum annuitization value immediately prior to the surrender multiplied by the percentage reduction in the account value resulting from the surrender. 23 Examples of the effect of surrenders on the minimum annuitization value are as follows:
------------------------------------------------------------------------------------------------------------------------------- EXAMPLE 1 ------------------------------------------------------------------------------------------------------------------------------- Assumptions ------------------------------------------------------------------------------------------------------------------------------- .. minimum annuitization value at time of distribution: $10,500 ------------------------------------------------------------------------------------------------------------------------------- .. account value at time of distribution: $15,000 ------------------------------------------------------------------------------------------------------------------------------- .. distribution amount: $1,500 ------------------------------------------------------------------------------------------------------------------------------- Calculations ------------------------------------------------------------------------------------------------------------------------------- .. account value after distribution: $15,000 - $1,500 = $13,500 ------------------------------------------------------------------------------------------------------------------------------- (since the account value is reduced 10% ($1,500/$15,000), the minimum annuitization value is also reduced 10%) ------------------------------------------------------------------------------------------------------------------------------- .. minimum annuitization value after distribution: $10,500 - (10% x $10,500) = $9,450 ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- EXAMPLE 2 ------------------------------------------------------------------------------------------------------------------------------- Assumptions ------------------------------------------------------------------------------------------------------------------------------- .. minimum annuitization value at time of distribution: $10,500 ------------------------------------------------------------------------------------------------------------------------------- .. account value at time of distribution: $7,500 ------------------------------------------------------------------------------------------------------------------------------- .. distribution amount: $1,500 ------------------------------------------------------------------------------------------------------------------------------- Calculations ------------------------------------------------------------------------------------------------------------------------------- .. account value after distribution: $7,500 - $1,500 = $6,000 ------------------------------------------------------------------------------------------------------------------------------- (since the account value is reduced 20% ($1,500/$7,500), the minimum annuitization value is also reduced 20%) ------------------------------------------------------------------------------------------------------------------------------- .. minimum annuitization value after distribution: $10,500 - (20% x $10,500) = $8,400 -------------------------------------------------------------------------------------------------------------------------------
The amount of the first payment provided by the Guaranteed Minimum Income Benefit will be determined by multiplying each $1,000 of minimum annuitization value by the applicable annuity factor shown on Schedule I of the Guaranteed Minimum Income Benefit. The applicable annuity factor depends upon the annuitant's (and joint annuitant's, if any) sex (or without regard to gender if required by law), age, and the Guaranteed Minimum Income Benefit payment option selected and is based on a guaranteed interest rate of 3% and the "2000 Table", using an assumed annuity date of 2005 (static projection to this point) with dynamic projection using scale G from that point (100% of G for male, 50% of G for females). Subsequent payments will be calculated as described in the rider using a 5% assumed investment return. Subsequent payments may fluctuate annually in accordance with the investment performance of the annuity subaccounts if the guaranteed minimum payment option is elected at annuitization. However, subsequent payments are guaranteed to never be less than the initial payment. If you elect the guaranteed minimum payment option, the stabilized payment on each subsequent contract anniversary after annuitization using the rider will equal the greater of the initial payment or the payment supportable by the variable annuity units in the selected subaccounts. The supportable payment is equal to the number of variable annuity units in the selected subaccounts multiplied by the variable annuity unit values in those subaccounts on the date the payment is made. The variable annuity unit values used to calculate the supportable payment will assume a 5% assumed investment return. If the supportable payment at any payment date during a contract year is greater than the stabilized payment for that contract year, the excess will be used to purchase additional variable annuity units. Conversely, if the supportable payment at any payment date during a contract year is less than the stabilized payment for that contract year, there will be a reduction in the number of variable annuity units credited to the contract to fund the deficiency. In the case of a reduction, you will not participate as fully in the future investment performance of the subaccounts you selected since fewer variable annuity units are credited to your contract. Purchases and reductions will be allocated to each subaccount on a proportionate basis. Transamerica bears the risk that it will need to make payments if all variable annuity units have been used in an attempt to maintain the stabilized payment at the initial payment level. In such an event, Transamerica will make all future payments equal to the initial payment. Once all the variable annuity units have been used, the amount of your payment will not increase or decrease and will not depend upon the performance of any subaccounts. To compensate Transamerica for this risk, a guaranteed minimum payment fee will be deducted. 24 TAX RELIEF RIDER -- ADDITIONAL INFORMATION The following example illustrates the Tax Relief Rider additional death benefit payable by this rider as well as the effect of a partial surrender on the Tax Relief Rider benefit amount.
Example 1 ---------------------------------------------------------------------------------------------------------------------- account value on the rider date: $100,000 ---------------------------------------------------------------------------------------------------------------------- premiums paid after the rider date before surrender: $25,000 ---------------------------------------------------------------------------------------------------------------------- gross partial surrenders after the rider date: $30,000 ---------------------------------------------------------------------------------------------------------------------- death benefit on date of surrender $150,000 ---------------------------------------------------------------------------------------------------------------------- rider earnings on date of surrender (death benefit - account value on rider date $25,000 - premiums paid after rider date = $150,000 - $100,000 - $25,000): ---------------------------------------------------------------------------------------------------------------------- amount of surrender that exceeds rider earnings ($30,000 - $25,000): $5,000 ---------------------------------------------------------------------------------------------------------------------- base contract death benefit on the date of death benefit calculation: $200,000 ---------------------------------------------------------------------------------------------------------------------- rider earnings (= death benefit - account value on rider date - premiums since $80,000 rider date + surrenders since rider date that exceeded rider earnings at time of surrender = $200,000 - $100,000 - $25,000 + $5,000): ---------------------------------------------------------------------------------------------------------------------- additional death benefit amount (= additional death benefit factor * rider earnings = 40%* $32,000 $80,000): ---------------------------------------------------------------------------------------------------------------------- total death benefit paid (=base contract death benefit plus additional death benefit amount: $232,000 ----------------------------------------------------------------------------------------------------------------------
Example 2 ---------------------------------------------------------------------------------------------------------------------- account value on the rider date: $100,000 ---------------------------------------------------------------------------------------------------------------------- premiums paid after the rider date before surrender: $0 ---------------------------------------------------------------------------------------------------------------------- gross partial surrenders after the rider date: $0 ---------------------------------------------------------------------------------------------------------------------- base contract death benefit on the date of death benefit calculation: $75,000 ---------------------------------------------------------------------------------------------------------------------- rider earnings = (death benefit - account value on rider date - premiums since $0 rider date + surrenders since rider date that exceeded rider earnings at time of surrender = $75,000 - $100,000 - $0 + $0): ---------------------------------------------------------------------------------------------------------------------- additional death benefit amount (= additional death benefit factor * rider earnings = 40%* $0): $0 ---------------------------------------------------------------------------------------------------------------------- total death benefit paid (=base contract death benefit plus additional death benefit amount): $75,000 ----------------------------------------------------------------------------------------------------------------------
HISTORICAL PERFORMANCE DATA Money Market Yields Transamerica may from time to time disclose the current annualized yield of the Money Market Subaccount, which invests in the Money Market Portfolio, for a 7-day period in a manner which does not take into consideration any realized or unrealized gains or losses on shares of the Money Market Portfolio 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 and income other than investment income) at the end of the 7-day period in the value of hypothetical account having a balance of 1 unit of the Money Market Subaccount at the beginning of the 7-day period, dividing such net change in account value by the value of the account at the beginning of the period to determine the base period return, and annualizing this quotient on a 365-day basis. The net change in account value reflects (i) net income from the portfolio attributable to the hypothetical account; and (ii) charges and deductions imposed under a contract that are attributable to the hypothetical account. The charges and deductions include the per unit charges for the hypothetical account for (i) the administrative charges and (ii) the mortality and expense risk fee. Current yield will be calculated according to the following formula: 25 Current Yield = ((NCS * ES)/UV) * (365/7) Where: NCS = The net change in the value of the portfolio (exclusive of realized gains and losses on the sale of securities and unrealized appreciation and depreciation and income other than investment income) for the 7-day period attributable to a hypothetical account having a balance of 1 subaccount unit. ES = Per unit expenses of the subaccount for the 7-day period. UV = The unit value on the first day of the 7-day period. Because of the charges and deductions imposed under a contract, the yield for the Money Market Subaccount will be lower than the yield for the Money Market Portfolio. The yield calculations do not reflect the effect of any premium taxes or surrender charges that may be applicable to a particular contract. Surrender charges range from 7% to 0% of the amount of purchase payments surrendered based on the number of years since the purchase payment was made. However, surrender charges will not be assessed after the seventh policy year. Transamerica may also disclose the effective yield of the Money Market Subaccount for the same 7-day period, determined on a compounded basis. The effective yield is calculated by compounding the base period return according to the following formula: Effective Yield = (1 + ((NCS - ES)/UV))/365/7/ - 1 Where: NCS = The net change in the value of the portfolio (exclusive of realized gains and losses on the sale of securities and unrealized appreciation and depreciation and income other than investment income) for the 7-day period attributable to a hypothetical account having a balance of 1 subaccount unit. ES = Per unit expenses of the subaccount for the 7-day period. UV = The unit value on the first day of the 7-day period. The yield on amounts held in the Money Market Subaccount 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 Subaccount's actual yield is affected by changes in interest rates on money market securities, average portfolio maturity of the Money Market Portfolio, the types and quality of portfolio securities held by the Money Market Portfolio and its operating expenses. For the seven days ended December 31, 2001, the yield of the Money Market Subaccount was 0.57%, and the effective yield was 0.57% for the Greater of 5% Annually Compounding through age 85 Death Benefit or Annual Step-Up through age 85 Death Benefit. There is no yield or effective yield for the Double Enhanced Death Benefit or Return of Premium Death Benefit for the seven days ended December 31, 2001, because those death benefits were not available during that period. Other Subaccount Yields Transamerica may from time to time advertise or disclose the current annualized yield of one or more of the subaccounts (except the Money Market Subaccount) for 30-day periods. The annualized yield of a subaccount refers to income generated by the subaccount over a specific 30-day period. Because the yield is annualized, the yield generated by a subaccount during the 30-day period is assumed to be generated each 30-day period over a 12-month period. The yield is computed by: (i) dividing the net investment income of the subaccount less subaccount expenses for the period, by (ii) the maximum offering price per unit on the last day of the period times the daily average number of units outstanding for the period, (iii) compounding that yield for a 6-month period, and (iv) multiplying that result by 2. Expenses attributable to the subaccount include (i) the administrative charges and (ii) the mortality and expense risk fee. The 30-day yield is calculated according to the following formula: Yield = 2 * ((((NI - ES)/(U - UV)) + 1)/6/ -1) 26 Where: NI = Net investment income of the subaccount for the 30-day period attributable to the subaccount's unit. ES = Expenses of the subaccount for the 30-day period. U = The average number of units outstanding. UV = The unit value at the close (highest) of the last day in the 30-day period. Because of the charges and deductions imposed by the variable account, the yield for a subaccount will be lower than the yield for its corresponding portfolio. The yield calculations do not reflect the effect of any premium taxes or surrender charges that may be applicable to a particular contract. The yield on amounts held in the subaccounts normally will fluctuate over time. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The types and quality of its investments and its operating expenses affect a subaccount's actual yield. Total Returns Transamerica may from time to time also advertise or disclose total returns for one or more of the subaccounts for various periods of time. One of the periods of time will include the period measured from the date the subaccount commenced operations. When a subaccount has been in operation for 1, 5 and 10 years, respectively, the total return for these periods will be provided. Total returns for other periods of time may from time to time also be disclosed. Total returns represent the average annual compounded rates of return that would equate an initial investment of $1,000 to the redemption value of that investment as of the last day of each of the periods. The ending date for each period for which total return quotations are provided will be for the most recent month end practicable, considering the type and media of the communication and will be stated in the communication. Total returns will be calculated using subaccount unit values which Transamerica calculates on each business day based on the performance of the variable account's underlying fund portfolio and the deductions for the mortality and expense risk fee and the administrative charges. Total return calculations will reflect the effect of surrender charges that may be applicable to a particular period. The total return will then be calculated according to the following formula: P (1 + T)/N/ = ERV Where: T = The average annual total return net of subaccount recurring charges. ERV = The ending redeemable value of the hypothetical account at the end of the period. P = A hypothetical initial payment of $1,000. N = The number of years in the period. 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 format described above. The non-standard format will be identical to the standard format except that the surrender charge 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 surrender charge percentage will be 0%. CTR = (ERV / P)-1 27 Where: CTR = The cumulative total return net of subaccount recurring charges for the period. ERV = The ending redeemable value of the hypothetical investment at the End of the period. P = A hypothetical initial payment of $1,000. All non-standard performance data will only be advertised if the standard performance data is also disclosed. Adjusted Historical Performance Data From time to time, sales literature or advertisements may quote average annual total returns for periods prior to the date a particular subaccount commenced operations. Such performance information for the subaccounts will be calculated based on the performance of the various portfolios and the assumption that the subaccounts were in existence for the same periods as those indicated for the portfolios, with the level of contract charges that are currently in effect. 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 Insurance Ratings Services, Moody's Investors Service and Fitch Financial Ratings. The purpose of the ratings is to reflect the financial strength of Transamerica. The ratings should not be considered as bearing on or investment performance of assets held in the variable account or of the safety or riskiness of an investment 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, these ratings 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 contracts in accordance with their terms. STATE REGULATION OF TRANSAMERICA Transamerica is subject to the laws of Iowa governing insurance companies and to regulation by the Iowa Division of Insurance. An annual statement in a prescribed form is filed with the Division of Insurance each year covering the operation of Transamerica for the preceding year and its financial condition as of the end of such year. Regulation by the Division of Insurance includes periodic examination to determine Transamerica's contract liabilities and reserves so that the Division may determine the items are correct. Transamerica's books and accounts are subject to review by the Division of Insurance at all times and a full examination of its operations is conducted periodically by the National Association of Insurance Commissioners. In addition, Transamerica is subject to regulation under the insurance laws of other jurisdictions in which it may operate. ADMINISTRATION Transamerica performs administrative services for the contracts. These services include issuance of the contracts, maintenance of records concerning the contracts, and certain valuation services. RECORDS AND REPORTS All records and accounts relating to the variable account will be maintained by Transamerica. As presently required by the 1940 Act, as amended, and regulations promulgated thereunder, Transamerica will mail to all owners at their last known address of record, at least annually, reports containing such information as may be required under that Act or by any other applicable law or regulation. Owners will also receive confirmation of each financial transaction and any other reports required by law or regulation. However, for certain routine transactions (for example, regular monthly premiums deducted from your checking account, or regular annuity payments Transamerica sends to you) you may only receive quarterly confirmations. 28 DISTRIBUTION OF THE CONTRACTS The contracts are offered to the public through brokers licensed under the federal securities laws and state insurance laws. The offering of the contracts is continuous and Transamerica does not anticipate discontinuing the offering of the contracts, however, Transamerica reserves the right to do so. Prior to May 1, 2002, the co-principal underwriters of the contracts were Transamerica Securities Sales Corporation ("TSSC") and Transamerica Financial Resources, Inc. ("TFR"). During fiscal years 2001, 2000 and 1999, $15,913,242.07, $40,610,303.06 and $17,147,205.77, respectively, in commissions was paid to TSSC and TFR as co-underwriters of the contracts; no amounts were retained by TSSC or TFR. As of May 1, 2002, AFSG Securities Corporation, an affiliate of Transamerica, is the principal underwriter of the contracts and may enter into agreements with broker-dealers for the distribution of the contracts. VOTING RIGHTS To the extent required by law, Transamerica will vote the underlying fund portfolios' shares held by the variable account at regular and special shareholder meetings of the underlying fund portfolios in accordance with instructions received from persons having voting interests in the portfolios, although none of the underlying fund portfolios hold regular annual shareholder meetings. If, however, the 1940 Act or any regulation thereunder should be amended or if the present interpretation thereof should change, and as a result Transamerica determines that it is permitted to vote the underlying fund portfolios shares in its own right, it may elect to do so. Before the annuity date, you hold the voting interest in the selected portfolios. The number of votes that you have the right to instruct will be calculated separately for each subaccount. The number of votes that you have the right to instruct for a particular subaccount will be determined by dividing your account value in the subaccount by the net asset value per share of the corresponding portfolio in which the subaccount invests. Fractional shares will be counted. After the annuity date, the person receiving annuity payments has the voting interest, and the number of votes decreases as annuity payments are made and as the reserves for the contract decrease. The person's number of votes will be determined by dividing the reserve for the contract allocated to the applicable subaccount by the net asset value per share of the corresponding portfolio. Fractional shares will be counted. The number of votes that you or the person receiving income payments has the right to instruct will be determined as of the date established by the underlying fund portfolio for determining shareholders eligible to vote at the meeting of the underlying fund portfolio. Transamerica will solicit voting instructions by sending you, or other persons entitled to vote, written requests for instructions prior to that meeting in accordance with procedures established by the underlying fund portfolio. Portfolio shares as to which no timely instructions are received and shares held by Transamerica in which you, or other persons entitled to vote, have no beneficial interest will be voted in proportion to the voting instructions that are received with respect to all contracts participating in the same subaccount. Each person having a voting interest in a subaccount will receive proxy material, reports, and other materials relating to the appropriate portfolio. OTHER PRODUCTS Transamerica makes other variable annuity contracts available that may also be funded through the variable account. These variable annuity contracts may have different features, such as different investment options or charges. 29 CUSTODY OF ASSETS Transamerica holds assets of each of the subaccounts. The assets of each of the subaccounts are segregated and held separate and apart from the assets of the other subaccounts and from Transamerica's general account assets. Transamerica maintains records of all purchases and redemptions of shares of the underlying fund portfolios held by each of the subaccounts. Additional protection for the assets of the variable account is afforded by Transamerica's fidelity bond, presently in the amount of $5,000,000, covering the acts of officers and employees of Transamerica. LEGAL MATTERS Sutherland Asbill & Brennan LLP, of Washington D.C. has provided legal advice to Transamerica relating to certain matters under the federal securities laws applicable to the issue and sale of the contracts. INDEPENDENT AUDITORS The statutory-basis financial statements and schedules of Transamerica Occidental Life Insurance Company as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, and the financial statements of certain subaccounts of Separate Account VA-2L, which are available for investment by the Dreyfus/Transamerica Triple Advantage(R) Variable Annuity contract owners as of December 31, 2000, and for the periods indicated thereon, included in this Statement of Additional Information have been audited by Ernst & Young LLP, Independent Auditors, 801 Grand Avenue, Suite 3400, Des Moines, Iowa 50309. OTHER INFORMATION A registration statement has been filed with the SEC, under the Securities Act of 1933 as amended, with respect to the contracts discussed in this SAI. Not all of the information set forth in the registration statement, amendments and exhibits thereto has been included in the prospectus or this SAI. Statements contained in the prospectus and this SAI concerning the content of the contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC. FINANCIAL STATEMENTS The values of your interest in the variable account will be affected solely by the investment results of the selected subaccount(s). Financial statements of certain subaccounts of Separate Account VA-2L, which are available for investment by the Dreyfus/Transamerica Triple Advantage(R) Variable Annuity contract owners, are contained herein. The statutory-basis financial statements of Transamerica Occidental Life Insurance Company, which are included in this SAI, should be considered only as bearing on the ability of Transamerica to meet its obligations under the contracts. They should not be considered as bearing on the investment performance of the assets held in the variable account. 30 Financial Statements Transamerica Occidental Life Insurance Company Years Ended December 31, 2001, 2000, and 1999 Transamerica Occidental Life Insurance Company Financial Statements - Statutory Basis Years Ended December 31, 2001, 2000, and 1999 Contents Report of Independent Auditors........................................................................ 1 Audited Financial Statements Balance Sheets - Statutory Basis...................................................................... 3 Statements of Operations - Statutory Basis............................................................ 5 Statements of Changes in Capital and Surplus - Statutory Basis........................................ 7 Statements of Cash Flow - Statutory Basis............................................................. 8 Notes to Financial Statements - Statutory Basis....................................................... 10 Statutory-Basis Financial Statement Schedules Schedule I - Summary of Investments - Other Than Investments in Related Parties....................... 45 Schedule III - Supplementary Insurance Information.................................................... 46 Schedule IV - Reinsurance............................................................................. 47
Report of Independent Auditors The Board of Directors Transamerica Occidental Life Insurance Company We have audited the accompanying statutory-basis balance sheets of Transamerica Occidental Life Insurance Company, an indirect, wholly-owned subsidiary of AEGON N.V., as of December 31, 2001 and 2000, and the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2001. Our audits also included the accompanying statutory-basis financial statement schedules required by Article 7 of Regulation S-X. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from accounting principles generally accepted in the United States. The variances between such practices and accounting principles generally accepted in the United States also are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material. In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States, the financial position of Transamerica Occidental Life Insurance Company at December 31, 2001 and 2000, or the results of its operations or its cash flow for each of the three years in the period ended December 31, 2001. 1 However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Transamerica Occidental Life Insurance Company at December 31, 2001 and 2000, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2001, in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein. As described in Note 2 to the financial statements, in 2001 Transamerica Occidental Life Insurance Company changed various accounting policies to be in accordance with the revised NAIC Accounting Practices and Procedures Manual, as adopted by the Insurance Division, Department of Commerce, of the State of Iowa. /s/ Ernst & Young LLP Des Moines, Iowa February 15, 2002 2 Transamerica Occidental Life Insurance Company Balance Sheets - Statutory Basis (Dollars in Thousands, Except per Share Amounts)
December 31 2001 2000 ---------------------------- Admitted assets Cash and invested assets: Bonds $13,994,027 $14,404,438 Preferred stocks: Affiliated entities 1,068 1,740 Other 71,829 77,603 Common stocks: Affiliated entities (cost: 2001 - 415,348; 2000 - $335,248) 964,082 849,503 Other (cost: 2001 - 411,193; 2000 - $479,874) 421,560 600,594 Mortgage loans on real estate 1,691,144 1,140,481 Real estate 85,496 96,219 Policy loans 411,306 417,849 Cash and short-term investments 172,913 100,681 Receivables for securities - 4,454 Net short-term notes receivable from affiliates 114,795 23,702 Other invested assets 601,144 278,629 ---------------------------- Total cash and invested assets 18,529,364 17,995,893 Federal and foreign income tax recoverable 40,456 - Net deferred income tax asset 105,070 - Accrued investment income 219,386 230,386 Premiums deferred and uncollected 243,404 215,315 Reinsurance receivable 116,195 271,365 Accounts receivable 103,620 159,949 General agents pension fund 55,040 109,553 Funds withheld by affiliates 562,853 262,448 Other admitted assets 183,331 166,998 Separate account assets 4,124,050 4,191,889 ---------------------------- Total admitted assets $24,282,769 $23,603,796 ============================
3
December 31 2001 2000 ---------------------------- Liabilities and capital and surplus Liabilities: Aggregate reserves for policies and contracts: Life $ 5,329,698 $ 5,341,927 Annuity 3,755,862 3,977,426 Accident and health 74,034 125,586 Liability for deposit-type contracts 4,918,103 4,217,255 Policy and contract claim reserves Life 32,527 351,135 Accident and health 104,983 43,341 Other policyholders' funds 15,035 15,785 Municipal reverse repurchase agreements 368,209 438,723 Remittances and items not allocated 119,068 124,862 Asset valuation reserve 179,307 331,625 Interest maintenance reserve 90,208 16,139 Funds held under coinsurance and other reinsurance treaties 2,591,742 2,520,027 Reinsurance in unauthorized reinsurers 77,809 33,682 Commissions and expense allowances payable on reinsurance assumed 23,126 95,725 Payable for securities 45,946 - Federal and foreign income taxes payable - 22,694 Payable to affiliates 20,077 26,084 Transfers to separate accounts due or accrued (81,230) (81,118) Other liabilities 553,937 411,833 Separate account liabilities 4,004,807 4,046,600 ---------------------------- Total liabilities 22,223,248 22,059,331 Commitments and contingencies (Note 10) Capital and surplus: Common stock, $12.50 par value, 4,000,000 shares authorized, 2,206,933 issued and outstanding 27,587 27,587 Paid-in surplus 889,600 589,600 Unassigned surplus 1,142,334 927,278 ---------------------------- Total capital and surplus 2,059,521 1,544,465 ---------------------------- Total liabilities and capital and surplus $24,282,769 $23,603,796 ============================
See accompanying notes. 4 Transamerica Occidental Life Insurance Company Statements of Operations - Statutory Basis (Dollars in Thousands)
Year Ended December 31 2001 2000 1999 ------------------------------------------------- Revenues: Premiums and other considerations, net of reinsurance: Life $1,176,575 $1,270,078 $1,192,299 Annuity 492,944 1,179,915 681,901 Accident and health 66,672 118,827 57,531 Net investment income 1,194,667 1,108,214 1,125,042 Amortization of interest maintenance reserve 629 (2,359) 4,739 Commissions and expense allowances on reinsurance ceded 308,252 415,788 469,910 Income from fees associated with investment management, administration and contract guarantees for separate accounts 34,348 36,536 16,821 Other income 232,625 153,589 528,952 ------------------------------------------------- 3,506,712 4,280,588 4,077,195 Benefits and expenses: Benefits paid or provided for: Life and accident and health 562,473 723,471 402,475 Surrender benefits 1,231,866 1,136,953 694,766 Other benefits 721,076 924,707 935,940 Increase (decrease) in aggregate reserves for policies and contracts: Life 423,176 328,852 392,921 Annuity (175,893) (181,511) (145,685) Accident and health (30,092) (3,632) 19,578 Other - 10,792 (7,225) ------------------------------------------------- 2,732,606 2,939,632 2,292,770 Insurance expenses: Commissions 481,455 680,635 691,802 General insurance expenses 249,466 331,316 272,168 Taxes, licenses and fees 33,889 42,636 53,309 Net transfer to (from) separate accounts (42,615) 175,350 50,572 Reinsurance reserve adjustments - 47,887 509,668 Other 6,229 138,410 22,767 ------------------------------------------------- 728,424 1,416,234 1,600,286 ------------------------------------------------- 3,461,030 4,355,866 3,893,056 ------------------------------------------------- Gain (loss) from operations before dividends to policyholders, federal income tax expense (benefit) and net realized capital gains 45,682 (75,278) 184,139
5 Transamerica Occidental Life Insurance Company Statements of Operations - Statutory Basis (continued) (Dollars in Thousands)
Year Ended December 31 2001 2000 1999 ------------------------------------------------- Dividends to policyholders $ 9,073 $ 9,377 $ 9,294 ------------------------------------------------- Gain (loss) from operations before federal income tax expense (benefit) and net realized capital gains 36,609 (84,655) 174,845 Federal income tax expense (benefit) (11,575) 6,152 30,330 ------------------------------------------------- Gain (loss) from operations before net realized capital gains on investments 48,184 (90,807) 144,515 Net realized capital gains on investments (net of related federal income taxes and amounts transferred from/to interest maintenance reserve) 13,610 292,197 17,515 ------------------------------------------------- Net income $ 61,794 $ 201,390 $ 162,030 =================================================
See accompanying notes. 6 Transamerica Occidental Life Insurance Company Statements of Changes in Capital and Surplus - Statutory Basis (Dollars in Thousands)
Common Stock Paid-in Unassigned Total Capital Surplus Surplus and Surplus ------------------------------------------------------------- Balance at January 1, 1999 $27,587 $372,538 $1,444,037 $1,844,162 Net income - - 162,030 162,030 Change in non-admitted assets - - (2,824) (2,824) Change in unrealized capital gains - - 119,420 119,420 Change in asset valuation reserve - - (178,342) (178,342) Dividend to stockholder - - (79,000) (79,000) Change in liability for reinsurance in unauthorized companies - - (4,646) (4,646) Change in surplus in separate accounts - - 16,637 16,637 Change in surplus due to reinsurance - - (35,865) (35,865) Prior year adjustments - - (14,710) (14,710) Capital contribution - 137,062 - 137,062 ------------------------------------------------------------- Balance at December 31, 1999 27,587 509,600 1,426,737 1,963,924 Net income - - 201,390 201,390 Change in non-admitted assets - - 42,867 42,867 Change in unrealized capital gains - - (528,752) (528,752) Change in asset valuation reserve - - 247,333 247,333 Cash dividend to stockholder - - (135,000) (135,000) Dividend of subsidiary to stockholder - - (210,386) (210,386) Change in liability for reinsurance in unauthorized companies - - (19,364) (19,364) Change in surplus in separate accounts - - (16,755) (16,755) Change in surplus due to reinsurance - - 9,587 9,587 Partnership termination - - (46,671) (46,671) Prior year adjustments - - (43,708) (43,708) Capital contribution - 80,000 - 80,000 ------------------------------------------------------------- Balance at December 31, 2000 27,587 589,600 927,278 1,544,465 Cumulative effect of change in accounting principles - - 59,703 59,703 Net income - - 61,794 61,794 Change in non-admitted assets - - 47,524 47,524 Change in unrealized capital gains - - (110,781) (110,781) Change in asset valuation reserve - - 152,318 152,318 Tax benefit on stock options exercised - - 2 2 Change in liability for reinsurance in unauthorized companies - - (44,127) (44,127) Change in surplus in separate accounts - - (26,046) (26,046) Change in net deferred income tax asset - - 60,600 60,600 Change in surplus due to reinsurance - - 10,659 10,659 Correction of error - - 3,410 3,410 Capital contribution - 300,000 - 300,000 ------------------------------------------------------------- Balance at December 31, 2001 $27,587 $889,600 $1,142,334 $2,059,521 =============================================================
See accompanying notes. 7 Transamerica Occidental Life Insurance Company Statements of Cash Flow - Statutory Basis (Dollars in Thousands)
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Operating activities Premiums and annuity considerations $1,705,802 $ 1,676,491 $ 319,552 Other policy proceeds and considerations - 278,093 212,546 Allowances and reserve adjustments received on reinsurance ceded 359,414 443,651 1,861,584 Investment income received 1,230,605 1,119,095 1,088,846 Other income received 420,057 1,851,376 141,247 Life and accident and health claims paid (612,487) (665,369) (266,727) Surrender benefits and other fund withdrawals paid (1,343,332) (1,137,020) (695,777) Annuity and other benefits paid (760,578) (653,975) (962,151) Commissions, other expenses and taxes paid (856,560) (1,083,271) (1,027,317) Dividends paid to policyholders (9,189) (9,820) (9,136) Federal income taxes received (paid) (165,655) 208,049 (146,945) Reinsurance reserve transfers and other (1,067,197) (546,720) (618,898) ------------------------------------------------------ Net cash provided by (used in) operating activities (1,099,120) 1,480,580 (103,176) Investing activities Proceeds from investments sold, matured or repaid: Bonds 8,563,654 5,872,493 2,993,985 Stocks 443,059 2,122,089 220,666 Mortgage loans 117,761 15,173 11,248 Real estate 4,938 - 3,050 Other invested assets 25,831 6,394 200 Miscellaneous proceeds 84,864 1,079 407 ------------------------------------------------------ Total investment proceeds 9,240,107 8,017,228 3,229,556 Income taxes paid on net realized capital gains (61,074) (178,914) - ------------------------------------------------------ Net proceeds from sales, maturities, or repayments of investments 9,179,033 7,838,314 3,229,556
8 Transamerica Occidental Life Insurance Company Statements of Cash Flow - Statutory Basis (continued) (Dollars in Thousands)
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Cost of investments acquired: Bonds $(8,111,235) $(7,506,987) $(3,656,035) Stocks (434,984) (1,273,183) (611,404) Mortgage loans (667,399) (771,604) (9,800) Real estate (370) (1,287) (5,064) Other invested assets (398,649) (132,908) (35,204) Miscellaneous applications (40,278) (1,242) (93,194) ------------------------------------------------------ Total cost of investments acquired (9,652,915) (9,687,211) (4,410,701) Net decrease (increase) in policy loans 6,543 (8,315) 1,094 ------------------------------------------------------ Net cost of investments acquired (9,646,372) (9,695,526) (4,409,607) ------------------------------------------------------ Net cash used in investing activities (467,339) (1,857,212) (1,180,051) Financing and miscellaneous activities Other cash provided: Capital and surplus paid-in 300,000 80,000 137,062 Deposits on deposit-type contract funds and other liabilities without life or disability contingencies 3,107,416 - - Other sources 2,227,912 1,971,505 914,148 ------------------------------------------------------ Total other cash provided 5,635,328 2,051,505 1,051,210 Other cash applied: Dividends paid to stockholder - (135,000) (79,000) Withdrawals on deposit-type contract funds and other liabilities without life or disability contingencies (2,720,630) - - Other applications, net (1,276,007) (1,571,646) (70,086) ------------------------------------------------------ Total other cash applied (3,996,637) (1,706,646) (149,086) ------------------------------------------------------ Net cash provided by financing and miscellaneous activities 1,638,691 344,859 902,124 ------------------------------------------------------ Net increase (decrease) in cash and short-term investments 72,232 (31,773) (381,103) Cash and short-term investments: Beginning of year 100,681 132,454 513,557 ------------------------------------------------------ End of year $ 172,913 $ 100,681 $ 132,454 ======================================================
See accompanying notes. 9 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (Dollars in Thousands) December 31, 2001 1. Organization and Summary of Significant Accounting Policies Transamerica Occidental Life Insurance Company (the Company) is a stock life insurance company domiciled in Iowa. The Company is a wholly-owned subsidiary of Transamerica Insurance Corporation, which is an indirect wholly-owned subsidiary of Transamerica Corporation (Transamerica). Transamerica is a wholly-owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands. The Company has two wholly-owned insurance subsidiaries: Transamerica Life Insurance and Annuity Company (TALIAC) and Transamerica Life Insurance Company of New York (TONY). As discussed in Note 14, in 2000, the Company transferred its entire ownership interest in its subsidiary, Transamerica Life Insurance Company of Canada, in the form of a dividend to its parent. Also in 2000, the Company was redomiciled from California to Iowa. Nature of Business The Company engages in providing life insurance, pension and annuity products, reinsurance, structured settlements and investment products which are distributed through a network of independent and company-affiliated agents and independent brokers. The Company's customers are primarily in the United States and are distributed in 49 states. Basis of Presentation The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are: 10 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Investments: Investments in bonds and mandatory redeemable preferred stocks are reported at amortized cost or market value based on their National Association of Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading, or available-for-sale. Held-to-maturity fixed investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in operations for those designated as trading and as a separate component of shareholder's equity for those designated as available-for-sale. All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to the undiscounted estimated future cash flows. Prior to April 1, 2001 under GAAP, changes in prepayment assumptions were accounted for in the same manner. Effective April 1, 2001 for GAAP purposes, all securities, purchased or retained, that represent beneficial interests in securitized assets, other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to fair value. If high credit quality securities are adjusted, the retrospective method is used. Derivative instruments that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability. Embedded derivatives are not accounted for separately from the host contract. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of shareholder's equity rather than to income as required under GAAP. 11 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Investments in real estate are reported net of related obligations rather than on a gross basis. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses include rent for the Company's occupancy of those properties. Changes between depreciated cost and admitted asset investment amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP. Valuation allowances, if necessary, are established for mortgage loans based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Prior to January 1, 2001, valuation allowances were based on the difference between the unpaid loan balance and the estimated fair value of the underlying real estate. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan's effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral. The initial valuation allowance and subsequent changes in the allowance for mortgage loans as a result of an other-than-temporary impairment are charged or credited directly to unassigned surplus, rather than being included as a component of earnings as would be required under GAAP. Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the bond or mortgage loan. That net deferral is reported as the "interest maintenance reserve" (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses would be reported in the statement of operations on a pretax basis in the period that the assets giving rise to the gains or losses are sold. The "asset valuation reserve" (AVR) provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP. 12 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Subsidiaries: The accounts and operations of the Company's subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP. Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, acquisition costs related to traditional life insurance and certain long duration accident and health insurance, to the extent recoverable from future policy revenues, would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves; for universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality, and expense margins. Separate Accounts With Guarantees: Some of the Company's separate accounts provide policyholders with a guaranteed return. These separate accounts are included in the general account for GAAP due to the nature of the guaranteed return. Nonadmitted Assets: Certain assets designated as "nonadmitted" are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet. Universal Life and Annuity Policies: Subsequent to January 1, 2001, revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and benefits incurred represent the total of surrender and death benefits paid and the change in policy reserves. Premiums received for and benefits incurred for annuity policies without mortality or morbidity risk are recorded using deposit accounting, and recorded directly to an appropriate policy reserve account, without recognizing premium income or benefits paid. Interest on these policies is reflected in other benefits. Prior to January 1, 2001, all revenues for universal life and annuity policies consist of the entire premium received and benefits incurred represent the total of surrender and death benefits paid and the change in policy reserves. Under GAAP, for universal life, premiums received in excess of policy charges would not be recognized as premium 13 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) revenue and benefits would represent the excess of benefits paid over the policy account value and interest credited to the account values. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability. Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP. Reinsurance: A liability for reinsurance balances has been provided for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to those amounts are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings. Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP. Commissions allowed by reinsurers on business ceded are reported as income when received rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP. Deferred Income Taxes: Effective January 1, 2001, deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse by the end of the subsequent calendar year, plus 2) the lesser of the remaining gross deferred income tax assets expected to be realized within one year of the balance sheet date or 10 percent of capital and surplus excluding any net deferred income tax assets, EDP equipment and operating software and any net positive goodwill, plus 3) the amount of remaining gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities. The remaining deferred income tax assets are nonadmitted. Deferred income taxes do not include amounts for state taxes. Prior to January 1, 2001, deferred federal income taxes were not provided for differences between the financial statement amounts and tax bases of assets and liabilities. Under GAAP, states taxes are included in the computation of deferred income taxes, a 14 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in future years, and a valuation allowance is established for deferred income tax assets not expected to be realizable. Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies. Statements of Cash Flow: Cash, cash equivalents, and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents include cash balances and investments with initial maturities of three months or less. The effects of these variances have not been determined by the Company, but are presumed to be material. Investments Investments in bonds [except those to which the Securities Valuation Office (SVO) of the NAIC has ascribed a value], mortgage loans on real estate and short-term investments are reported at cost adjusted for amortization of premiums and accrual of discounts. Amortization is computed using methods which result in a level yield over the expected life of the investment. The Company reviews its prepayment assumptions on mortgage and other asset-backed securities at regular intervals and adjusts amortization rates retrospectively when such assumptions are changed due to experience and/or expected future patterns. Investments in preferred stocks in good standing are reported at cost. Investments in preferred stocks not in good standing are reported at the lower of cost or market. Common stocks of unaffiliated companies are carried at market value. Common stock of the Company's affiliated insurance subsidiaries are recorded at the equity in statutory-basis net assets. Real estate is reported at cost less allowances for depreciation. Depreciation of real estate is computed principally by the straight-line method. Policy loans are reported at unpaid principal. Other invested assets consist principally of investments in various joint ventures and limited partnerships, which are recorded at equity in underlying net assets, and derivative financial instruments, which are valued in 15 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) accordance with the NAIC Accounting Practices and Procedures Manual and Practices and Procedures Manual of the SVO. All derivative instruments are used for hedging purposes and valued on a basis consistent with the hedged item. The Company uses swaps, interest rate caps and floors, options, swaptions and certain other derivatives as part of its overall interest rate risk management strategy for certain life insurance and annuity products. As the Company only uses derivatives for hedging purposes, the Company values all derivative instruments on a consistent basis as the hedged item. Upon termination, gains and losses on those instruments are included in the carrying values of the underlying hedged items and are amortized over the remaining lives of the hedged items as adjustments to investment income or benefits from the hedged items. Any unamortized gains or losses are recognized when the underlying hedged items are sold. Interest rate swap contracts are used to convert the interest rate characteristics (fixed or variable) of certain investments to match those of the related insurance liabilities that the investments are supporting. The net interest effect of such swap transactions is reported as an adjustment of interest income from the hedged items as incurred. Interest rate caps and floors are used to limit the effects of changing interest rates on yields of variable rate or short-term assets or liabilities. The initial cost of any such agreements is amortized to net investment income over the life of the agreement. Periodic payments that are receivable as a result of the agreements are accrued as an adjustment of interest income or benefits from the hedged item. Realized capital gains and losses are determined on the basis of specific identification and are recorded net of related federal income taxes. The AVR is established by the Company to provide for potential losses in the event of default by issuers of certain invested assets. These amounts are determined using a formula prescribed by the NAIC and are reported as a liability. The formula for the AVR provides for a corresponding adjustment for realized gains and losses. Under a formula prescribed by the NAIC, the Company defers, in the IMR, the portion of realized gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the security. 16 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or on real estate where rent is in arrears for more than three months. Further, income is not accrued when collection is uncertain. During 2001, 2000, and 1999, the Company excluded investment income due and accrued of $9,659, $1,518, and $-0-, respectively, with respect to such practices. Premiums Subsequent to January 1, 2001, revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and benefits incurred represent the total of surrender and death benefits paid and the change in policy reserves. These revenues are recognized when due. Premiums received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting, and recorded directly to an appropriate policy reserve account, without recognizing premium income or benefits paid. Prior to January 1, 2001, life, annuity, accident and health premiums were recognized as revenue when due. Aggregate Policy Reserves Life, annuity and accident and health benefit reserves are developed by actuarial methods and are determined based on published tables based on statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum required by law. The Company waives deduction of deferred fractional premiums upon death and refunds portions of premiums beyond the date of death. Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Tabular interest, tabular less actual reserves released, and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined by formula. 17 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, and 1980 Commissioners' Standard Ordinary Mortality Tables. The reserves are calculated using interest rates ranging from 2.00 to 9.00 percent and are computed principally on the Net Level Premium Valuation and the Commissioners' Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioners' Reserve Valuation Method. Deferred annuity reserves are calculated according to the Commissioners' Annuity Reserve Valuation Method including excess interest reserves to cover situations where the future interest guarantees plus the decrease in surrender charges are in excess of the maximum valuation rates of interest. Reserves for immediate annuities and supplementary contracts with life contingencies are equal to the present value of future payments assuming interest rates ranging from 2.00 to 12.00 percent and mortality rates, where appropriate, from a variety of tables. Annuity reserves also include guaranteed investment contracts (GIC)s and funding agreements classified as life-type contracts as defined in Statement of Statutory Accounting Principles (SSAP) No. 50 "Classifications and Definitions of Insurance or Managed Care Contracts In Force." These liabilities have annuitization options at guaranteed rates and consist of floating interest rate and fixed interest rate contracts. The contract reserves are carried at the greater of the account balance or the value as determined for an annuity with cash settlement option, on a change in fund basis, according to the Commissioners' Annuity Reserve Valuation Method. Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required midterminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims. Policy and Contract Claim Reserves Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the statement date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency, and are continually reviewed and adjusted as necessary as experience develops or new information becomes available. 18 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Liability for Deposit-Type Contracts Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include GICs, funding agreements and other annuity contracts. Deposits and withdrawals received on these contracts are recorded as a direct increase or decrease directly to the liability balance, and are not reflected as premiums, benefits or changes in reserve in the statement of operations. Separate Accounts Assets held in trust for purchases of variable annuity contracts and the Company's corresponding obligation to the contract owners are shown separately in the balance sheets. The assets in the separate accounts are valued at market. Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The Company received variable contract premiums of $191,967, $350,784, and $255,210 in 2001, 2000, and 1999, respectively. Other Income Other income consists primarily of profit sharing on reinsurance ceded and reserve adjustments on ceded modified coinsurance transactions. Reinsurance Coinsurance premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of inforce blocks of business are included in surplus and will be amortized into income over the estimated life of the policies. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. 19 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 1. Organization and Summary of Significant Accounting Policies (continued) Prior Year Adjustments Prior year adjustments charged directly to surplus in 2001 relate to various suspense account adjustments of $3,410. These adjustments were made to balances in existence at December 31, 2000 and this write off has been treated as a correction of an error. Prior year adjustments charged directly to surplus in 2000 relate to expenses incurred for sales practices litigation of $8,199, the write off of software of $30,043 and suspense adjustments of $5,466. There was no overall impact to surplus resulting from the software write off as this item was previously nonadmitted. Prior year adjustments charged directly to surplus in 1999 relate primarily to expenses incurred for sales practices litigation of $7,710 and a suspense asset adjustment of $7,000. Reclassifications Certain reclassifications have been made to the 2000 and 1999 financial statements to conform to the 2001 presentation. 2. Accounting Changes The Company prepares its statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the State of Iowa. Effective January 1, 2001, the State of Iowa required that insurance companies domiciled in the State of Iowa prepare their statutory-basis financial statements in accordance with the NAIC Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the State of Iowa Commissioner of Insurance. Accounting changes adopted to conform to the provisions of the NAIC Accounting Practices and Procedures Manual are reported as changes in accounting principles. The cumulative effect of changes in accounting principles is reported as an adjustment to unassigned surplus in the period of the change in accounting principle. The cumulative effect is the difference between the amount of capital and surplus at the beginning of the year and the amount of capital and surplus that would have been reported at that date if the new accounting principles had been applied retroactively for all prior periods. As a 20 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 2. Accounting Changes (continued) result of these changes, the Company reported a change of accounting principle, as an adjustment that increased capital and surplus, of $59,703 as of January 1, 2001. This amount was made up by the establishment of deferred income tax assets of $58,009 and investment adjustments that increased surplus by $12,724, offset by the establishment of a guaranty fund accrual of $4,317 and the establishment of a vacation accrual amount of $6,713. 3. Fair Values of Financial Instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Investment securities: Fair values for fixed maturity securities (including preferred stocks) are based on quoted market prices, where available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placements, are estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, and maturity of the investments. The fair values for equity securities, other than affiliated entities, are based on quoted market prices. Mortgage loans on real estate and policy loans: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flow analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans. The fair value of policy loans is assumed to equal their carrying amount. Interest rate floors, caps, swaps, and swaptions and currency swaps: Estimated fair value of interest rate floors and caps are based upon the latest quoted market price. Estimated fair value of swaps, including interest rate swaps and swaptions and currency swaps, are based upon the pricing differential for similar swap agreements. The carrying value of these items is included with other invested assets on the balance sheet. Cash and short-term investments: The carrying amounts reported in the balance sheet for these instruments approximate their fair values. Net short-term notes receivable from affiliates: The fair value for net short-term notes receivable from affiliates approximate their carrying value. 21 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 3. Fair Values of Financial Instruments (continued) Separate Account Assets: The fair value of separate account assets are based on quoted market prices. Investment contracts: Fair values for the Company's liabilities under investment-type insurance contracts are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. Separate Account Annuity Liabilities: Separate account annuity liabilities approximate the market value of the separate account assets less a provision for the present value of future profits related to the underlying contracts. Fair values for the Company's insurance contracts other than investment contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company's overall management of interest rate risk, which minimizes exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts. 22 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 3. Fair Values of Financial Instruments (continued) The following sets forth a comparison of the fair values and carrying amounts of the Company's financial instruments:
December 31 2001 2000 -------------------------------- --------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------------------------------- --------------------------------- Admitted assets Bonds $13,994,027 $14,318,212 $14,404,438 $14,562,288 Preferred stocks other than affiliates 71,829 71,781 77,603 78,621 Common stocks other than affiliates 421,560 421,560 600,594 600,594 Mortgage loans on real estate 1,691,144 1,725,209 1,140,481 1,170,426 Policy loans 411,306 411,306 417,849 417,849 Floors, caps, options and swaptions 20,460 23,573 47,543 109,800 Interest rate and currency swaps 19,037 (9,528) 10,994 11,367 Cash and short-term investments 172,913 172,913 100,681 100,681 Net short-term notes receivable from affiliates 114,795 114,795 23,702 23,702 Separate account assets 4,124,050 4,124,050 4,191,889 4,191,889 Liabilities Investment contract liabilities 7,129,511 7,023,710 7,275,853 7,187,031 Separate account annuity liabilities 3,950,263 4,022,537 3,919,092 4,022,404
4. Investments The Company's investment in common stocks of its wholly-owned subsidiaries, based on the statutory capital and surplus of the subsidiaries, is summarized as follows:
Carrying Cost Amount ------------------------------------ December 31, 2001 TALIAC $298,418 $931,476 TONY 98,600 32,606 Other 18,330 - ------------------------------------ $415,348 $964,082 ====================================
23 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued)
Carrying Cost Amount ------------------------------------ December 31, 2000 TALIAC $238,418 $823,859 TONY 83,600 25,470 Other 13,230 174 ------------------------------------ $335,248 $849,503 ====================================
Certain statutory basis financial information with respect to TALIAC and TONY, the Company's wholly-owned insurance subsidiaries, is as follows:
December 31 2001 2000 ------------------------------------ Summary statutory-basis balance sheets Cash and investments $ 17,439,047 $ 15,244,044 Other assets 6,257,332 6,492,031 ------------------------------------ Total assets 23,696,379 21,736,075 Aggregate reserves 13,332,009 11,067,366 Other liabilities 9,400,288 9,819,380 ------------------------------------ Total liabilities 22,732,297 20,886,746 ------------------------------------ Total capital and surplus $ 964,082 $ 849,329 ====================================
Year Ended December 31 2001 2000 1999 ----------------------------------------------- Summary statutory-basis statements of income Revenues $6,606,843 $7,429,428 $7,509,559 Expenses and taxes 6,683,417 7,342,603 7,453,829 ----------------------------------------------- Net income $ (76,574) $ 86,825 $ 55,730 ===============================================
24 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) The carrying value and estimated fair value of investments in bonds and preferred stock were as follows:
Gross Gross Estimated Carrying Unrealized Unrealized Fair Value Gains Losses Value -------------------------------------------------------------- December 31, 2001 United States Government and agencies $ 589,852 $ 5,275 $ 339 $ 594,788 State, municipal and other government 241,086 21,819 840 262,065 Public utilities 1,277,568 51,514 21,107 1,307,975 Industrial and miscellaneous 8,779,383 437,071 158,900 9,057,554 Mortgage and other asset- backed 3,106,138 61,561 71,869 3,095,830 securities -------------------------------------------------------------- 13,994,027 577,240 253,055 14,318,212 Preferred stocks 71,829 1,281 1,329 71,781 -------------------------------------------------------------- $ 14,065,856 $ 578,521 $ 254,384 $ 14,389,993 ============================================================== December 31, 2000 United States Government and agencies $ 722,783 $ 8,263 $ 959 $ 730,087 State, municipal and other government 344,859 53,300 669 397,490 Public utilities 1,453,514 56,108 28,252 1,481,370 Industrial and miscellaneous 9,255,458 296,606 285,486 9,266,578 Mortgage and other asset- backed securities 2,627,824 77,521 18,582 2,686,763 -------------------------------------------------------------- 14,404,438 491,798 333,948 14,562,288 Preferred stocks 77,603 6,622 5,604 78,621 -------------------------------------------------------------- $ 14,482,041 $ 498,420 $ 339,552 $ 14,640,909 ==============================================================
The carrying value and estimated fair value of bonds at December 31, 2001, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Carrying Fair Amount Value ------------------------------------ Due in one year or less $ 349,953 $ 357,115 Due after one year through five years 2,601,682 2,681,159 Due after five years through ten years 2,361,549 2,431,912 Due after ten years 5,574,705 5,752,196 Mortgage and other asset-backed securities 3,106,138 3,095,830 ------------------------------------ $ 13,994,027 $ 14,318,212 ====================================
25 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) A detail of net investment income is presented below:
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Interest on bonds and preferred stocks $1,090,350 $1,068,590 $ 994,418 Dividends from common stocks 2,390 5,332 53,192 Interest on mortgage loans 106,538 49,068 28,314 Rental income on real estate 25,496 30,180 28,008 Interest on policy loans 28,095 22,994 27,086 Cash and short-term investments 9,982 5,938 10,526 Other investment income 2,622 18,427 16,343 ------------------------------------------------------ 1,265,473 1,200,529 1,157,887 Less investment expenses (70,806) (92,315) (32,845) ------------------------------------------------------ Net investment income $1,194,667 $1,108,214 $ 1,125,042 ======================================================
Proceeds from sales and maturities of bonds and related gross realized capital gains and losses were as follows:
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Proceeds $ 8,563,654 $5,872,493 $2,993,985 ====================================================== Gross realized gains $ 221,180 $ 94,531 $ 46,135 Gross realized losses (200,610) (157,019) (43,142) ------------------------------------------------------ Net realized capital gains (losses) $ 20,570 $ (62,488) $ 2,993 ======================================================
Gross realized losses in 2001 include $94,439 that relates to losses recognized on other than temporary declines in market values of debt securities. At December 31, 2001, investments with an aggregate carrying value of $4,165 were on deposit with regulatory authorities or were restrictively held in bank custodial accounts for the benefit of such regulatory authorities as required by statute. 26 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) Realized investment gains (losses) and changes in unrealized gains (losses) for investments are summarized below:
Realized ------------------------------------------------- Year Ended December 31 2001 2000 1999 ------------------------------------------------- Bonds $ 20,570 $ (62,488) $ 2,993 Preferred stocks (9,175) 6,124 (6,085) Common stocks 19,878 499,621 41,011 Derivatives 90,144 (103) (92,870) Gain from transfer of Taiwan branch (Note 15) 75,125 - - Other 5,847 (16,983) 2,470 ------------------------------------------------ 202,389 426,171 (52,481) Federal income tax effect (114,082) (178,914) 71,941 Transfer from (to) interest maintenance reserve (74,697) 44,940 (1,945) ------------------------------------------------ Net realized capital gains on investments $ 13,610 $ 292,197 $ 17,515 ================================================
The derivative loss of $92,870 in 1999 primarily resulted from the net pretax loss incurred on an ineffective equity collar hedge (see Note 11).
Change in Unrealized ------------------------------------------------ Year Ended December 31 2001 2000 1999 ------------------------------------------------ Bonds $ 5,670 $ (10,264) $ (5,756) Preferred stocks 2,346 (4,499) 2,271 Common stocks (75,874) (512,790) 125,177 Mortgage loans 1,745 (1,791) - Derivatives (36,737) 1,342 - Other invested assets (7,931) (750) (2,272) ------------------------------------------------ Change in unrealized capital gains $ (110,781) $(528,752) $ 119,420 ================================================
27 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) Gross unrealized gains and gross unrealized losses on common stock of unaffiliated entities are as follows:
December 31 2001 2000 ------------------------------- Unrealized gains $ 40,756 $172,202 Unrealized losses (30,389) (51,482) ------------------------------- Net unrealized gains $ 10,367 $120,720 ===============================
During 2001, the Company issued mortgage loans with interest rates ranging from 3.90% to 8.72%. The maximum percentage of any one mortgage loan to the value of the underlying real estate at origination was 89%. The Company requires all mortgaged properties to carry fire insurance equal to the value of the underlying property. At December 31, 2001 and 2000, the Company held a mortgage loan loss reserve in the AVR of $12,167 and $6,792, respectively. The mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
Geographic Distribution Property Type Distribution --------------------------------------------------- ---------------------------------------------------- December 31 December 31 2001 2000 2001 2000 -------------------- -------------------- Pacific 29% 35% Office 36% 38% South Atlantic 25 24 Apartment 19 18 Middle Atlantic 10 11 Retail 19 18 W. South Central 9 5 Industrial 17 9 W. North Central 8 5 Other 9 17 Mountain 7 7 E. North Central 7 5 New England 3 5 E. South Central 2 3
The operations of the Company are subject to risk of interest rate fluctuations to the extent that there is a difference between the cash flows from the Company's interest-earning assets and the cash flows related to its liabilities. In the normal course of its 28 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) operations, the Company hedges some of its interest rate risk with derivative financial instruments. These derivatives comprise primarily interest rate swap agreements, interest rate floor agreements, foreign currency swap agreements, call option agreements, S&P 500 call option agreements, and options to enter into interest rate swap agreements (swaptions). The Company does not use derivatives financial instruments for trading or speculative purposes, nor is the Company a party to any leveraged derivative contracts. Interest swap agreements are intended to help the Company more closely match the cash flows received from its assets to the payments on its liabilities. The Company's interest rate swap agreements generally provide that one party pays interest at a floating rate in relation to movements in an underlying index and the other party pays interest at a fixed rate. Generally, no cash is exchanged at the outset of the contract, and no principal payments are made by either party. A single net payment is made usually by one counterparty at each settlement date. Interest rate swaps that terminate prior to maturity are generally settled for the fair value of the swap on the termination date. Interest rate floor agreements purchased by the Company provide for the receipt of payments in the event interest rates fall below specified levels. Interest rate floors are intended to mitigate the Company's risk of reinvesting the cash flow it receives from calls, mortgage prepayments, and redemptions on its investment portfolio at lower interest rates. A single premium payment is made by the Company at the beginning of the contract. Once the interest rate floor becomes effective, if the actual rate moves below the agreed upon floor rate, the Company receives payment equal to the difference between the actual rate and the floor rate times the notional amount of the agreement. The Company purchases swaptions to help manage the risk of interest rate fluctuations by providing an option to enter into an interest rate swap in the event of unfavorable interest rate movements. A single premium payment is made by the purchaser at the beginning of the contract. Once the option is exercised, the parties enter into an interest rate swap agreement. The Company may issue foreign denominated assets or liabilities. Cross currency swaps are utilized to convert the asset or liability to a U.S. denominated security. A cash payment is often exchanged at the outset of the swap contract that represents the present value of cash flows of the instrument. This may result because the derivative is being purchased between coupon periods or the rates in the swap are not at market. A single net 29 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) payment is exchanged each due date as well as at the end of the contract. Each asset or liability is hedged individually and terms of the swap must meet the terms of the underlying instrument. These swaps meet hedge accounting rules and are carried at book value. If a swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in the IMR or AVR if the underlying instrument receives that treatment. Interest rate basis swaps are used in the overall asset/liability management process to modify the interest rate characteristics of the underlying liability to mitigate the basis risk of assets and liabilities resetting on different indices. These interest rate swaps generally provide for the exchange of the difference between a floating rate on one index to a floating rate of another based upon an underlying notional amount. Generally, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. These swaps meet hedge accounting rules and are not marked to their current market value in the financial statements. If a swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses are recognized in the financial statements when incurred. The Company issues products which provide the customer a return based on the S&P 500 Index. The Company uses S&P 500 futures contracts and/or S&P options to hedge the option risk associated with the products. These programs require a Black-Scholes formula to be used to calculate the delta of the liability option and the delta of the futures contracts and options; the difference between the deltas must be within a specified tolerance. Futures are marked to market on a daily basis and a cash payment is made/received by the Company. These payments are recognized as realized gains or losses in the financial statements. The Company has credit risk exposure to the extent that a counterparty fails to make payment on its obligation. While the Company is exposed to credit risk in the event of nonperformance by the other party, nonperformance is not anticipated due to the credit rating of the counterparties. At December 31, 2001, all of the Company's derivative financial instruments were with financial institutions rated A or better by one or more of the major credit rating agencies. 30 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 4. Investments (continued) Market risk is the risk the Company faces from a change in the market value of a derivative instrument. The Company uses derivatives as hedges, consequently, when the value of the derivative changes, the value of a corresponding hedged asset or liability will move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk). The Company mitigates this risk by actively measuring and monitoring correlation and taking corrective action as necessary. At December 31, 2001 and 2000, the Company's outstanding financial instruments with on and off balance sheet risks, shown in notional amounts are summarized as follows:
Notional Amount ------------------------------------ 2001 2000 ------------------------------------ Derivative securities Interest rate and currency swaps: Receive float-pay float $ 68,979 $ 15,833 Receive fixed-pay float 1,462,521 3,342,842 Receive float-pay fixed 1,237,938 700,742 Interest rate floor agreements 508,348 500,445 Swaptions 850,000 6,500,000 Call options 31,399 32,199
5. Reinsurance The Company is involved in both the cession and assumption of reinsurance with other companies, including affiliated companies. Risks are reinsured with other companies to permit the recovery of a portion of the direct losses. These reinsured risks are treated as though, to the extent of the reinsurance, they are risks for which the Company is not liable. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded. The Company remains liable to the extent the reinsuring companies do not meet their obligations under these reinsurance treaties. 31 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 5. Reinsurance (continued) Premiums earned reflect the following reinsurance assumed and ceded amounts:
Ceded/Retroceded to Assumed from ------------------------------------------------------ Direct Affiliated Unaffiliated Affiliated Unaffiliated Net Amount Companies Companies Companies Companies Amount ----------------------------------------------------------------------------------- Year ended December 31, 2001: Premium revenue $ 2,226,471 $ 262,322 $ 1,220,411 $ 248,816 $ 743,637 $ 1,736,191 =================================================================================== At December 31, 2001: Reserves for future policy benefits $ 13,376,871 $ 3,095,365 $ 3,565,994 $ 591,624 $ 1,852,458 $ 9,159,594 Policy and contract claims payable 232,878 23,654 532,401 4,612 456,075 137,510 ----------------------------------------------------------------------------------- $ 13,609,749 $ 3,119,019 $ 4,098,395 $ 596,236 $ 2,308,533 $ 9,297,104 =================================================================================== Year ended December 31, 2000: Premium revenue $ 2,623,910 $ 199,290 $ 1,574,257 $ 359,387 $ 1,359,070 $ 2,568,820 =================================================================================== At December 31, 2000: Reserves for future policy benefits $ 13,558,393 $ 3,402,793 $ 3,590,670 $ 524,069 $ 2,355,940 $ 9,444,939 Policy and contract claims payable 289,280 34,769 267,285 4,844 402,406 394,476 ----------------------------------------------------------------------------------- $ 13,847,673 $ 3,437,562 $ 3,857,955 $ 528,913 $ 2,758,346 $ 9,839,415 =================================================================================== Year ended December 31, 1999: Premium revenue $ 2,281,775 $ 112,947 $ 2,274,338 $ 157,197 $ 1,880,044 $ 1,931,731 =================================================================================== At December 31, 1999: Reserves for future policy benefits $ 14,241,446 $ 4,124,327 $ 3,056,908 $ 233,126 $ 2,401,859 $ 9,695,196 Policy and contract claims payable 127,030 40,341 137,047 1,824 345,323 296,789 ----------------------------------------------------------------------------------- $ 14,368,476 $ 4,164,668 $ 3,193,955 $ 234,950 $ 2,747,182 $ 9,991,985 ===================================================================================
32 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 5. Reinsurance (continued) During 2001, the Company novated certain traditional life insurance contracts to AUSA Life Insurance Company, Inc. (AUSA), an affiliate, via an assumption reinsurance transaction. Under the terms of this agreement, a significant portion of the future statutory-basis profits from the contracts assumed by AUSA will be passed through to the Company as an experience rated refund. The Company recorded a deferred liability of $14,281 as a result of this transaction. The accretion of the deferred liability for 2001 was $1,428. In 2000, the Company entered into a reinsurance transaction with two affiliated companies in which the Company assumed certain structured settlement liabilities on a funds withheld basis. As a result, the Company has recorded a related asset of $562,853 at December 31, 2001 and $262,448 at December 31, 2000. During 2001, the Company entered into a reinsurance transaction with Transamerica International Re (Bermuda) Ltd., an affiliate of the Company. Under the terms of this transaction, the Company ceded the obligation of future guaranteed minimum death benefits included in certain of its variable annuity contracts. The gain on the transaction of $28,967 was credited directly to unassigned surplus on a net of tax basis. The Company holds collateral from this affiliate in the form of letters of credit of $107,803, covering this reinsurance agreement and others. 6. Income Taxes The components of the Company's net deferred income tax assets are comprised of the following: December 31, January 1, 2001 2001 ----------------------------- Gross deferred income tax assets $419,734 $434,058 Gross deferred income tax liabilities 83,709 158,633 Deferred income tax assets nonadmitted 230,955 217,415 ----------------------------- Net admitted deferred income tax asset $105,070 $ 58,010 ============================= 33 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 6. Income Taxes (continued) The main components of deferred income tax amounts, as well as the net change for the year ended December 31, 2001, are as follows:
December 31, 2001 January 1, 2001 Net Change ------------------------------------------------------ Deferred income tax assets: Nonadmitted assets $ 10,312 $ 18,412 $ (8,100) Depreciable personal property 4,986 883 4,103 Policyholder dividend 4,818 4,833 (15) Provision for contingent experience rated refund 10,979 10,934 45 Tax basis deferred acquisitions costs 137,730 145,515 (7,785) Reserves 177,081 235,575 (58,494) Unrealized capital losses 53,850 - 53,850 Other 19,978 17,906 2,072 ------------------------------------------------------ Deferred income tax assets $ 419,734 $ 434,058 $ (14,324) ====================================================== Deferred income tax assets nonadmitted $ 230,955 $ 217,415 $ 13,540 ====================================================== Deferred income tax liabilities: Partnerships $ 6,073 $ 5,907 $ 166 Agent deferred compensation 20,243 25,919 (5,676) Real estate 1,543 3,276 (1,733) (S)807(f) liabilities 2,807 2,992 (185) Separate account seed money 5,705 - 5,705 Software/system development cost 6,094 16,669 (10,575) Unrealized capital gains (losses) 39,006 103,469 (64,463) Other 2,238 401 1,837 ------------------------------------------------------ Total deferred income tax liabilities $ 83,709 $ 158,633 $ (74,924) ======================================================
34 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 6. Income Taxes (continued) Federal income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to gain from operations before federal income tax expense and net realized capital gains on investments for the following reasons:
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Income tax expense (benefit) computed at the federal statutory rate (35%) $ 12,813 $(29,629) $ 61,196 Agent deferred compensation 5,676 - - Deferred acquisition costs - tax basis (7,785) 6,082 13,326 Dividends received deduction (2,266) (1,420) (17,500) IMR amortization (220) 826 - Investment income items (4,688) - (2,399) Prior year under accrual 49,533 46,125 24,640 Reinsurance adjustments 6,093 - (14,442) Tax credits (31,301) (27,111) (16,000) Tax reserve valuation (46,303) 11,844 (1,153) All other adjustments 6,873 (565) (17,338) ------------------------------------------------------ Federal income tax expense (benefit) $(11,575) $ 6,152 $ 30,330 ======================================================
For federal income tax purposes, the Company joins in a consolidated income tax return filing with other affiliated companies. Under the terms of a tax sharing agreement between the Company and its affiliates, the Company computes federal income tax expense as if it were filing a separate income tax return, except that tax credits and net operating loss carryforwards are determined on the basis of the consolidated group. Additionally, the alternative minimum tax is computed for the consolidated group and the resulting tax, if any, is allocated back to the separate companies on the basis of the separate companies' alternative minimum taxable income. Prior to July 21, 1999, Transamerica Occidental Life Insurance Company and includible subsidiaries were included in a life/nonlife consolidation with Transamerica Corporation. The Company's federal income tax returns have been examined and closing agreements have been executed with the Internal Revenue Service through 1995. The examination fieldwork for 1996 and 1997 has been completed and a petition has been filed in the tax court. An examination is underway for 1998 and for the period from January 1 through July 21, 1999 (short tax period). 35 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 6. Income Taxes (continued) Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959, a portion of statutory income was not subject to current taxation but was accumulated for income tax purposes in a memorandum account referred to as the "policyholders' surplus account" (PSA). No federal income taxes have been provided for in the financial statements on income deferred in the PSA ($117,701 at December 31, 2001). To the extent that dividends are paid from the amount accumulated in the PSA, net earnings would be reduced by the amount of tax required to be paid. Should the entire amount in the PSA account become taxable, the tax thereon computed at the current rates would amount to approximately $41,195. 7. Policy and Contract Attributes A portion of the Company's policy reserves and other policyholders' funds (including separate account liabilities) relates to liabilities established on a variety of the Company's annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, are summarized as follows:
December 31 2001 2000 ------------------------------- ------------------------------- Amount Percent Amount Percent ------------------------------- ------------------------------- Subject to discretionary withdrawal with adjustment: With market value adjustment $ 2,901,417 16% $ 994,166 7% At book value less surrender charge 472,377 3 537,251 4 At market value 2,702,165 15 3,367,374 26 Subject to discretionary withdrawal without adjustment 1,039,197 6 1,419,091 11 Not subject to discretionary withdrawal provision 10,497,679 60 6,760,644 52 ------------------------------- ------------------------------- Total annuity reserves and deposit liabilities 17,612,835 100% 13,078,526 100% ============== ============== Less reinsurance ceded (5,065,994) (5,209,341) ---------------- ---------------- Net annuity reserves and deposit liabilities $ 12,546,841 $ 7,869,185 ================ ================
Funding agreements are included in the above table for December 31, 2001 but not included for December 31, 2000. 36 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 7. Policy and Contract Attributes (continued) Certain separate accounts held by the Company represent funds which are administered for pension plans. The assets consist primarily of fixed maturities and equity securities and are carried at estimated fair value. The Company provides a minimum guaranteed return to policyholders of certain separate accounts. Certain other separate accounts do not have any minimum guarantees and the investment risks associated with market value changes are borne entirely by the policyholder. Information regarding the separate accounts of the Company is as follows:
Nonindexed Nonindexed Guaranteed Nonguaranteed Guaranteed Guaranteed More Separate Indexed Less Than 4% Than 4% Accounts Total ------------------------------------------------------------------------ Premiums, deposits and other considerations for the year ended December 31, 2001 $ - $ 478,757 $ 555,299 $ 190,187 $1,224,243 ======================================================================== For accounts with assets at market value as of December 31, 2001 $ 11,151 $ 472,869 $ 777,765 $2,660,485 $3,922,270 ======================================================================== Reserves by withdrawal characteristics as of December 31, 2001: At market value $ - $ - $ - $2,613,016 $2,613,016 Not subject to discretionary withdrawal 11,151 472,869 777,765 47,469 1,309,254 ------------------------------------------------------------------------ $ 11,151 $ 472,869 $ 777,765 $2,660,485 $3,922,270 ======================================================================== Premiums, deposits and other considerations for the year ended December 31, 2000 $ - $ - $ - $ 349,535 $ 349,535 ======================================================================== Reserves for separate accounts as of December 31, 2000 $ 17,528 $ - $ 754,619 $3,188,901 $3,961,048 ======================================================================== Reserves by withdrawal characteristics as of December 31, 2000: At market value $ - $ - $ - $3,188,901 $3,188,901 Not subject to discretionary withdrawal 17,528 - 754,619 - 772,147 ------------------------------------------------------------------------ $ 17,528 $ - $ 754,619 $3,188,901 $3,961,048 ========================================================================
Comparative information for 1999 is not available. 37 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 7. Policy and Contract Attributes (continued) A reconciliation of the amounts transferred to and from the Company's separate accounts is presented below:
Year Ended December 31 2001 2000 1999 ------------------------------------------------------ Transfer as reported in the summary of operations of the separate accounts statement: Transfers to separate accounts $ 191,967 $350,784 $ 255,210 Transfers from separate accounts 230,254 181,133 217,729 ------------------------------------------------------ Net transfers to separate accounts (38,287) 169,651 37,481 Other reconciling adjustments (4,328) 5,699 13,091 ------------------------------------------------------ Net transfers as reported in the statements of operations $ (42,615) $175,350 $ 50,572 ======================================================
At December 31, 2001, the Company had variable annuities with guaranteed benefits as follows:
Benefit and Subjected Amount of Type of Risk Account Value Reserve Held -------------------------------------------------------------------------------------------------------- Guaranteed minimum income benefit $71,147 $315
Reserves on the Company's traditional life insurance products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policy's paid-through date to the policy's next anniversary date. At December 31, 2001 and 2000, these assets (which are reported as premiums deferred and uncollected) and the amounts of the related gross premiums and loadings, are as follows: 38 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 7. Policy and Contract Attributes (continued)
Gross Loading Net ------------------------------------------------------ December 31, 2001 Life and annuity: Ordinary first-year business $ 78,769 $13,701 $ 65,068 Ordinary renewal business 280,273 16,335 263,938 Group life direct business 4,058 - 4,058 Reinsurance ceded (104,839) - (104,839) ------------------------------------------------------ 258,261 30,036 228,225 Accident and health 15,179 - 15,179 ------------------------------------------------------ $ 273,440 $30,036 $ 243,404 ====================================================== December 31, 2000 Life and annuity: Ordinary first-year business $ 30,778 $17,890 $ 12,888 Ordinary renewal business 411,229 17,145 394,084 Group life direct business 4,968 - 4,968 Reinsurance ceded (212,969) - (212,969) ------------------------------------------------------ 234,006 35,035 198,971 Accident and health 16,344 - 16,344 ------------------------------------------------------ $ 250,350 $35,035 $ 215,315 ======================================================
At December 31, 2001 and 2000, the Company had insurance in force aggregating $38,795,528 and $12,725,579, respectively, in which the gross premiums are less than the net premiums required by the standard valuation standards established by the Insurance Division, Department of Commerce, of the State of Iowa. The Company established policy reserves of $53,483 and $125,826 to cover these deficiencies at December 31, 2001 and 2000, respectively. 8. Dividend Restrictions The Company is subject to limitations, imposed by the State of Iowa, on the payment of dividends to its parent company. Generally, dividends during any twelve-month period may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of the Company's statutory surplus as of the preceding December 31, or (b) the Company's statutory gain from operations before net realized capital gains (losses) on 39 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 8. Dividend Restrictions (continued) investments for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the maximum payment which may be made in 2002, without the prior approval of insurance regulatory authorities, is $203,193. Life/health insurance companies are subject to certain Risk-Based Capital (RBC) requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life/health insurance company is to be determined based on the various risk factors related to it. At December 2001, the Company meets the RBC requirements. 9. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities During 2001, the Company sold $55,838 of agent balances without recourse to Money Services, Inc., an affiliated company. The Company did not realize a gain or loss as a result of the sale. 10. Pension Plan and Other Postretirement Benefits Beginning in 2001, the Company's employees participate in a qualified benefit plan sponsored by AEGON USA, Inc. (AEGON), an affiliate. The Company has no legal obligation for the plan. The Company recognizes pension expense equal to its allocation from AEGON. The pension expense is allocated among the participating companies based on the SFAS No. 87 expense as a percent of salaries. The benefits are based on years of service and the employee's compensation during the highest five consecutive years of employment. Pension expense aggregated $3,515 for the year ended December 31, 2001. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974. Prior to 2001, substantially all employees were covered by noncontributory defined plans sponsored by the Company and Transamerica. The Company's total pension costs were approximately $1,100 and $800 for the years ended December 31, 2000, and 1999, respectively. In addition to pension benefits, in 2001 the Company participates in plans sponsored by AEGON that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The expenses of the postretirement plans are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed 40 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 10. Pension Plan and Other Postretirement Benefits (continued) $496 for the year ended December 31, 2001. Prior to 2001, the Company participated in various contributory defined benefit programs sponsored by Transamerica that provided medical and certain other benefits to eligible retirees. Postretirement benefit costs charged to income was approximately $3,000 for each of the years ended December 31, 2000 and 1999. 11. Related Party Transactions The Company shares certain offices, employees and general expenses with affiliated companies. Beginning in 2000, the Company receives data processing, investment advisory and management, marketing and administration services from affiliates. During 2001 and 2000, the Company paid $31,310 and $21,323, respectively, for these services, which approximates their costs to the affiliates. Payables to affiliates bear interest at the thirty-day commercial paper rate. The Company received capital contributions of $300,000, $80,000 and $137,062 from its parent in 2001, 2000 and 1999, respectively. At December 31, 2001, the Company has short-term notes receivable from affiliates of $114,795. At December 31, 2000, the Company has short-term notes receivable from affiliates of $155,000 and short-term notes payable to affiliates of $131,298. Interest on these accrue at the thirty-day commercial paper rate at the time of issuance. In March 1999, the Company entered into an equity collar (which expired December 17, 1999), with an unrelated party to hedge the price fluctuations of their unaffiliated equity securities portfolio. In addition, Transamerica Corporation agreed to protect the Company from any ineffectiveness in the hedge that would expose the Company to loss net of tax benefit. As a result of the ineffectiveness of the collar with the unrelated party and the payment that the Company was required to make upon settlement, Transamerica Corporation made a payment of approximately $172,000 to the Company in December 1999. 41 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 12. Commitments and Contingencies The Company is a defendant in various legal actions arising from its operations. These include legal actions similar to those faced by many other major life insurers which allege damages related to sales practices for universal life policies sold between January 1981 and June 1996. In one such action, the Company and plaintiff's counsel entered into a settlement which was approved on June 26, 1997. The settlement required prompt notification to affected policyholders. Administrative and policy benefit costs associated with the settlement of $8,199, and $7,710 after-tax have been incurred in 2000 and 1999, respectively, and reflected in these statements as prior period adjustments as a direct charge to unassigned surplus. Related costs incurred in 2001 were not significant. Additional costs relating to ancillary litigation are not expected to be material and will be incurred over a period of years. In the opinion of the Company, any ultimate liability which might result from other litigation would not have a materially adverse effect on the combined financial position of the Company or the results of its operations. The Company has contingent commitments for $108,698 as of December 31, 2001 to provide additional funding for various joint ventures, partnerships, and limited liability companies. The Company may pledge assets as collateral for transactions involving funding agreements and reverse repurchase agreements. At December 31, 2001, the Company has pledged invested assets with a carrying value and market value of $482,999 and $486,509, respectively in conjunction with these transactions. At December 31, 2001, the Company had entered into multiple agreements with notional amounts of $504,704 for which it was paid a fee to provide standby letter of credit. The Company believes the chance of draws or other performance features being exercised under these agreements is minimal. The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company, except where right of offset against other taxes paid is allowed by law; amounts available for future offsets are recorded as an asset on the Company's balance sheet. The future obligation has been based on the most recent information available from the National Organization 42 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 12. Commitments and Contingencies (continued) of Life and Health Insurance Guaranty Associations (NOLHGA). Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $5,712 and $335 at December 31, 2001 and 2000, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense was $197 and $1,247 for the years ended December 31, 2001 and 2000, respectively. 13. Leases The Company leases office buildings under various noncancelable operating lease agreements. At December 31, 2001, the future minimum aggregate rental commitments are as follows: 2002 $ 5,394 2003 5,398 2004 5,467 2005 5,517 2006 5,524 Thereafter 20,207 The Company owns a building that is rented to others. Future minimum lease payments under noncancelable leasing arrangements as of December 31, 2001 are as follows: 2002 $ 5,926 2003 4,575 2004 4,744 2005 4,457 2006 4,381 Thereafter 29,349 43 Transamerica Occidental Life Insurance Company Notes to Financial Statements - Statutory Basis (continued) (Dollars in Thousands) 14. Dividend of Subsidiary to Stockholder On December 1, 2000, the Company paid a non-cash dividend to its stockholder, Transamerica Insurance Corporation, consisting of 100% of the outstanding common and preferred stock of Transamerica Life Insurance Company of Canada. The dividend of $210,386 represented the Company's statutory-basis carrying value of the stock at the time it was distributed. 15. Taiwan Branch During 2000, the Company increased its ownership of its Taiwan branch operations to 100% through a buyout of its 60% partner, Pacific Life Insurance Ltd., for a payment of $19,192. A receivable from the partner of $35,510 was also written off in conjunction with the buy-out. Additional costs of $17,100 were incurred as a result of the scheduled termination of reinsurance treaties with three unaffiliated companies. These items were recorded as a charge to unassigned surplus on a net of tax basis. During 2001, the Company transferred its entire interest in its Taiwan branch to AEGON N.V. Assets of $96,241 were contributed to AEGON N.V. and liabilities of $162,303 were assumed by AEGON N.V. These assets primarily consisted of invested assets and the liabilities primarily consisted of insurance reserves. In addition, AEGON N.V. also paid cash of $9,063 to the Company. The net impact of $75,125 was recognized as a realized gain. 16. Reconciliation to Insurance Department Annual Statement The following table reconciles net income and total capital and surplus as reported in the Annual Statement filed with the Insurance Department to the amounts reported in the accompanying financial statements as of and for the year ended December 31, 2000:
Total Capital Net Income and Surplus ------------------------------- Amounts reported in Annual Statement $251,510 $1,594,585 Adjustments related to reinsurance treaties (97,108) (97,108) Adjustments to policy and contract claim reserves 20,000 20,000 Tax effect of adjustments 26,988 26,988 ------------------------------- Amounts reported herein $201,390 $1,544,465 ===============================
There were no such reconciliation items as of and for the year ended December 31, 2001. 44 Statutory-Basis Financial Statement Schedules Transamerica Occidental Life Insurance Company Summary of Investments - Other Than Investments in Related Parties (Dollars in Thousands) December 31, 2001 Schedule I
Amount at Which Shown Market in the Type of Investment Cost (1) Value Balance Sheet ----------------------------------------------------------------------------------------------------------- Fixed maturities Bonds: United States government and government agencies and authorities $ 631,453 $ 638,177 $ 631,453 States, municipalities and political subdivisions 464,209 491,683 464,209 Foreign governments 103,840 109,718 103,840 Public utilities 1,277,568 1,307,975 1,277,568 All other corporate bonds 11,516,957 11,770,659 11,516,957 Preferred stock 71,829 71,781 71,829 ------------------------------------------------------------ Total fixed maturities 14,065,856 14,389,993 14,065,856 Equity securities Common stocks: Banks, trust and insurance 58,376 51,360 51,360 Industrial, miscellaneous and all other 352,817 370,200 370,200 ------------------------------------------------------------ Total equity securities 411,193 421,560 421,560 Mortgage loans on real estate 1,691,144 1,691,144 Real estate 85,496 85,496 Policy loans 411,306 411,306 Other long-term investments 601,144 601,144 Cash and short-term investments 172,913 172,913 -------------------- --------------------- Total investments $ 17,439,052 $ 17,449,419 ==================== =====================
(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual discounts. 45 Transamerica Occidental Life Insurance Company Supplementary Insurance Information (Dollars in Thousands) December 31, 2001 Schedule III
Benefits, Claims Future Policy Policy and Net Losses and Other Benefits and Unearned Contract Premium Investment Settlement Operating Premiums Expenses Premiums Liabilities Revenue Income* Expenses Expenses* Written ----------------------------------------------------------------------------------------------------- Year ended December 31, 2001 Individual life $ 5,327,935 $ - $ 200,565 $ 1,153,081 $ 333,597 $ 1,067,494 $ 579,700 Individual health 16,832 33,833 13,788 60,607 12,916 (46,229) 46,837 $103,036 Group life and health 22,853 2,279 108,833 29,558 708 175,474 41,039 30,958 Annuity 3,755,862 - (185,676) 492,945 847,446 1,535,867 103,463 ------------------------------------------------------------------------------------------ $ 9,123,482 $ 36,112 $ 137,510 $ 1,736,191 $ 1,194,667 $ 2,732,606 $ 771,039 ========================================================================================== Year ended December 31, 2000 Individual life $ 5,330,707 $ - $ 304,132 $ 1,241,149 $ 447,840 $ 1,245,378 $ 919,647 Individual health 39,295 48,256 16,298 43,836 8,517 84,424 89,362 $ 91,282 Group life and health 15,770 8,580 53,306 103,920 11,522 (55,633) 114,131 49,345 Annuity 4,002,331 - 20,740 1,179,915 640,335 1,665,463 117,744 ------------------------------------------------------------------------------------------ $ 9,388,103 $ 56,836 $ 394,476 $ 2,568,820 $ 1,108,214 $ 2,939,632 $ 1,240,884 ========================================================================================== Year ended December 31, 1999 Individual life $ 4,988,602 $ - $ 240,452 $ 894,532 $ 405,705 $ 909,143 $ 692,956 Individual health 42,065 28,046 33,481 (10,184) 2,770 (33,811) 35,665 $ 80,328 Group life and health 31,586 2,616 32,963 158,775 10,967 134,414 124,689 $ 65,217 Annuity 4,602,281 - (10,107) 888,608 705,600 1,283,024 696,404 ------------------------------------------------------------------------------------------ $ 9,664,534 $ 30,662 $ 296,789 $ 1,931,731 $ 1,125,042 $ 2,292,770 $ 1,549,714 ==========================================================================================
*Allocations of net investment income and other operating expenses are based on a number of assumptions of estimates, and the results would change if different methods were applied. 46 Transamerica Occidental Life Insurance Company Reinsurance (Dollars in Thousands) December 31, 2001 Schedule IV
Assumed Percentage Ceded to From of Amount Gross Other Other Net Assumed Amount Companies Companies Amount to Net -------------------------------------------------------------------------------- Year ended December 31, 2001 Life insurance in force $289,306,065 $310,449,745 $169,770,753 $148,627,073 114% Premiums: Individual life $ 1,550,693 $ 893,635 $ 496,023 $ 1,153,081 43% Individual health 103,036 98,013 55,584 60,607 92% Group life and health 30,958 55,024 53,624 29,558 181% Annuity 541,784 436,061 387,222 492,945 79% -------------------------------------------------------------------------------- $ 2,226,471 $ 1,482,733 $ 992,453 $ 1,736,191 57% ================================================================================ Year ended December 31, 2000 Life insurance in force $277,477,021 $455,425,869 $371,149,739 $193,200,891 192% Premiums: Individual life $ 1,457,065 $ 1,119,760 $ 903,844 $ 1,241,149 74% Individual health 91,282 95,419 47,973 43,836 109% Group life and health 49,345 124,268 178,843 103,920 172% Annuity 1,026,218 434,100 587,797 1,179,915 49% -------------------------------------------------------------------------------- $ 2,623,910 $ 1,773,547 $ 1,718,457 $ 2,568,820 67% ================================================================================ Year ended December 31, 1999 Life insurance in force $210,134,978 $370,217,933 $354,847,683 $194,764,728 182% Premiums: Individual life $ 1,181,390 $ 1,220,329 $ 933,471 $ 894,532 104% Individual health 80,328 97,296 6,784 (10,184) -% Group life and health 65,217 247,870 341,428 158,775 215% Annuity 954,840 821,790 755,558 888,608 85% -------------------------------------------------------------------------------- $ 2,281,775 $ 2,387,285 $ 2,037,241 $ 1,931,731 149% ================================================================================
47 Financial Statements Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Year Ended December 31, 2001 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Financial Statements Year Ended December 31, 2001 Contents
Report of Independent Auditors..................................... 1 Financial Statements Statements of Assets and Liabilities............................... 3 Statements of Operations........................................... 21 Statements of Changes in Net Assets................................ 27 Notes to Financial Statements...................................... 38
Report of Independent Auditors The Board of Directors and Contract Owners of the Dreyfus/Transamerica Triple Advantage Variable Annuity, Transamerica Occidental Life Insurance Company We have audited the accompanying statements of assets and liabilities of Separate Account VA-2L of Transamerica Occidental Life Insurance Company (comprised of the Balanced, Appreciation, Disciplined Stock, Growth and Income, International Equity, International Value, Limited Term High Income, Money Market, Quality Bond, Small Cap, Small Company Stock, Special Value, Zero Coupon 2000, Dreyfus Stock Index, Dreyfus Socially Responsible Growth, Core Bond, Core Value, Emerging Leaders, Emerging Markets, European Equity, Founders Discovery, Founders Growth, Founders International Equity, Founders Passport, Japan, MidCap Stock, Technology Growth, and Transamerica VIF Growth subaccounts), which are available for investment by contract owners of the Dreyfus/Transamerica Triple Advantage Variable Annuity, as of December 31, 2001, and the related statements of operations for the year then ended and changes in net assets for the periods indicated thereon. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of mutual fund shares owned as of December 31, 2001, by correspondence with the mutual funds' transfer agents. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 1 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts of Separate Account VA-2L of Transamerica Occidental Life Insurance Company which are available for investment by contract owners of the Dreyfus/Transamerica Triple Advantage Variable Annuity at December 31, 2001, and the results of their operations for the year then ended and changes in their net assets for the periods indicated thereon in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Des Moines, Iowa February 1, 2002 2 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities December 31, 2001
Disciplined Balanced Appreciation Stock Subaccount Subaccount Subaccount ------------------------------------------ Assets Cash $ - $ 6 $ 63 Investments in mutual funds, at current market value: Dreyfus Variable Investment Fund: Balanced Portfolio: Initial 77,235,879 - - Service 14,221,658 - - Appreciation Portfolio: Initial - 250,861,897 - Service - 24,832,399 - Disciplined Stock Portfolio: Initial - - 100,647,704 Service - - 6,561,215 Growth and Income Portfolio: Initial - - - Service - - - International Equity Portfolio: Initial - - - Service - - - International Value Portfolio: Initial - - - Service - - - Limited Term High Income Portfolio: Initial - - - Service - - - Money Market Portfolio - - - Quality Bond Portfolio: Initial - - - Service - - - Small Cap Portfolio: Initial - - - Service - - - Small Company Stock Portfolio: Initial - - - Service - - - Special Value Portfolio: Initial - - - Service - - -
See accompanying notes. 3
Growth and International International Limited Term Income Equity Value High Income Money Market Quality Bond Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ---------------------------------------------------------------------------------------------------------------- $ 1 $ - $ - $ 95 $ 46 $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 175,928,669 - - - - - 14,900,229 - - - - - - 32,485,517 - - - - - 1,587,697 - - - - - - 14,050,779 - - - - - 2,055,953 - - - - - - 24,816,749 - - - - - 2,447,130 - - - - - - 109,558,285 - - - - - - 89,865,437 - - - - - 19,392,047 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
Disciplined Balanced Appreciation Stock Subaccount Subaccount Subaccount ------------------------------------------ Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Variable Investment Fund (continued): Zero Coupon 2000 Portfolio: Initial $ - $ - $ - Dreyfus Stock Index Fund: Initial - - - Service - - - Dreyfus Socially Responsible Growth Fund: Initial - - - Service - - - Dreyfus Investment Portfolios: Core Bond Portfolio: Initial - - - Service - - - Core Value Portfolio: Initial - - - Service - - - Emerging Leaders Portfolio: Initial - - - Service - - - Emerging Markets Portfolio: Initial - - - Service - - - European Equity Portfolio: Initial - - - Service - - - Founders Discovery Portfolio: Initial - - - Service - - - Founders Growth Portfolio: Initial - - - Service - - - Founders International Equity Portfolio: Initial - - - Service - - -
See accompanying notes. 5
Growth and International International Limited Term Income Equity Value High Income Money Market Quality Bond Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount --------------------------------------------------------------------------------------------------------------- $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
6 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
Disciplined Balanced Appreciation Stock Subaccount Subaccount Subaccount ------------------------------------------------------------------ Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Investment Portfolios (continued): Founders Passport Portfolio: Initial $ - $ - $ - Service - - - Japan Portfolio: Initial - - - Service - - - MidCap Stock Portfolio: Initial - - - Service - - - Technology Growth Portfolio: Initial - - - Service - - - Transamerica Variable Insurance Fund: Transamerica VIF Growth Portfolio - - - -------------------------------------------------------- Total investments in mutual funds 91,457,537 275,694,296 107,208,919 -------------------------------------------------------- Total assets 91,457,537 275,694,302 107,208,982 Liabilities Contract terminations payable 2 - - -------------------------------------------------------- $ 91,457,535 $ 275,694,302 $ 107,208,982 ======================================================== Net assets: Deferred annuity contracts terminable by owners $ 91,457,535 $ 275,694,302 $ 107,208,982 -------------------------------------------------------- Total net assets $ 91,457,535 $ 275,694,302 $ 107,208,982 ======================================================== Accumulation units outstanding - Initial 5,964,638.892 7,366,868.292 5,890,686.117 ======================================================== Accumulation unit value - Initial $ 12.948961 $ 34.052720 $ 17.085916 ======================================================== Accumulation units outstanding - Service 1,100,499.219 731,798.395 384,844.742 ======================================================== Accumulation unit value - Service $ 12.922916 $ 33.933388 $ 17.048990 ========================================================
See accompanying notes. 7
Growth and International International Limited Term Income Equity Value High Income Money Market Quality Bond Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------------------------------------- $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ------------------------------------------------------------------------------------------------------------------ 190,828,898 34,073,214 16,106,732 27,263,879 109,558,285 109,257,484 ------------------------------------------------------------------------------------------------------------------ 190,828,899 34,073,214 16,106,732 27,263,974 109,558,331 109,257,484 - - - - - 334 ------------------------------------------------------------------------------------------------------------------ $ 190,828,899 $ 34,073,214 $ 16,106,732 $ 27,263,974 $ 109,558,331 $ 109,257,150 ================================================================================================================== $ 190,828,899 $ 34,073,214 $ 16,106,732 $ 27,263,974 $ 109,558,331 $ 109,257,150 ------------------------------------------------------------------------------------------------------------------ $ 190,828,899 $ 34,073,214 $ 16,106,732 $ 27,263,974 $ 109,558,331 $ 109,257,150 ================================================================================================================== 5,926,304.581 2,253,497.876 1,164,395.489 2,748,955.097 81,225,135.541 4,966,205.213 ================================================================================================================== $ 29.686066 $ 14.415597 $ 12.067017 $ 9.027697 $ 1.348823 $ 18.095394 ================================================================================================================== 503,479.557 110,400.612 170,087.266 271,205.510 1,074,818.006 =========================================================================== ================= $ 29.594508 $ 14.381231 $ 12.087630 $ 9.023563 $ 18.041854 =========================================================================== =================
8 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
Small Company Small Cap Stock Special Value Subaccount Subaccount Subaccount ------------------------------------------------------ Assets Cash $ -- $ -- $ 2 Investments in mutual funds, at current market value: Dreyfus Variable Investment Fund: Balanced Portfolio: Initial -- -- -- Service -- -- -- Appreciation Portfolio: Initial -- -- -- Service -- -- -- Disciplined Stock Portfolio: Initial -- -- -- Service -- -- -- Growth and Income Portfolio: Initial -- -- -- Service -- -- -- International Equity Portfolio: Initial -- -- -- Service -- -- -- International Value Portfolio: Initial -- -- -- Service -- -- -- Limited Term High Income Portfolio: Initial -- -- -- Service -- -- -- Money Market Portfolio -- -- -- Quality Bond Portfolio: Initial -- -- -- Service -- -- -- Small Cap Portfolio: Initial 142,155,996 -- -- Service 4,618,788 -- -- Small Company Stock Portfolio: Initial -- 20,110,197 -- Service -- 1,867,623 -- Special Value Portfolio: Initial -- -- 27,193,516 Service -- -- 2,407,123
See accompanying notes. 9
Dreyfus Socially Zero Coupon Dreyfus Responsible Emerging Emerging 2000 Stock Index Growth Core Bond Core Value Leaders Markets Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------------------------------ $ - $ 6 $ 126 $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
10 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
Small Company Small Cap Stock Special Value Subaccount Subaccount Subaccount ----------------------------------------------------------- Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Variable Investment Fund (continued): Zero Coupon 2000 Portfolio: Initial $ - $ - $ - Dreyfus Stock Index Fund: Initial - - - Service - - - Dreyfus Socially Responsible Growth Fund: Initial - - - Service - - - Dreyfus Investment Portfolios: Core Bond Portfolio: Initial - - - Service - - - Core Value Portfolio: Initial - - - Service - - - Emerging Leaders Portfolio: Initial - - - Service - - - Emerging Markets Portfolio: Initial - - - Service - - - European Equity Portfolio: Initial - - - Service - - - Founders Discovery Portfolio: Initial - - - Service - - - Founders Growth Portfolio: Initial - - - Service - - - Founders International Equity Portfolio: Initial - - - Service - - -
See accompanying notes. 11
Dreyfus Socially Zero Coupon Dreyfus Responsible Emerging Emerging 2000 Stock Index Growth Core Bond Core Value Leaders Markets Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------------------------------------------------------ $ - $ - $ - $ - $ - $ - $ - - 208,811,056 - - - - - - 22,586,836 - - - - - - - 82,401,904 - - - - - - 7,278,485 - - - - - - - 20,571,110 - - - - - - 23,234,853 - - - - - - - 32,397,914 - - - - - - 19,252,110 - - - - - - - 10,007,857 - - - - - - 3,962,099 - - - - - - - 742,185 - - - - - - 190,087 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
12 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
Small Company Small Cap Stock Special Value Subaccount Subaccount Subaccount ------------------------------------------------------ Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Investment Portfolios (continued): Founders Passport Portfolio: Initial $ - $ - $ - Service - - - Japan Portfolio: Initial - - - Service - - - MidCap Stock Portfolio: Initial - - - Service - - - Technology Growth Portfolio: Initial - - - Service - - - Transamerica Variable Insurance Fund: Transamerica VIF Growth Portfolio - - - ------------------------------------------------------ Total investments in mutual funds 146,774,784 21,977,820 29,600,639 ------------------------------------------------------ Total assets 146,774,784 21,977,820 29,600,641 Liabilities Contract terminations payable 11 2 - ------------------------------------------------------ $ 146,774,773 $ 21,977,818 $ 29,600,641 ====================================================== Net assets: Deferred annuity contracts terminable by owners $ 146,774,773 $ 21,977,818 $ 29,600,641 ------------------------------------------------------ Total net assets $ 146,774,773 $ 21,977,818 $ 29,600,641 ====================================================== Accumulation units outstanding - Initial 1,755,966.852 1,479,035.551 1,678,906.413 ====================================================== Accumulation unit value - Initial $ 80.955961 $ 13.596830 $ 16.197161 ====================================================== Accumulation units outstanding - Service 57,268.440 137,822.098 148,932.102 ====================================================== Accumulation unit value - Service $ 80.651565 $ 13.550969 $ 16.162557 ======================================================
See accompanying notes. 13
Dreyfus Socially Zero Coupon Dreyfus Responsible Emerging Emerging 2000 Stock Index Growth Core Bond Core Value Leaders Markets Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ---------------------------------------------------------------------------------------------------------------------------------- $ - $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ---------------------------------------------------------------------------------------------------------------------------------- - 231,397,892 89,680,389 43,805,963 51,650,024 13,969,956 932,272 ---------------------------------------------------------------------------------------------------------------------------------- - 231,397,898 89,680,515 43,805,963 51,650,024 13,969,956 932,272 - - - 2 1 6 1 --------------------------------------------------------------------------------------------------------------------------------- $ - $ 231,397,898 $ 89,680,515 $ 43,805,961 $ 51,650,023 $ 13,969,950 $ 932,271 ================================================================================================================================== $ - $ 231,397,898 $ 89,680,515 $ 43,805,961 $ 51,650,023 $ 13,969,950 $ 932,271 --------------------------------------------------------------------------------------------------------------------------------- $ - $ 231,397,898 $ 89,680,515 $ 43,805,961 $ 51,650,023 $ 13,969,950 $ 932,271 ================================================================================================================================== - 5,101,627.890 2,795,959.566 1,854,166.941 2,768,228.725 764,463.997 101,905.379 ================================================================================================================================== $ - $ 40.930281 $ 29.471825 $ 11.094530 $ 11.703482 $ 13.091329 $ 7.283074 ================================================================================================================================== - 553,642.667 247,846.709 2,095,855.394 1,644,988.805 302,977.532 26,072.327 ================================================================================================================================== $ - $ 40.796774 $ 29.366878 $ 11.086094 $ 11.703489 $ 13.077206 $ 7.290758 ==================================================================================================================================
14 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
European Founders Founders Equity Discovery Growth Subaccount Subaccount Subaccount ------------------------------------------------------- Assets Cash $ 1 $ 6 $ 5 Investments in mutual funds, at current market value: Dreyfus Variable Investment Fund: Balanced Portfolio: Initial - - - Service - - - Appreciation Portfolio: Initial - - - Service - - - Disciplined Stock Portfolio: Initial - - - Service - - - Growth and Income Portfolio: Initial - - - Service - - - International Equity Portfolio: Initial - - - Service - - - International Value Portfolio: Initial - - - Service - - - Limited Term High Income Portfolio: Initial - - - Service - - - Money Market Portfolio - - - Quality Bond Portfolio: Initial - - - Service - - - Small Cap Portfolio: Initial - - - Service - - - Small Company Stock Portfolio: Initial - - - Service - - - Special Value Portfolio: Initial - - - Service - - -
See accompanying notes. 15
Founders International Founders Technology Transamerica Equity Passport Japan MidCap Stock Growth VIF Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ----------------------------------------------------------------------------------------------------------- $ - $ - $ - $ - $ - $ 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
16 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
European Founders Founders Equity Discovery Growth Subaccount Subaccount Subaccount ---------------------------------------------------------- Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Variable Investment Fund (continued): Zero Coupon 2000 Portfolio: Initial $ - $ - $ - Dreyfus Stock Index Fund: Initial - - - Service - - - Dreyfus Socially Responsible Growth Fund: Initial - - - Service - - - Dreyfus Investment Portfolios: Core Bond Portfolio: Initial - - - Service - - - Core Value Portfolio: Initial - - - Service - - - Emerging Leaders Portfolio: Initial - - - Service - - - Emerging Markets Portfolio: Initial - - - Service - - - European Equity Portfolio: Initial 3,480,014 - - Service 241,210 - - Founders Discovery Portfolio: Initial - 11,866,789 - Service - 2,315,923 - Founders Growth Portfolio: Initial - - 21,615,309 Service - - 3,646,672 Founders International Equity Portfolio: Initial - - - Service - - -
See accompanying notes. 17 Founders International Founders Technology Transamerica Equity Passport Japan MidCap Stock Growth VIF Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ----------------------------------------------------------------------------- $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,768,545 - - - - - 1,392,487 - - - - - 18 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Assets and Liabilities (continued)
European Founders Founders Equity Discovery Growth Subaccount Subaccount Subaccount ---------------------------------------------- Assets (continued) Investments in mutual funds, at current market value (continued): Dreyfus Investment Portfolios (continued): Founders Passport Portfolio: Initial $ - $ - $ - Service - - - Japan Portfolio: Initial - - - Service - - - MidCap Stock Portfolio: Initial - - - Service - - - Technology Growth Portfolio: Initial - - - Service - - - Transamerica Variable Insurance Fund: Transamerica VIF Growth Portfolio - - - ---------------------------------------------- Total investments in mutual funds 3,721,224 14,182,712 25,261,981 ---------------------------------------------- Total assets 3,721,225 14,182,718 25,261,986 Liabilities Contract terminations payable - - - ---------------------------------------------- $ 3,721,225 $ 14,182,718 $ 25,261,986 ============================================== Net assets: Deferred annuity contracts terminable by owners $ 3,721,225 $ 14,182,718 $ 25,261,986 ---------------------------------------------- Total net assets $ 3,721,225 $ 14,182,718 $ 25,261,986 ============================================== Accumulation units outstanding - Initial 396,158.872 1,976,068.628 2,947,769.953 ============================================== Accumulation unit value - Initial $ 8.784392 $ 6.005253 $ 7.332768 ============================================== Accumulation units outstanding - Service 27,256.201 386,833.093 498,157.518 ============================================== Accumulation unit value - Service $ 8.849731 $ 5.986886 $ 7.320322 ==============================================
See accompanying notes. 19
Founders International Founders Technology Transamerica Equity Passport Japan MidCap Stock Growth VIF Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount --------------------------------------------------------------------------------------------- $ - $ 13,192,080 $ - $ - $ - $ - - 687,375 - - - - - - 316,418 - - - - - 5,167 - - - - - - 30,709,330 - - - - - 8,975,102 - - - - - - 62,640,872 - - - - - 7,041,487 - - - - - - 37,404,642 --------------------------------------------------------------------------------------------- 9,161,032 13,879,455 321,585 39,684,432 69,682,359 37,404,642 --------------------------------------------------------------------------------------------- 9,161,032 13,879,455 321,585 39,684,432 69,682,359 37,404,644 2 1 1 1 409 - --------------------------------------------------------------------------------------------- $ 9,161,030 $ 13,879,454 $ 321,584 $ 39,684,431 $ 69,681,950 $ 37,404,644 ============================================================================================= $ 9,161,030 $ 13,879,454 $ 321,584 $ 39,684,431 $ 69,681,950 $ 37,404,644 --------------------------------------------------------------------------------------------- $ 9,161,030 $ 13,879,454 $ 321,584 $ 39,684,431 $ 69,681,950 $ 37,404,644 ============================================================================================= 988,311.468 1,632,394.749 57,853.979 2,863,076.333 8,574,826.108 3,352,423.693 ============================================================================================= $ 7.860420 $ 8.081427 $ 5.469242 $ 10.725991 $ 7.305158 $ 11.157493 ============================================================================================= 177,003.733 85,056.211 944.823 837,658.891 967,986.322 - ============================================================================================= $ 7.866994 $ 8.081420 $ 5.469244 $ 10.714505 $ 7.274369 $ - =============================================================================================
20 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Operations Year Ended December 31, 2001
Disciplined Balanced Appreciation Stock Subaccount Subaccount Subaccount ------------------------------------------------------ Net investment income (loss) Income: Dividends $ 1,765,348 $ 2,343,174 $ 456,569 Expenses: Administrative, mortality and expense risk charges 1,207,489 3,996,735 1,609,976 ------------------------------------------------------ Net investment income (loss) 557,859 (1,653,561) (1,153,407) Net realized and unrealized capital gains (losses) on investments Net realized capital gains (losses) on investments: Realized gain distributions - - - Proceeds from sales 6,593,167 38,042,193 15,799,385 Cost of investments sold 7,757,159 34,098,465 16,269,337 ------------------------------------------------------ Net realized capital gains (losses) on investments (1,163,992) 3,943,728 (469,952) Net change in unrealized appreciation/depreciation of investments: Beginning of period (4,420,876) 54,820,593 8,927,449 End of period (13,255,984) 18,924,675 (8,770,206) ------------------------------------------------------ Net change in unrealized appreciation/depreciation of investments (8,835,108) (35,895,918) (17,697,655) ------------------------------------------------------ Net realized and unrealized capital gains (losses) on investments (9,999,100) (31,952,190) (18,167,607) ------------------------------------------------------ Increase (decrease) in net assets from operations $ (9,441,241) $(33,605,751) $(19,321,014) ======================================================
See accompanying notes. 21
Growth and International International Limited Term Income Equity Value High Income Money Market Quality Bond Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------------------------------------ $ 954,840 $ 335,035 $ 152,620 $ 3,404,229 $ 3,531,254 $ 5,553,225 2,715,791 574,585 234,829 430,689 1,311,377 1,282,781 ------------------------------------------------------------------------------------------------------------------ (1,760,951) (239,550) (82,209) 2,973,540 2,219,877 4,270,444 2,971,531 - 86,937 - - 741,651 25,888,916 17,021,968 6,723,914 9,102,985 75,336,682 15,921,799 25,686,415 20,518,053 7,822,117 13,315,340 75,336,682 15,817,367 ------------------------------------------------------------------------------------------------------------------ 3,174,032 (3,496,085) (1,011,266) (4,212,355) - 846,083 15,696,653 (5,593,468) (1,010,959) (11,482,666) - (645,161) (796,173) (18,033,225) (2,621,990) (11,637,739) - (1,620,867) ------------------------------------------------------------------------------------------------------------------ (16,492,826) (12,439,757) (1,611,031) (155,073) - (975,706) ------------------------------------------------------------------------------------------------------------------ (13,318,794) (15,935,842) (2,622,297) (4,367,428) - (129,623) ------------------------------------------------------------------------------------------------------------------ $(15,079,745) $(16,175,392) $ (2,704,506) $ (1,393,888) $ 2,219,877 $ 4,140,821 ==================================================================================================================
22 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Operations (continued)
Small Company Small Cap Stock Special Value Subaccount Subaccount Subaccount -------------------------------------------------------- Net investment income (loss) Income: Dividends $ 665,344 $ 15,234 $ 236,615 Expenses: Administrative, mortality and expense risk charges 2,148,943 303,642 443,960 -------------------------------------------------------- Net investment income (loss) (1,483,599) (288,408) (207,345) Net realized and unrealized capital gains (losses) on investments Net realized capital gains (losses) on investments: Realized gain distributions 9,702,207 - 712,366 Proceeds from sales 26,364,695 3,931,096 7,208,223 Cost of investments sold 39,490,749 3,594,207 7,389,779 -------------------------------------------------------- Net realized capital gains (losses) on investments (3,423,847) 336,889 530,810 Net change in unrealized appreciation/depreciation of investments: Beginning of period (33,296,257) 2,717,448 1,762,867 End of period (42,149,024) 1,923,333 (1,782,533) -------------------------------------------------------- Net change in unrealized appreciation/depreciation of investments (8,852,767) (794,115) (3,545,400) -------------------------------------------------------- Net realized and unrealized capital gains (losses) on investments (12,276,614) (457,226) (3,014,590) -------------------------------------------------------- Increase (decrease) in net assets from operations $(13,760,213) $ (745,634) $ (3,221,935) ========================================================
See accompanying notes. 23
Dreyfus Socially Zero Coupon Dreyfus Stock Responsible Emerging Emerging 2000 Index Growth Core Bond Core Value Leaders Markets Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------------------------------------ $ - $ 2,585,570 $ 60,414 $ 1,313,742 $ 11,092 $ - $ 5,355 - - 3,339,035 1,424,044 306,063 474,098 102,166 9,599 ------------------------------------------------------------------------------------------------------------------ - (753,465) (1,363,630) 1,007,679 (463,006) (102,166) (4,244) - 1,221,706 - 383,726 402,998 1,902 - 28,390 34,204,108 15,382,065 3,460,810 3,080,770 2,408,901 3,042,011 28,390 34,051,208 16,571,669 3,425,441 3,037,114 2,452,985 3,063,533 ------------------------------------------------------------------------------------------------------------------ - 1,374,606 (1,189,604) 419,095 446,654 (42,182) (21,522) (259) 25,726,281 7,002,821 43,144 1,310,808 144,034 (16,199) (259) (11,360,073) (19,782,304) (1,194,500) 752,895 937,172 44,517 ------------------------------------------------------------------------------------------------------------------ - (37,086,354) (26,785,125) (1,237,644) (557,913) 793,138 60,716 ------------------------------------------------------------------------------------------------------------------ - (35,711,748) (27,974,729) (818,549) (111,259) 750,956 39,194 ------------------------------------------------------------------------------------------------------------------ $ - $(36,465,213) $(29,338,359) $ 189,130 $ (574,265) $ 648,790 $ 34,950 ==================================================================================================================
24 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Operations (continued)
European Founders Founders Equity Discovery Growth Subaccount Subaccount Subaccount ------------------------------------------- Net investment income (loss) Income: Dividends $ 27,049 $ - $ 18,436 Expenses: Administrative, mortality and expense risk charges 62,700 179,676 335,114 ------------------------------------------- Net investment income (loss) (35,651) (179,676) (316,678) Net realized and unrealized capital gains (losses) on investments Net realized capital gains (losses) on investments: Realized gain distributions - - - Proceeds from sales 6,576,014 1,875,730 2,357,513 Cost of investments sold 7,520,856 2,948,322 3,682,040 ------------------------------------------- Net realized capital gains (losses) on investments (944,842) (1,072,592) (1,324,527) Net change in unrealized appreciation/depreciation of investments: Beginning of period (257,172) (2,403,787) (5,960,435) End of period (857,112) (3,866,124) (10,057,555) ------------------------------------------- Net change in unrealized appreciation/depreciation of investments (599,940) (1,462,337) (4,097,120) ------------------------------------------- Net realized and unrealized capital gains (losses) on investments (1,544,782) (2,534,929) (5,421,647) ------------------------------------------- Increase (decrease) in net assets from operations $ (1,580,433) $ (2,714,605) $ (5,738,325) ===========================================
See accompanying notes. 25
Founders International Founders Technology Transamerica Equity Passport Japan MidCap Stock Growth VIF Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount ----------------------------------------------------------------------------------- $ 3,339 $ - $ - $ 63,027 $ - $ - 133,090 234,173 4,783 450,020 1,074,795 602,824 ----------------------------------------------------------------------------------- (129,751) (234,173) (4,783) (386,993) (1,074,795) (602,824) - - - - - 568,638 3,616,547 17,668,526 1,310,719 6,182,346 12,952,522 14,476,638 4,827,240 30,564,439 1,407,620 5,752,862 20,384,771 16,929,696 ----------------------------------------------------------------------------------- (1,210,693) 12,895,913) (96,901) 429,484 (7,432,249) (1,884,420) (1,375,228) (7,798,487) (23,565) 970,830 (38,443,042) (3,351,058) (3,624,224) (1,370,297) (43,502) (300,804) (66,580,296) (11,153,341) ----------------------------------------------------------------------------------- (2,248,996) 6,428,190 (19,937) (1,271,634) (28,137,254) (7,802,283) ----------------------------------------------------------------------------------- (3,459,689) (6,467,723) (116,838) (842,150) (35,569,503) (9,686,703) ----------------------------------------------------------------------------------- $(3,589,440) $(6,701,896) $ (121,621) $(1,229,143) $(36,644,298) $(10,289,527) ===================================================================================
26 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets Years Ended December 31, 2001 and 2000, Except as Noted
Balanced Subaccount Appreciation Subaccount -------------------------------- -------------------------------- 2001 2000 2001 2000 -------------------------------- -------------------------------- Operations: Net investment income (loss) $ 557,859 $ 1,260,572 $ (1,653,561) $ (2,308,710) Net realized capital gains (losses) (1,163,992) 341,380 3,943,728 11,044,689 Net change in unrealized appreciation/depreciation of investments (8,835,108) (4,999,352) (35,895,918) (16,163,256) -------------------------------- -------------------------------- Increase (decrease) in net assets from operations (9,441,241) (3,397,400) (33,605,751) (7,427,277) Contract transactions: Net contract purchase payments 9,818,035 12,435,730 19,227,959 29,540,411 Transfer payments from (to) other subaccounts or general account 16,025,417 14,698,963 9,551,489 (1,387,238) Contract terminations, withdrawals, and other deductions (8,386,355) (7,104,282) (31,369,212) (39,532,877) Contract maintenance charges (26,941) (17,296) (93,847) (76,469) -------------------------------- -------------------------------- Increase (decrease) in net assets from contract transactions 17,430,156 20,013,115 (2,683,611) (11,456,173) -------------------------------- -------------------------------- Net increase (decrease) in net assets 7,989,915 16,615,715 (36,289,362) (18,883,450) Net assets: Beginning of period 83,468,620 66,852,905 311,983,664 330,867,114 -------------------------------- -------------------------------- End of period $ 91,457,535 $ 83,468,620 $ 275,694,302 $ 311,983,664 ================================ ================================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 27
Disciplined Stock Growth and Income International Equity Subaccount Subaccount Subaccount -------------------------------- -------------------------------- -------------------------------- 2001 2000 2001 2000 2001 2000 -------------------------------- -------------------------------- -------------------------------- $ (1,153,407) $ (1,568,356) $ (1,760,951) $ (1,707,104) $ (239,550) $ (674,899) (469,952) 2,955,549 3,174,032 10,303,822 (3,496,085) 12,297,266 (17,697,655) (16,425,009) (16,492,826) (19,784,460) (12,439,757) (22,823,274) -------------------------------- -------------------------------- -------------------------------- (19,321,014) (15,037,816) (15,079,745) (11,187,742) (16,175,392) (11,200,907) 5,578,711 18,591,698 11,672,195 19,116,391 1,287,049 8,624,397 1,335,198 7,922,971 11,200,781 2,452,403 (1,447,377) 8,170,835 (10,981,441) (11,401,053) (22,563,141) (25,307,635) (3,850,343) (8,814,202) (35,677) (26,437) (63,561) (55,564) (13,806) (11,433) -------------------------------- -------------------------------- -------------------------------- (4,103,209) 15,087,179 246,274 (3,794,405) (4,024,477) 7,969,597 -------------------------------- -------------------------------- -------------------------------- (23,424,223) 49,363 (14,833,471) (14,982,147) (20,199,869) (3,231,310) 130,633,205 130,583,842 205,662,370 220,644,517 54,273,083 57,504,393 -------------------------------- -------------------------------- -------------------------------- $107,208,982 $130,633,205 $190,828,899 $205,662,370 $ 34,073,214 $ 54,273,083 ================================ ================================ ================================
28 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets (continued)
International Value Limited Term High Subaccount Income Subaccount -------------------------------- -------------------------------- 2001 2000 2001 2000 -------------------------------- -------------------------------- Operations: Net investment income (loss) $ (82,209) $ (182,819) $ 2,973,540 $ 4,352,943 Net realized capital gains (losses) (1,011,266) 1,956,061 (4,212,355) (3,933,316) Net change in unrealized appreciation/depreciation of investments (1,611,031) (2,813,023) (155,073) (4,401,938) -------------------------------- -------------------------------- Increase (decrease) in net assets from operations (2,704,506) (1,039,781) (1,393,888) (3,982,311) Contract transactions: Net contract purchase payments 1,388,749 1,169,375 2,248,351 2,517,188 Transfer payments from (to) other subaccounts or general account 535,370 (745,213) (1,643,525) (11,527,559) Contract terminations, withdrawals, and other deductions (1,968,178) (1,786,558) (5,078,770) (9,095,080) Contract maintenance charges (4,412) (3,858) (8,880) (11,233) -------------------------------- -------------------------------- Increase (decrease) in net assets from contract transactions (48,471) (1,366,254) (4,482,824) (18,116,684) -------------------------------- -------------------------------- Net increase (decrease) in net assets (2,752,977) (2,406,035) (5,876,712) (22,098,995) Net assets: Beginning of period 18,859,709 21,265,744 33,140,686 55,239,681 -------------------------------- -------------------------------- End of period $ 16,106,732 $ 18,859,709 $ 27,263,974 $ 33,140,686 ================================ ================================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 29
Money Market Subaccount Quality Bond Subaccount Small Cap Subaccount --------------------------------- ----------------------------------- ----------------------------------- 2001 2000 2001 2000 2001 2000 --------------------------------- ----------------------------------- ----------------------------------- $ 2,219,877 $ 2,874,535 $ 4,270,444 $ 3,334,595 $ (1,483,599) $ (1,796,504) - - 846,083 (1,036,563) (3,423,847) 82,203,774 - - (975,706) 4,180,508 (8,852,767) (61,826,128) --------------------------------- ----------------------------------- ----------------------------------- 2,219,877 2,874,535 4,140,821 6,478,540 (13,760,213) 18,581,142 19,384,216 25,670,078 13,057,752 5,463,527 3,720,905 10,506,523 32,837,178 (10,721,382) 31,036,434 (6,569,575) (3,476,267) 5,136,227 (23,604,721) (20,582,523) (13,490,661) (9,411,154) (16,156,535) (21,752,107) (21,071) (9,334) (20,534) (14,083) (54,000) (51,513) --------------------------------- ----------------------------------- ----------------------------------- 28,595,602 (5,643,161) 30,582,991 (10,531,285) (15,965,897) (6,160,870) --------------------------------- ----------------------------------- ----------------------------------- 30,815,479 (2,768,626) 34,723,812 (4,052,745) (29,726,110) 12,420,272 78,742,852 81,511,478 74,533,338 78,586,083 176,500,883 164,080,611 --------------------------------- ----------------------------------- ----------------------------------- $ 109,558,331 $ 78,742,852 $ 109,257,150 $ 74,533,338 $ 146,774,773 $ 176,500,883 ================================= =================================== ===================================
30 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets (continued)
Small Company Stock Subaccount Special Value Subaccount -------------------------------------- -------------------------------------- 2001 2000 2001 2000 -------------------------------------- -------------------------------------- Operations: Net investment income (loss) $ (288,408) $ (274,400) $ (207,345) $ (174,952) Net realized capital gains (losses) 336,889 472,309 530,810 1,833,669 Net change in unrealized appreciation/depreciation of investments (794,115) 1,240,461 (3,545,400) (385,735) -------------------------------- ------------------------------- Increase (decrease) in net assets from operations (745,634) 1,438,370 (3,221,935) 1,272,982 Contract transactions: Net contract purchase payments 1,657,601 2,872,541 1,802,364 1,191,359 Transfer payments from (to) other subaccounts or general account 119,165 (173,267) 414,166 (3,149,124) Contract terminations, withdrawals, and other deductions (2,384,424) (2,586,423) (4,366,760) (4,526,248) Contract maintenance charges (7,493) (5,815) (7,623) (7,549) -------------------------------- ------------------------------- Increase (decrease) in net assets from contract transactions (615,151) 107,036 (2,157,853) (6,491,562) -------------------------------- ------------------------------- Net increase (decrease) in net assets (1,360,785) 1,545,406 (5,379,788) (5,218,580) Net assets: Beginning of period 23,338,603 21,793,197 34,980,429 40,199,009 -------------------------------- ------------------------------- End of period $ 21,977,818 $ 23,338,603 $ 29,600,641 $ 34,980,429 ================================ ===============================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 31
Zero Coupon 2000 Dreyfus Stock Index Dreyfus Socially Responsible Subaccount Subaccount Growth Subaccount ------------------------------------- --------------------------------------- ----------------------------------- 2001 2000 2001 2000 2001 2000 ------------------------------------- --------------------------------------- ----------------------------------- $ - $ 676,800 $ (753,465) $ (1,215,752) $ (1,363,630) $ (634,386) - (270,069) 1,374,606 8,211,086 (1,189,604) 1,936,970 - 291,776 (37,086,354) (37,797,690) (26,785,125) (17,649,093) ------------------------------------- --------------------------------------- ----------------------------------- - 698,507 (36,465,213) (30,802,356) (29,338,359) (16,346,509) - 870,860 17,804,418 40,931,132 6,856,414 26,157,133 269 (17,041,256) 11,165,338 21,658,028 4,491,170 16,725,296 (798) (3,975,324) (26,183,642) (36,705,002) (11,408,774) (12,932,700) (17) (3,698) (87,686) (64,273) (44,379) (27,062) ------------------------------------- --------------------------------------- ----------------------------------- (546) (20,149,418) 2,698,428 25,819,885 (105,569) 29,922,667 ------------------------------------- --------------------------------------- ----------------------------------- (546) (19,450,911) (33,766,785) (4,982,471) (29,443,928) 13,576,158 546 19,451,457 265,164,683 270,147,154 119,124,443 105,548,285 ------------------------------------- --------------------------------------- ----------------------------------- $ - $ 546 $231,397,898 $265,164,683 $ 89,680,515 $119,124,443 ===================================== ======================================= ===================================
32 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets (continued)
Core Bond Subaccount Core Value Subaccount ------------------------------- ------------------------------- 2001 2000(1) 2001 2000 ------------------------------- ------------------------------- Operations: Net investment income (loss) $ 1,007,679 $ 43,697 $ (463,006) $ 33,370 Net realized capital gains (losses) 419,095 29,554 446,654 417,571 Net change in unrealized appreciation/depreciation of investments (1,237,644) 43,144 (557,913) 1,075,434 ------------------------------- ------------------------------- Increase (decrease) in net assets from operations 189,130 116,395 (574,265) 1,526,375 Contract transactions: Net contract purchase payments 12,812,843 2,113,036 11,851,755 5,935,702 Transfer payments from (to) other subaccounts or general account 28,236,514 2,111,142 23,133,838 6,908,886 Contract terminations, withdrawals, and other deductions (1,749,606) (20,425) (3,012,452) (891,906) Contract maintenance charges (3,062) (6) (9,809) (1,521) ------------------------------- ------------------------------- Increase (decrease) in net assets from contract transactions 39,296,689 4,203,747 31,963,332 11,951,161 ------------------------------- ------------------------------- Net increase (decrease) in net assets 39,485,819 4,320,142 31,389,067 13,477,536 Net assets: Beginning of period 4,320,142 - 20,260,956 6,783,420 ------------------------------- ------------------------------- End of period $43,805,961 $4,320,142 $51,650,023 $20,260,956 =============================== ===============================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 33
Emerging Leaders Subaccount Emerging Markets Subaccount European Equity Subaccount ----------------------------------- --------------------------------- -------------------------------- 2001 2000 (1) 2001 2000 (1) 2001 2000 ----------------------------------- --------------------------------- -------------------------------- $ (102,166) $ (8,876) $ (4,244) $ (516) $ (35,651) $ (46,352) (42,182) 110,489 (21,522) (75,993) (944,842) 247,730 793,138 144,034 60,716 (16,199) (599,940) (401,046) ----------------------------------- --------------------------------- -------------------------------- 648,790 245,647 34,950 (92,708) (1,580,433) (199,668) 2,866,666 1,049,094 164,529 577,582 246,921 2,071,254 7,922,555 1,631,549 340,803 22,700 322,687 2,469,456 (368,272) (24,304) (94,278) (20,895) (333,802) (185,915) (1,689) (86) (405) (7) (1,693) (306) ----------------------------------- --------------------------------- -------------------------------- 10,419,260 2,656,253 410,649 579,380 234,113 4,354,489 ----------------------------------- --------------------------------- -------------------------------- 11,068,050 2,901,900 445,599 486,672 (1,346,320) 4,154,821 2,901,900 - 486,672 - 5,067,545 912,724 ----------------------------------- --------------------------------- -------------------------------- $13,969,950 $ 2,901,900 $ 932,271 $ 486,672 $ 3,721,225 $ 5,067,545 =================================== ================================= ================================
34 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets (continued)
Founders Discovery Founders Growth Subaccount Subaccount ------------------------------- --------------------------------- 2001 2000 (1) 2001 2000 ------------------------------- --------------------------------- Operations: Net investment income (loss) $ (179,676) $ (58,452) $ (316,678) $ (189,475) Net realized capital gains (losses) (1,072,592) (13,218) (1,324,527) 40,130 Net change in unrealized appreciation/depreciation of investments (1,462,337) (2,403,787) (4,097,120) (6,372,079) -------------------------------- ------------------------------- Increase (decrease) in net assets from operations (2,714,605) (2,475,457) (5,738,325) (6,521,424) Contract transactions: Net contract purchase payments 1,470,612 8,740,624 3,274,557 15,936,768 Transfer payments from (to) other subaccounts or general account 4,644,494 5,653,496 6,264,073 12,268,681 Contract terminations, withdrawals, and other deductions (921,903) (206,800) (1,750,857) (1,108,240) Contract maintenance charges (7,667) (76) (12,619) (831) -------------------------------- ------------------------------- Increase (decrease) in net assets from contract transactions 5,185,536 14,187,244 7,775,154 27,096,378 -------------------------------- ------------------------------- Net increase (decrease) in net assets 2,470,931 11,711,787 2,036,829 20,574,954 Net assets: Beginning of period 11,711,787 - 23,225,157 2,650,203 -------------------------------- ------------------------------- End of period $ 14,182,718 $ 11,711,787 $ 25,261,986 $ 23,225,157 ================================ ===============================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 35
Founders International Founders Passport MidCap Stock Equity Subaccount Subaccount Japan Subaccount Subaccount --------------------------- ----------------------------- ---------------------- --------------------------- 2001 2000 2001 2000 2001 2000 (1) 2001 2000 --------------------------- ----------------------------- ---------------------- --------------------------- $ (129,751) $ (71,045) $ (234,173) $ (246,173) $ (4,783) $ (1,808) $ (386,993) $ (152,346) (1,210,693) 90,772 (12,895,913) (1,872,922) (96,901) (24,120) 429,484 510,357 (2,248,996) (1,425,916) 6,428,190 (8,341,751) (19,937) (23,565) (1,271,634) 36,569 --------------------------- ----------------------------- ---------------------- --------------------------- (3,589,440) (1,406,189) (6,701,896) (10,460,846) (121,621) (49,493) (1,229,143) 394,580 1,388,049 6,532,312 838,874 12,335,802 19,290 218,404 6,136,029 9,130,076 2,141,780 4,643,312 693,821 16,266,430 111,881 161,599 11,205,553 10,805,770 (843,680) (413,308) (1,545,520) (1,263,864) (13,585) (4,795) (2,862,003) (1,013,264) (5,416) (254) (8,696) (1,656) (96) - (14,743) (2,463) --------------------------- ----------------------------- ---------------------- --------------------------- 2,680,733 10,762,062 (21,521) 27,336,712 117,490 375,208 14,464,836 18,920,119 --------------------------- ----------------------------- ---------------------- --------------------------- (908,707) 9,355,873 (6,723,417) 16,875,866 (4,131) 325,715 13,235,693 19,314,699 10,069,737 713,864 20,602,871 3,727,005 325,715 - 26,448,738 7,134,039 --------------------------- ----------------------------- ---------------------- --------------------------- $ 9,161,030 $10,069,737 $ 13,879,454 $ 20,602,871 $ 321,584 $325,715 $39,684,431 $26,448,738 =========================== ============================= ====================== ===========================
36 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Statements of Changes in Net Assets (continued)
Technology Growth Transamerica VIF Subaccount Growth Subaccount -------------------------------- --------------------------------- 2001 2000 2001 2000 -------------------------------- --------------------------------- Operations: Net investment income (loss) $ (1,074,795) $ (1,541,364) $ (602,824) $ (757,920) Net realized capital gains (losses) (7,432,249) 491,619 (1,884,420) 6,365,839 Net change in unrealized appreciation/depreciation of investments (28,137,254) (47,827,703) (7,802,283) (12,471,426) -------------------------------- --------------------------------- Increase (decrease) in net assets from operations (36,644,298) (48,877,448) (10,289,527) (6,863,507) Contract transactions: Net contract purchase payments 6,529,944 47,793,677 1,857,577 9,538,392 Transfer payments from (to) other subaccounts or general account 6,602,451 67,133,279 268,771 9,604,731 Contract terminations, withdrawals, and other deductions (6,738,231) (10,642,733) (4,474,444) (7,919,250) Contract maintenance charges (42,930) (18,023) (14,886) (10,873) -------------------------------- --------------------------------- Increase (decrease) in net assets from contract transactions 6,351,234 104,266,200 (2,362,982) 11,213,000 -------------------------------- --------------------------------- Net increase (decrease) in net assets (30,293,064) 55,388,752 (12,652,509) 4,349,493 Net assets: Beginning of period 99,975,014 44,586,262 50,057,153 45,707,660 -------------------------------- --------------------------------- End of period $ 69,681,950 $ 99,975,014 $ 37,404,644 $ 50,057,153 ================================ =================================
(1) Commencement of operations, May 1, 2000. See accompanying notes. 37 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements December 31, 2001 1. Organization and Summary of Significant Accounting Policies Organization The Separate Account VA-2L of Transamerica Occidental Life Insurance Company (the Mutual Fund Account) is a segregated investment account of Transamerica Occidental Life Insurance Company (Transamerica Life), an indirect wholly owned subsidiary of Transamerica Corporation. During 1999, Transamerica Corporation was merged with an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands. The Mutual Fund Account is registered with the Securities and Exchange Commission as a Unit Investment Trust pursuant to provisions of the Investment Company Act of 1940. The Mutual Fund Account consists of twenty-eight investment subaccounts, including thirteen in specified portfolios of the Dreyfus Variable Investment Fund, one in the Dreyfus Stock Index Fund, one in the Dreyfus Socially Responsible Growth Fund, twelve in specified portfolios of the Dreyfus Investment Portfolios, and one in the Transamerica VIF Growth Portfolio of the Transamerica Variable Insurance Fund, Inc. (each a Series Fund and collectively the Series Funds). Activity in these twenty-eight subaccounts is available to contract owners of the Dreyfus/Transamerica Triple Advantage Variable Annuity, issued by Transamerica Life. Effective December 27, 2000, the Zero Coupon 2000 Subaccount is no longer available to new contract owners. Effective January 22, 2001, new contract owners may only invest in the Service Class Subaccounts, with the exception of the Money Market Subaccount and the Transamerica Variable Insurance Fund Growth Subaccount. The Initial Class Subaccounts, other than the Money Market Subaccount and the Transamerica Variable Insurance Fund Growth Subaccount, are only available to contract owners that purchased the contract prior to January 22, 2001. 38 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 1. Organization and Summary of Significant Accounting Policies (continued) Investments Net purchase payments received by the Mutual Fund Account are invested in the portfolios of the Series Funds, as selected by the contract owner. Investments are stated at the closing net asset values per share as of December 31, 2001. Prior to July 31, 2000, realized capital gains and losses from the sale of shares in the Series Funds were determined on the basis of average cost. Subsequent to this date, such gains and losses are determined on the first-in, first-out basis. This change was implemented by establishing the average cost of the portfolio as of July 31, 2000 as the opening cost for purposes of the first- in, first-out basis. This change has no effect on "net realized and unrealized capital gains (loss) on investments" and "increase (decrease) in net assets from operations" as reported in the Statements of Operations. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date. Unrealized gains or losses on investments in the Series Funds are included in the Statements of Operations. Dividend Income Dividends received from the Series Funds investments are reinvested to purchase additional mutual fund shares. Reclassifications Certain amounts in the 2000 Statements of Changes in Net Assets have been reclassified to conform to the 2001 financial statement presentation. 39 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments A summary of the mutual fund investments at December 31, 2001 follows:
Number of Net Asset Value Shares Held Per Share Market Value Cost ------------------------------------------------------------------------ Dreyfus Variable Investment Fund: Balanced Portfolio: Initial 5,789,796.040 $13.34 $ 77,235,879 $ 90,182,720 Service 1,066,891.100 13.33 14,221,658 14,530,801 Appreciation Portfolio: Initial 7,171,580.807 34.98 250,861,897 231,708,006 Service 711,530.060 34.90 24,832,399 25,061,615 Disciplined Stock Portfolio: Initial 4,817,984.861 20.89 100,647,704 109,294,789 Service 314,535.74 20.86 6,561,215 6,684,336 Growth and Income Portfolio: Initial 8,126,035.499 21.65 175,928,669 176,732,280 Service 689,506.220 21.61 14,900,229 14,892,791 International Equity Portfolio: Initial 3,019,100.112 10.76 32,485,517 50,577,381 Service 147,692.720 10.75 1,587,697 1,529,058 International Value Portfolio: Initial 1,215,465.343 11.56 14,050,779 16,702,929 Service 177,543.40 11.58 2,055,953 2,025,793 Limited Term High Income Portfolio: Initial 3,394,904.163 7.31 24,816,749 36,265,762 Service 334,764.710 7.31 2,447,130 2,635,856 Money Market Portfolio 109,558,284.740 1.00 109,558,285 109,558,285 Quality Bond Portfolio: Initial 7,903,732.360 11.37 89,865,437 91,058,116 Service 1,708,550.430 11.35 19,392,047 19,820,235 Small Cap Portfolio: Initial 4,046,569.778 35.13 142,155,996 184,238,847 Service 131,852.37 35.03 4,618,788 4,684,961 Small Company Stock Portfolio: Initial 1,130,421.444 17.79 20,110,197 18,254,949 Service 105,336.880 17.73 1,867,623 1,799,538
40 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments (continued)
Number of Net Asset Value Shares Held Per Share Market Value Cost ------------------------------------------------------------------------ Dreyfus Variable Investment Fund (continued): Special Value Portfolio: Initial 2,080,605.697 $13.07 $ 27,193,516 $ 28,946,526 Service 184,453.870 13.05 2,407,123 2,436,646 Zero Coupon 2000 Portfolio: Initial 0.036 12.19 - 259 Dreyfus Stock Index Fund: Initial 7,112,093.205 29.36 208,811,056 219,774,466 Service 770,093.280 29.33 22,586,836 22,983,499 Dreyfus Socially Responsible Growth Fund: Initial 3,089,685.183 26.67 82,401,904 101,642,749 Service 273,730.170 26.59 7,278,485 7,819,944 Dreyfus Investment Portfolios: Core Bond Portfolio: Initial 1,623,607.732 12.67 20,571,110 21,155,806 Service 1,835,296.460 12.66 23,234,853 23,844,657 Core Value Portfolio: Initial 2,228,192.191 14.54 32,397,914 32,048,266 Service 1,324,079.110 14.54 19,252,110 18,848,863 Emerging Leaders Portfolio: Initial 540,089.449 18.53 10,007,857 9,345,422 Service 214,051.830 18.51 3,962,099 3,687,362 Emerging Markets Portfolio: Initial 78,289.545 9.48 742,185 709,629 Service 20,030.250 9.49 190,087 178,126 European Equity Portfolio: Initial 325,539.186 10.69 3,480,014 4,342,898 Service 22,396.520 10.77 241,210 235,438 Founders Discovery Portfolio: Initial 1,209,662.516 9.81 11,866,789 15,746,159 Service 236,801.950 9.78 2,315,923 2,302,677 Founders Growth Portfolio: Initial 1,836,474.881 11.77 21,615,309 31,667,627 Service 310,355.040 11.75 3,646,672 3,651,909
41 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments (continued)
Number of Net Asset Value Shares Held Per Share Market Value Cost ------------------------------------------------------------------------ Dreyfus Investment Portfolios (continued): Founders International Equity Portfolio: Initial 649,001.240 $11.97 $ 7,768,545 $ 11,446,830 Service 116,234.270 11.98 1,392,487 1,338,426 Founders Passport Portfolio: Initial 1,119,870.934 11.78 13,192,080 14,587,907 Service 58,351.020 11.78 687,375 661,845 Japan Portfolio: Initial 39,112.210 8.09 316,418 359,021 Service 638.740 8.09 5,167 6,066 MidCap Stock Portfolio: Initial 2,225,313.804 13.80 30,709,330 31,329,469 Service 650,841.360 13.79 8,975,102 8,655,767 Technology Growth Portfolio: Initial 6,600,724.135 9.49 62,640,872 129,142,115 Service 745,130.950 9.45 7,041,487 7,120,540 Transamerica Variable Insurance Fund: Transamerica VIF Growth Portfolio 2,116,844.485 17.67 37,404,642 48,557,983
42 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments (continued) The aggregate cost of purchases and proceeds from sales of investments for the period ended December 31, 2001 were as follows:
Purchases Sales ---------------------------------- Dreyfus Variable Investment Fund: Balanced Portfolio: Initial $ 9,948,527 $ 6,498,491 Service 14,632,637 94,676 Appreciation Portfolio: Initial 7,210,782 36,724,605 Service 26,494,042 1,317,588 Disciplined Stock Portfolio: Initial 3,695,762 15,653,936 Service 6,846,848 145,449 Growth and Income Portfolio: Initial 10,772,482 24,346,460 Service 16,573,039 1,542,456 International Equity Portfolio: Initial 6,333,627 12,297,039 Service 6,424,369 4,724,929 International Value Portfolio: Initial 3,669,838 5,803,437 Service 3,010,338 920,477 Limited Term High Income Portfolio: Initial 4,286,277 8,480,510 Service 3,307,329 622,475 Money Market Portfolio: 106,117,201 75,336,682 Quality Bond Portfolio: Initial 30,784,028 15,014,605 Service 20,733,195 907,194 Small Cap Portfolio: Initial 13,314,381 25,797,690 Service 5,302,847 567,005 Small Company Stock Portfolio: Initial 1,188,107 3,890,824 Service 1,839,205 40,272 Special Value Portfolio: Initial 3,110,773 7,200,878 Service 2,444,610 7,345
43 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments (continued)
Purchases Sales ---------------------------------- Dreyfus Variable Investment Fund (continued): Zero Coupon 2000 Portfolio: Initial $ 27,587 $ 28,390 Service - - Dreyfus Stock Index Fund: Initial 12,870,656 32,839,652 Service 24,499,631 1,364,456 Dreyfus Socially Responsible Growth Fund: Initial 5,828,858 15,200,481 Service 8,083,920 181,584 Dreyfus Investment Portfolios: Core Bond Portfolio: Initial 19,486,593 2,654,916 Service 24,662,313 805,894 Core Value Portfolio: Initial 15,966,928 2,922,123 Service 19,017,165 158,647 Emerging Leaders Portfolio: Initial 8,787,660 2,174,385 Service 3,940,241 234,516 Emerging Markets Portfolio: Initial 3,244,320 3,018,446 Service 204,097 23,565 European Equity Portfolio: Initial 3,019,117 3,062,527 Service 3,755,360 3,513,487 Founders Discovery Portfolio: Initial 4,414,828 1,736,782 Service 2,466,796 138,948 Founders Growth Portfolio: Initial 6,048,896 2,266,150 Service 3,767,078 91,363 Founders International Equity Portfolio: Initial 2,838,100 1,836,921 Service 3,329,433 1,779,626 Founders Passport Portfolio: Initial 15,664,714 16,661,124 Service 1,748,123 1,007,402
44 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 2. Investments (continued)
Purchases Sales ---------------------------------- Dreyfus Investment Portfolios (continued): Japan Portfolio: Initial $ 1,417,161 $ 1,310,538 Service 6,266 181 MidCap Stock Portfolio: Initial 9,839,897 4,469,780 Service 10,420,275 1,712,566 Technology Growth Portfolio: Initial 9,749,237 11,945,581 Service 8,479,076 1,006,941 Transamerica Variable Insurance Fund: Transamerica VIF Growth Portfolio 12,079,439 14,476,638
3. Accumulation Units Outstanding A summary of changes in accumulation units outstanding follows:
Disciplined Growth and International Balanced Appreciation Stock Income Equity Subaccount Subaccount Subaccount Subaccount Subaccount -------------------------------------------------------------------------------------- Units outstanding at January 1, 2000 4,426,908 8,513,807 5,856,979 6,548,395 2,296,713 Units purchased 841,629 767,886 879,604 582,213 377,597 Units redeemed and transferred 507,809 (1,088,222) (197,550) (698,349) (45,141) -------------------------------------------------------------------------------------- Units outstanding at December 31, 2000 5,776,346 8,193,471 6,539,033 6,432,259 2,629,169 Units purchased 747,810 578,802 317,446 415,967 83,519 Units redeemed and transferred 540,982 (673,606) (580,948) (418,442) (348,790) -------------------------------------------------------------------------------------- Units outstanding at December 31, 2001 7,065,138 8,098,667 6,275,531 6,429,784 2,363,898 ======================================================================================
45 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 3. Accumulation Units Outstanding (continued)
International Limited Term Value High Income Money Market Quality Bond Small Cap Subaccount Subaccount Subaccount Subaccount Subaccount --------------------------------------------------------------------------------------- Units outstanding at January 1, 2000 1,432,408 5,300,352 64,761,300 5,010,814 2,096,730 Units purchased 80,794 253,617 19,944,152 332,305 126,812 Units redeemed and transferred (175,726) (2,039,002) (24,850,082) (1,009,621) (205,152) --------------------------------------------------------------------------------------- Units outstanding at December 31, 2000 1,337,476 3,514,967 59,855,370 4,333,498 2,018,390 Units purchased 127,992 253,660 15,077,958 736,583 49,847 Units redeemed and transferred (130,985) (748,466) 6,291,808 970,942 (255,002) --------------------------------------------------------------------------------------- Units outstanding at December 31, 2001 1,334,483 3,020,161 81,225,136 6,041,023 1,813,235 ======================================================================================= Dreyfus Socially Small Company Dreyfus Stock Responsible Stock Special Value Zero Coupon Index Growth Subaccount Subaccount 2000 Subaccount Subaccount Subaccount --------------------------------------------------------------------------------------- Units outstanding at January 1, 2000 1,665,730 2,347,757 1,153,904 5,113,717 2,399,067 Units purchased 212,103 68,135 50,565 817,869 633,365 Units redeemed and transferred (211,150) (455,988) (1,204,438) (321,318) 53,550 --------------------------------------------------------------------------------------- Units outstanding at December 31, 2000 1,666,683 1,959,904 31 5,610,268 3,085,982 Units purchased 130,958 118,474 117 443,893 218,050 Units redeemed and transferred (180,783) (250,539) (148) (398,890) (260,226) --------------------------------------------------------------------------------------- Units outstanding at December 31, 2001 1,616,858 1,827,839 - 5,655,271 3,043,806 =======================================================================================
46 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 3. Accumulation Units Outstanding (continued)
Core Core Emerging Emerging European Bond Value Leaders Markets Equity Subaccount Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------------------- Units outstanding at January 1, 2000 - 618,555 - - 71,171 Units purchased 392,699 514,202 171,860 161,595 164,260 Units redeemed and transferred 8,742 538,876 65,832 (93,515) 173,414 ------------------------------------------------------------------------------------- Units outstanding at December 31, 2000 401,441 1,671,633 237,692 68,080 408,845 Units purchased 1,166,454 1,041,797 237,173 23,656 25,900 Units redeemed and transferred 2,382,127 1,699,788 592,577 36,242 (11,330) ------------------------------------------------------------------------------------- Units outstanding at December 31, 2001 3,950,022 4,413,218 1,067,442 127,978 423,415 =====================================================================================
Founders Founders Founders International Founders Discovery Growth Equity Passport Subaccount Subaccount Subaccount Subaccount -------------------------------------------------------------------- Units outstanding at January 1, 2000 - 209,797 51,378 230,853 Units purchased 2,338,809 1,453,372 518,198 882,241 Units redeemed and transferred (771,893) 834,551 320,198 629,925 -------------------------------------------------------------------- Units outstanding at December 31, 2000 1,566,916 2,497,720 889,774 1,743,019 Units purchased 239,165 432,834 157,837 85,718 Units redeemed and transferred 556,821 515,373 117,704 (111,286) -------------------------------------------------------------------- Units outstanding at December 31, 2001 2,362,902 3,445,927 1,165,315 1,717,451 ====================================================================
47 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 3. Accumulation Units Outstanding (continued)
MidCap Technology Transamerica Japan Stock Growth VIF Growth Subaccount Subaccount Subaccount Subaccount ------------------------------------------------------------------------ Units outstanding at January 1, 2000 - 677,576 2,898,342 2,963,759 Units purchased 56,785 838,684 3,612,383 654,250 Units redeemed and transferred (14,443) 836,076 2,514,201 26,212 ------------------------------------------------------------------------ Units outstanding at December 31, 2000 42,342 2,352,336 9,024,926 3,644,221 Units purchased 3,434 592,246 777,770 168,266 Units redeemed and transferred 13,023 756,153 (259,884) (460,063) ------------------------------------------------------------------------ Units outstanding at December 31, 2001 58,799 3,700,735 9,542,812 3,352,424 ========================================================================
4. Financial Highlights Effective with these 2001 annual financial statements, the Mutual Fund Account has presented the following disclosures required by the AICPA Audit and Accounting Guide for Investment Companies.
At December 31, 2001 Year Ended December 31, 2001 ----------------------------------------------- ---------------------------------------------------- Unit Fair Value Investment Total Return*** Lowest to Net Income Expense Lowest Subaccount Units Highest Assets Ratio* Ratio** to Highest -------------------------------------------------------------------------- ---------------------------------------------------- Balanced 7,065,138 $12.92 to $12.95 $ 91,457,535 2.04% 1.40% (11.08)% to (10.39)% Appreciation 8,098,667 33.93 to 34.05 275,694,302 0.82 1.40 (10.57) to (10.06) Disciplined Stock 6,275,531 17.05 to 17.09 107,208,982 0.40 1.40 (15.83) to (14.47) Growth and Income 6,429,784 29.59 to 29.69 190,828,899 0.49 1.40 (8.33) to (7.15) International Equity 2,363,898 14.38 to 14.42 34,073,214 0.81 1.40 (31.08) to (30.17) International Value 1,334,483 12.07 to 12.09 16,106,732 0.90 1.40 (14.42) to (13.62) Limited Term High Income 3,020,161 9.02 to 9.03 27,263,974 11.07 1.40 (6.09) to (4.25) Money Market 81,225,136 1.35 109,558,331 3.76 1.40 2.53 Quality Bond 6,041,023 18.04 to 18.10 109,257,150 5.99 1.40 3.63 to 5.21 Small Cap 1,813,235 80.65 to 80.96 146,774,773 0.43 1.40 (7.42) to (6.34) Small Company Stock 1,616,858 13.55 to 13.60 21,977,818 0.07 1.40 (2.90) to 0.70 Special Value 1,827,839 16.16 to 16.20 29,600,641 0.74 1.40 (9.25) to (6.88) Zero Coupon 2000 - - - 0.00 1.40 - Dreyfus Stock Index 5,655,271 40.80 to 40.93 231,397,898 1.08 1.40 (15.10) to (13.40)
48 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 4. Financial Highlights (continued)
At December 31, 2001 Year Ended December 31, 2001 ---------------------------------------------------- ---------------------------------------------------- Unit Fair Value Investment Total Return*** Lowest to Net Income Expense Lowest Subaccount Units Highest Assets Ratio* Ratio** to Highest -------------------------------------------------------------------------- ---------------------------------------------------- Dreyfus Socially Responsible Growth 3,043,806 $29.37 to $29.47 $89,680,515 0.06% 1.40% (27.19)% to (23.65)% Core Bond 3,950,022 11.09 43,805,961 5.88 1.40 1.93 to 3.09 Core Value 4,413,218 11.70 51,650,023 0.03 1.40 (3.44) to (2.38) Emerging Leaders 1,067,442 13.08 to 13.09 13,969,950 0.00 1.40 7.23 to 9.99 Emerging Markets 127,978 7.29 to 7.28 932,271 0.80 1.40 (4.05) to 1.88 European Equity 423,415 8.78 to 8.85 3,721,225 0.60 1.40 (29.13) to (27.42) Founders Discovery 2,362,902 5.99 to 6.01 14,182,718 0.00 1.40 (19.66) to (16.86) Founders Growth 3,445,927 7.32 to 7.33 25,261,986 0.08 1.40 (41.34) to (21.14) Founders International Equity 1,165,315 7.86 to 7.87 9,161,030 0.04 1.40 (31.43) to (30.54) Founders Passport 1,717,451 8.08 13,879,454 0.00 1.40 (31.63) to (31.08) Japan 58,799 5.47 321,584 0.00 1.40 (28.90) to (26.27) MidCap Stock 3,700,735 10.71 to 10.73 39,684,431 0.20 1.40 (4.60) to (1.09) Technology Growth 9,542,812 7.27 to 7.31 69,681,950 0.00 1.40 (41.34) to (34.06) Transamerica VIF Growth 3,352,424 11.16 37,404,644 0.00 1.40 (18.77)
* These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying Series Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying Series Fund in which the subaccounts invest. ** These ratios represent the annualized contract expenses of the Mutual Fund Account, consisting primarily of mortality and expense charges. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying Series Fund are excluded. *** These amounts represent the total return for the period indicated, including changes in the value of the underlying Series Fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. 49 Separate Account VA-2L of Transamerica Occidental Life Insurance Company - Dreyfus/Transamerica Triple Advantage Variable Annuity Notes to Financial Statements (continued) 5. Administrative, Mortality, and Expense Risk Charges Mortality and expense risk charges are deducted from each subaccount of the Separate Account on a daily basis, which is equal, on an annual basis, to 1.25% of the daily net asset value of the subaccount. This amount can never increase and is paid to Transamerica Life. An administrative expense charge is also deducted by Transamerica Life from each subaccount on a daily basis, which is equal, on an annual basis, to .15% of the daily net asset value of the subaccount. This amount may change, but it is guaranteed not to exceed a maximum effective annual rate of .25%. The following charges are deducted from a contract holder's account by Transamerica Life and not directly form the Separate Account. An annual contract fee is deducted at the end of each contract year prior to the annuity date. Currently, this charge is $30 (or 2% of the account value, if less). After the annuity date this charge is referred to as the Annuity Fee. The Annuity Fee is $30. 6. Income Taxes Operations of the Mutual Fund Account form a part of Transamerica Life, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code of 1986, as amended (the Code). The operations of the Mutual Fund Account are accounted for separately from other operations of Transamerica Life for purposes of federal income taxation. The Mutual Fund Account is not separately taxable as a regulated investment company under Subchapter M of the Code and is not otherwise taxable as an entity separate from Transamerica Life. Under existing federal income tax laws, the income of the Mutual Fund Account is not taxable to Transamerica Life, as long as earnings are credited under the variable annuity contracts. 50 PART C Other Information Item 24. Financial Statements and Exhibits (a) Financial Statements All required financial statements are included in Parts A and B of this Registration Statement. (b) Exhibits (1) Resolution of the Board of Directors of Transamerica Occidental Life Insurance Company ("Transamerica") authorizing establishment of the Variable Account. (1) (2) Not Applicable. (3) (a) Master Agreement among Transamerica Occidental Life Insurance Company, First Transamerica Life Insurance, Transamerica Financial Resources, Inc., Dreyfus Service Corporation, and Dreyfus Service Organization, Inc. (4) (b) Principal Agency Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Service Organization, Inc. (4) (c) Distribution Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Service Corporation. (4) (d) Form of Sales Agreement among Dreyfus Service Corporation, Dreyfus Service Organization, Inc., and Broker-Dealers. (4) (e) Amendment Dated as of August 31, 1993, to Master Agreement among Transamerica Occidental Life Insurance Company, First Transamerica Life Insurance Company, Transamerica Financial Resources, Inc., Dreyfus Service Corporation and Dreyfus Service Organization, Inc. (6) (f) Amendment Dated as of August 31, 1993 to Principal Agency Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Service Organization, Inc. (6) (g) Amendment Dated as of August 31, 1993 to Distribution Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Service Corporation. (6) (h) Distribution Agreement between Transamerica Occidental Life Insurance Company and Transamerica Insurance Securities Sales Corporation, dated as of August 24, 1994. (8) (i) Sales Agreement among Transamerica Insurance Securities Sales Corporation, Transamerica Occidental Life Insurance Company, First Transamerica Life Insurance Company, Dreyfus Service Corporation, and Dreyfus Service Organization, Inc., dated as of August 24, 1994. (8) (j) Services Agreement among Transamerica Occidental Life Insurance Company, First Transamerica Life Insurance Company, Transamerica Insurance Securities Sales Corporation, Dreyfus Service Corporation, and Dreyfus Service Organization, Inc., dated as of August 24, 1994. (8) (k) Services Agreement among Transamerica Occidental Life Insurance Company, First Transamerica Life Insurance Company, Transamerica Insurance Securities Sales Corporation, Dreyfus Service Corporation, and Dreyfus Service Organization, Inc., dated as of August 24, 1994. (8) (l) Form of Sales Agreement between Transamerica Occidental Life Insurance Company, Transamerica Life Insurance and Annuity Company, First Transamerica Life Insurance Company and Transamerica Securities Sales Corporation. (10) (m) Principal Underwriting Agreement by and between Transamerica Occidental Life Insurance Company, on its own behalf and on the behalf of Mutual Fund Account, and AFSG Securities Corporation. (18) (n) Form of Amendment to Principal Underwriting Agreement. (25) (4) Group Contract Form, Certificate Form, Individual Contract Form and Endorsements. (a) Contract form and Endorsements. (5) (i) Form of Flexible Purchase Payment Multi-Funded Deferred Master Group Annuity Contract. (5) (ii) Form of Automatic Payout Option Endorsement to Group Contract. (5) (iii) Form of Dollar Cost Averaging Option Endorsement to Group Contract. (5) (iv) Form of Systematic Withdrawal Option Endorsement to Group Contract. (5) (v) Form of Guaranteed Minimum Death Benefit Endorsement to Group Contract. (5) (vi) Form of Fixed Account Rider to Group Contract. (7) (vii) Form of Tax Relief Rider. (21) (b) Certificate of Participation Form and Endorsements. (5) (i) Form of Certificate of Participation. (5) (ii) Form of IRA Endorsement to Certificate. (5) (iii) Form of Dollar Cost Averaging Option Endorsement to Certificate. (5) (iv) Form of Systematic Withdrawal Option Endorsement to Certificate. (5) (v) Form of Automatic Payout Option Endorsement to Certificate. (5) (vi) Form of Benefit Distribution Endorsement to Certificate. (5) (vii) Form of Death Benefit Endorsement to Group Contract. (14) (viii) Form of Individual Purchase Payment Endorsement. (14) (ix) Form of Guaranteed Minimum Income Builder Rider. (14) (x) Form of Tax Relief Rider.(21) (c) Individual Contract Form and Endorsements. (6) (i) Form of Flexible Purchase Payment Multi-Funded Deferred Individual Annuity Contract. (6) (ii) Form of IRA Endorsement to Individual Contract. (6) (iii) Form of Benefit Distribution Endorsement. (6) (iv) Form of Dollar Cost Averaging Option Endorsement to Individual Contract. (6) (v) Form of Systematic Withdrawal Option Endorsement to Individual Contract. (6) (vi) Form of Automatic Payout Option Endorsement to Individual Contract. (6) (vii) Form of Guaranteed Minimum Death Benefit Endorsement to Individual Contract. (6) (viii) Form of Fixed Account Rider to Individual Contract. (7) (x) Form of Death Benefit Endorsement. (14) (xi) Form of Initial Purchase Payment Endoresment. (14) (xii) Form of Guaranteed Minimum Income Benefit Rider. (14) (xiii) Form of Tax Relief Rider.(21) (d) Individual Contract Form and Endorsements. (26) (5) (a) Form of Application for and Acceptance of Group Annuity Contract. (5) (b) Form of Application for Enrollment under Group Annuity Contract. (5) (c) Form of Application for Individual Annuity Contract. (6) (d) Form of Application for Individual Contract. (26) (6) (a) Restated Articles of Incorporation of Transamerica. (1) (a)(1) Articles of Redomestication and Reincorporation of Transamerica Occidental Life Insurance Company. (16) (b) Restated By-Laws of Transamerica. (1) (b)(1) Amended and Restated By-Laws of Transamerica Occidental Life Insurance Company. (16) (7) Not Applicable. (8) (a) Participation Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Variable Investment Fund. (4) (b) Participation Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Life and Annuity Index Fund, Inc. (4) (c) Participation Agreement between Transamerica Occidental Life Insurance Company and The Dreyfus Socially Responsible Growth Fund, Inc. (6) (d) Administrative Services Agreement between Transamerica Occidental Life Insurance Company and Vantage Computer Systems, Inc. (4) (e) Amendment Dated as of August 31, 1993 to Participation Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Variable Investment Fund. (6) (f) Amendment Dated as of August 31, 1993 to Participation Agreement between Transamerica Occidental Life Insurance Company and Dreyfus Life and Annuity Index Fund, Inc. (6) (g) Amendment Dated as of August 24, 1994 to Participation Agreement Dated as of March 3, 1993, As Amended, between Transamerica Occidental Life Insurance Company and Dreyfus Variable Investment Fund. (8) (g)(1) Fund Participation Agreement (Dreyfus). (19) (2) Amendment to Fund Participation Agreement. (19) (h) Amendment Dated as of August 24, 1994 to Participation Agreement Dated as of August 31, 1993 between Transamerica Occidental Life Insurance Company and Dreyfus Socially Responsible Growth Fund, Inc. (8) (i) Amendment Dated as of August 24, 1994 to Participation Agreement Dated as of March 3, 1993, As Amended, between Transamerica Occidental Life Insurance Company and Dreyfus Stock Index Fund. (8) (j) Form of Participation Agreement (Transamerica). (20) (8) (k) Participation Agreement among WRL Series Fund, Inc., Western Reserve Life Assurance co. of Ohio, and PFL Life Insurance Company. Note 22 (8) (k) (1) Amendment No. 16 to Participation Agreement among WRL Series fund, Inc., PFL Life Insurance company, AUSA Life Insurance Company, Inc., Peoples Benefit Life Insurance Company and Transamerica Occidental Life Insurance Company. Note 23 (8) (k) (2) Amendment No. 17 to Participation Agreement among WRL Series Fund, Inc., Transamerica Life Insurance Company, AUSA Life Insurance Company, Inc., Peoples Benefit Life Insurance Company and Transamerica Occidental Life Insurance Company. Note 24 (8) (k) (3) Form of Amendment No. 20 to Participation Agreement among AEGON/Transamerica Series Fund, Inc., Transamerica Life Insurance Company, AUSA Life Insurance Company, Inc., Peoples Benefit Life Insurance Company, Transamerica Occidental Life Insurance Company and Transamerica Life Insurance and Annuity Company. Note 25 (9) (a) Opinion and Consent of Counsel. (9) (b) Consent of Counsel. (11) (10) (a) Consent of Independent Auditors. (25) (b) Opinion and Consent of Actuary. (25) (11) No financial statements are omitted from item 23. (12) Not applicable. (13) Performance Data Calculations. (6) (14) Not applicable. (15) Powers of Attorney. Frank Beardsley (12) Richard N. Latzer (15) Thomas J. Cusak (11) Karen MacDonald (15) James W. Dederer (15) Gary U. Rolle' (15) Paul E. Rutledge III (15) T. Desmond Sugrue (11) George A. Foegele (15) Nooruddin S. Veerjee (15) David E. Gooding (15) Robert A. Watson (11) Edgar H. Grubb (11) Frank C. Herringer (11) Patrick S. Baird (15) Brenda K. Clancy (15) Douglas C. Kolsrud (15) Craig D. Vermie (15) Ron F. Wagley (17) Bruce Clark (17) (1) Filed with initial filing of this form N-4 Registration Statement, File No. 33-49998 (July 24, 1992). (2) Incorporated by reference to Exhibit 7(c) of Post-Effective Amendment No.1 to the Registration Statement of Transamerica Occidental Life Insurance Company's Separate Account VL on Form S-6, File No. 33-28107 (April 30, 1990) (3) Incorporated by reference to Exhibit 7(d) of Post-Effective Amendment No. 2 to the Registration Statement of Transamerica Occidental Life Insurance Company's Separate Account VL on Form S-6, File No. 33-28107 (April 30, 1991) (4) Filed with Post-Effective Amendment No. 1 to this Form N-4 Registration Statement, File No. 33-49998 (April 30, 1993). (5) Filed with Post-Effective Amendment No. 3 to this Form N-4 Registration Statement, File No. 33-49998 (March 8, 1994). (6) Filed with Post-Effective Amendment No. 4 to this Form N-4 Registration Statement, File No. 33-49998 (April 29, 1994). (7) Filed with Post-Effective Amendment No. 5 to this Form N-4 Registration Statement, File No. 33-49998 (March 1, 1995). (8) Filed with Post-Effective Amendment No. 6 to this Form N-4 Registration Statement File No. 33-49998 (April 28, 1995). (9) Filed with Post-Effective Amendment No. 7 to this Form N-4 Registration Statement File No. 33-49998 (April 26, 1996). (10) Filed with Post-Effective Amendment No. 8 to this Form N-4 Registration Statement File No. 33-49998 (April 28, 1997). (11) Filed with Post-Effective Amendment No. 9 to this Form N-4 Registration Statement file No. 33-49998 (April 28, 1998). (12) Filed with Post-Effective Amendment No. 10 to this Form N-4 Registration Statement file No. 33-49998 (February 26, 1999). (13) Filed with Post-Effective Amendment No. 11 to this Form N-4 Registration Statement file No. 33-49998 (April 28, 1999). (14) Filed with Post-Effective Amendment No. 13 to this Form N-4 Registration Statement file No. 33-49998 (December 6, 1999). (15) Filed with Post-Effective Amendment No. 14 to this Form N-4 Registration Statement file No 33-49998 (April 28, 2000) (16) Filed with Post-Effective Amendment No 16 to this Form N-4 Registration Statement file No. 33-49998 (February 9, 2001) (17) Filed with Post-Effective Amendment No. 17 to this Form N-4 Registration Statement file No. 33-49998 (April 27, 2001) (18) Incorporated by reference to the Initial Filing of Form S-6 Registration Statement (File No. 333-91851) filed on November 30, 1999. (19) Incorporated by reference to Pre-Effective Amendment No. 1 to N-4 Registration Statement (File No. 333-63086) filed on September 13, 2001. (20) Incorporated by reference to Post-Effective Amendment No. 26 to N-4 Registration Statement (file No. 33-33085) filed on October 2, 2001. (21) Filed with Post-Effective Amendment No. 18 to this Form N-4 Registration Statement (File No. 33-49998) filed on January 18, 2002. (22) Incorporated herein by reference to Post-Effective Amendment No. 1 to form N-4 Registration Statement (File No. 333-7509) on April 29, 1998. (23) Incorporated herein by reference to Initial Filing to form N-4 Registration Statement (File No. 333-62738) on June 11, 2001. (24) Incorporated herein by reference to Post-Effective Amendment No. 25 to Form N-4 Registration Statement (file No. 33-33085) on April 27, 2001. (25) File herewith. (26) To be filed by Amendment. Item 25. List of Directors and Officers of the Depositor Principal Positions and Name Offices with Depositor ---- ---------------------- Patrick S. Baird Director Ron F. Wagley Director, President Brenda K. Clancy Director, Senior Vice President, Corporate Douglas C. Kolsrud Director, Senior Vice President, Investment Division Craig D. Vermie Director, Vice President and Counsel, Corporate Bruce Clark Chief Financial Officer and Senior Vice President Frank A. Camp Vice President and Financial Markets Division General Counsel Item 26. Persons Controlled by or under Common Control With the Depositor or Registrant.
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business AEGON USA, Inc. Iowa AEGON U.S. Holding Corporation, Holding company AEGON U.S. Corporation RCC North America, L.L.C. Delaware 100% AEGON USA, Inc. Real estate Transamerica Holding Company, L.L.C. Delaware 100% AEGON USA, Inc. Holding Company AEGON Funding Corp. Delaware 100% Transamerica Holding Company, Issue debt L.L.C. securities-net proceeds used to make loans to affiliates First AUSA Life Insurance Company Maryland 100% Transamerica Holding Company, Insurance holding L.L.C. company AUSA Life Insurance Company, Inc. New York 100% First AUSA Life Insurance Insurance Company Life Investors Insurance Company of Iowa 100% First AUSA Life Ins. Co. Insurance America Apple Partners of Iowa, L.L.C. Iowa 100% LICCA Apple production, packing, storage and sales Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the equity interest of other entities Transamerica Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance AEGON Financial Services Group, Inc. Minnesota 100% Transamerica Life Insurance Marketing Co. AEGON Assignment Corporation of Kentucky 100% AEGON Financial Services Administrator of Kentucky Group, Inc. structured settlements AEGON Assignment Corporation Illinois 100% AEGON Financial Services Administrator of Group, Inc. structured settlements Transamerica Financial Minnesota 100% AEGON Financial Services Life insurance and Institutions, Inc. Group, Inc. underwriting services Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock First Insurance AUSA Life Ins. Co.
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock First Insurance AUSA Life Ins. Co. Western Reserve Life Assurance Co. Ohio 100% First AUSA Life Ins. Co. Insurance of Ohio WRL Insurance Agency, Inc. California 100% Western Reserve Life Insurance Agency Assurance Co. of Ohio WRL Insurance Agency of Alabama, Alabama 100% WRL Insurance Agency, Inc. Insurance Agency Inc. WRL Insurance Agency of Massachusetts 100% WRL Insurance Agency, Inc. Insurance Agency Massachusetts, Inc. WRL Insurance Agency of Nevada, Inc. Nevada 100% WRL Insurance Agency, Inc. Insurance Agency WRL Insurance Agency of Texas, Inc. Texas Record shareholder Daniel DeMarco Insurance Agency WRL Insurance Agency of Wyoming Wyoming 100% WRL Insurance Agency, Inc. Insurance Agency AEGON/Transamerica Series Fund, Inc. Maryland Various Mutual fund AEGON/Transamerica Fund Services, Florida 100% Western Reserve Life Provides administration Inc. Assurance Co. of Ohio for affiliated mutual fund AEGON/Transamerica Fund Advisors, Florida 100% Western Reserve Life Registered investment Inc. Assurance Co. of Ohio advisor World Financial Group Insurance California 100% Western Reserve Life Insurance agency Agency, Inc. Assurance Co. of Ohio World Financial Group Insurance Alabama 100% World Financial Group Insurance Agency Agency of Alabama, Inc. Insurance Agency, Inc. World Financial Group Insurance Ohio 100% World Financial Group Insurance agency Agency of Ohio, Inc. Insurance Agency, Inc. World Financial Group Insurance Massachusetts 100% World Financial Group Insurance Agency Agency of Massachusetts, Inc. Insurance Agency, Inc. WFG Insurance Agency of Texas, Inc. Texas Record Shareholder Jack Linder Insurance Agency World Financial Group Insurance Hawaii 100% World Financial Group Insurance Agency Agency of Hawaii, Inc. Insurance Agency, Inc.
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business World Financial Group Insurance Nevada 100% World Financial Group Insurance Agency Agency of Nevada, Inc. Insurance Agency, Inc. World Financial Group Insurance New Mexico 100% World Financial Group Insurance Agency Agency of New Mexico, Inc. Insurance Agency, Inc. World Financial Group Insurance Wyoming 100% World Financial Group Insurance Agency Agency of Wyoming Insurance Agency, Inc. AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency Assurance Co. of Ohio Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency Cadet Holding Corp. Iowa 100% First AUSA Life Insurance Holding company Company Monumental General Life Insurance Puerto Rico 51% First AUSA Life Insurance Insurance Company of Puerto Rico Company 49% Baldrich & Associates of Puerto Rico AUSA Holding Company Maryland 100% Transamerica Holding Company Holding company Monumental General Insurance Group, Maryland 100% AUSA Holding Co. Holding company Inc. Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Insurance Sale/admin. of travel Group, Inc. insurance Monumental General Administrators, Maryland 100% Monumental General Insurance Provides management Inc. Group, Inc. srvcs. to unaffiliated third party administrator National Association Management And Maryland 100% Monumental General Provides actuarial Consultant Services, Inc. Administrators, Inc. consulting services Monumental General Mass Marketing, Maryland 100% Monumental General Insurance Marketing arm for sale Inc. Group, Inc. of mass marketed insurance coverages Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator Investors Warranty of America, Inc. Iowa 100% AUSA Holding Co. Provider of automobile extended maintenance contracts Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling for employees and agents of affiliated companies ADB Corporation, L.L.C. Delaware 100% Money Services, Inc. Special purpose limited Liability company ORBA Insurance Services, Inc. California 26.91% Money Services, Inc. Insurance agency Great Companies L.L.C. Iowa 30% Money Services, Inc. Markets & sells mutual funds & individually managed accounts AEGON USA Travel and Conference Iowa 100% Money Services Travel and Conference Services, L.L.C. Services Roundit, Inc. Maryland 50% AUSA Holding Co. Financial services Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. Insurance agency AEGON Asset Management Services, Delaware 100% AUSA Holding Co. Registered investment Inc. advisor World Group Securities, Inc. Delaware 100% AEGON Asset Management Broker-Dealer Services, Inc. World Financial Group, Inc. Delaware 100% AEGON Asset Management Marketing Services, Inc. Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer Associated Mariner Financial Group, Michigan 100% Intersecurities, Inc. Holding co./management Inc. services
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Associated Mariner Ins. Agency of Massachusetts 100% Associated Mariner Agency, Insurance agency Massachusetts, Inc. Inc. Associated Mariner Agency Ohio, Inc. Ohio 100% Associated Mariner Agency, Insurance agency Inc. Associated Mariner Agency Texas, Texas 100% Associated Mariner Agency, Insurance agency Inc. Inc. PIA General Partner, Inc. Delaware 100% AUSA Holding Company General Partner to PIA 2001-A, L.P. PIA 2001-A, L.P. Delaware PIA General, Inc. is the General Private placement Partner investment limited partnership Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor IDEX Mutual Funds Massachusetts Various Mutual fund Diversified Investment Advisors, Delaware 100% AUSA Holding Co. Registered investment Inc. advisor Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer Corp. Advisors, Inc. George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and Advisors, Inc. actuarial consulting Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance CRC Creditor Resources Canadian Canada 100% Creditor Resources, Inc. Insurance agency Dealer Network Inc. Premier Solutions Group, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency AEGON USA Investment Management, Iowa 100% Transamerica Holding Company, Investment advisor LLC. L.L.C. AEGON USA Realty Advisors, Inc. Iowa 100% AUSA Holding Co. Provides real estate administrative and real estate investment services AEGON USA Real Estate Services, Inc. Delaware 100% AEGON USA Realty Advisors, Real estate and Inc. mortgage holding company
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business QSC Holding, Inc. Delaware 100% AEGON USA Realty Advisors, Real estate and Inc. financial software production and sales Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Advisors, Inc Information Systems for real estate investment management USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment 13.11% PFL Life Ins. Co. trust 4.86% Bankers United Life Assurance Co. RCC Properties Limited Partnership Iowa AEGON USA Realty Advisors, Inc. is Limited Partnership General Partner and 5% owner Commonwealth General Corporation Delaware 100% AEGON U.S. Corporation Holding company ("CGC") AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life Insurance Company AEGON Alliances, Inc. Virginia 100% Benefit Plans, Inc. General agent Capital 200 Block Corporation Delaware 100% CGC Real estate holdings AEGON Structured Settlements, Inc. Kentucky 100% CGC Administrator of structured settlements AEGON Institutional Markets, Inc. Delaware 100% CGC Provider of investment, marketing and admin. Services to ins. cos. Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management (EIN 23-1720755) support services Compass Rose Development Corporation Pennsylvania 100% Ampac Insurance Agency, Inc. Special-purpose subsidiary Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Agency, Inc. Special-purpose subsidiary Frazer Association Consultants, Inc. Illinois 100% Ampac Insurance Agency, Inc. TPA license-holder
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business National Home Life Corporation Pennsylvania 100% Ampac Insurance Agency, Inc. Special-purpose subsidiary Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Agency, Inc. Furniture & equipment lessor Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Agency, Inc. Administrator of group insurance programs Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Agency, Inc. Special-purpose subsidiary Academy Insurance Group, Inc. Delaware 100% CGC Holding company Academy Life Insurance Co. Missouri 100% Academy Insurance Group, Inc. Insurance company Pension Life Insurance Company of New Jersey 100% Academy Life Insurance Company Insurance company America FED Financial, Inc. Delaware 100% Academy Insurance Group, Inc. Special-purpose subsidiary Ammest Massachusetts Insurance Massachusetts 100% Academy Insurance Group, Inc. Special-purpose Agency, Inc. subsidiary Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Group, Inc. Special-purpose subsidiary Ampac, Inc. Texas 100% Academy Insurance Group, Inc. Managing general agent Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Group, Inc. Special-purpose (EIN 23-2364438) subsidiary Force Financial Group, Inc. Delaware 100% Academy Insurance Group, Inc. Special-purpose subsidiary Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary Military Associates, Inc. Pennsylvania 100% Academy Insurance Group, Inc. Special-purpose subsidiary NCOAA Management Company Texas 100% Academy Insurance Group, Inc. Special-purpose subsidiary NCOA Motor Club, Inc. Georgia 100% Academy Insurance Group, Inc. Automobile club Unicom Administrative Services, Inc. Pennsylvania 100% Academy Insurance Group, Inc. Provider of admin. services
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Unicom Administrative Services, GmbH Germany 100%Unicom Administrative Provider of admin. Services, Inc. services Capital General Development Delaware 100% CGC Holding company Corporation Monumental Life Insurance Company Maryland 73.23% Capital General Development Insurance company Company 26.77% First AUSA Life Insurance Company Exchange Management Services, Inc. Missouri 100% Monumental Life Insurance Management company Company AEGON Direct Marketing Services, Maryland 100% Monumental Life Insurance Marketing company Inc. Company Peoples Benefit Life Insurance Iowa 3.7% CGC Insurance company Company 20.0% Capital Liberty, L.P. 76.3% Monumental Life Insurance Company Veterans Life Insurance Co. Illinois 100% Transamerica Holding Company, Insurance company L.L.C. Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary Coverna Direct Insurance Insurance Maryland 100% Peoples Benefit Life Insurance agency Agency, Inc. Insurance Company Ammest Realty Corporation Texas 100% Monumental Life Insurance Special purpose Company subsidiary JMH Operating Company, Inc. Mississippi 100% Peoples Benefit Life Real estate holdings Insurance Company Capital Liberty, L.P. Delaware 99.0% Monumental Life Insurance Holding Company Company 1.0% CGC Consumer Membership Services, Inc. Delaware 100% Commonwealth General Credit Card Protection Corporation Global Premier Reinsurance Company, British Virgin 100% Commonwealth General Insurance and LTD. Islands Corporation Reinsurance company Health Benefits Services, Inc. Delaware 100% Commonwealth General Health discount plan Corporation Quest Membership Services, Inc. Delaware 100% Commonwealth General Travel discount plan Corporation
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Stonebridge Group, Inc. Delaware 100% Commonwealth General General purpose Corporation corporation J.C. Penney Life Insurance Vermont 100% Commonwealth General Insurance Corporation Corporation Stonebridge Insurance Company Wisconsin 100% J.C. Penney Life Insurance Insurance Company Insurance Consultants, Inc. Nebraska 100% Commonwealth General Brokerage Corporation ICON Partners Limited United Kingdom 100% Insurance Consultants, Inc. Marketing company J.C. Penney Casualty Insurance Ohio 100% Commonwealth General Insurance Company Corporation AEGON N.V. Netherlands 51.27% of Vereniging Holding Company AEGON Netherlands Membership Association Groninger Financieringen B.V. Netherlands Held through AEGON Nevak Holding Holding Company B.V. AEGON Nederland N.V. Netherlands 100% AEGON N.V. Holding Company AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding Company AEGON Derivatives Netherlands 100% AEGON N.V. Holding Company AEGON International N.V. Netherlands 100% AEGON N.V. Holding Company AEGON Trust Advisory Board Members: Delaware 100% AEGON International N.V. Manage assets of AEGON K.J.Storm U.S. Holding Corporation Donald J. Shepard Joseph Streppel Dennis Hersch AEGON U.S. Holding Corporation Delaware 100% AEGON Trust Holding company AEGON DMS Holding B.V. Netherlands 100% AEGON International N.V. Holding company JCPenney Financial & Marketing Korea 100% AEGON DMS Holding B.V. Marketing Services Group LTD JCPenney Direct Marketing Services Japan 100% AEGON DMS Holding B.V. Marketing Japan K.K. Canadian Premier Holdings LTD Canada 100% AEGON DMS Holding B.V. Holding company
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Canadian Premier Life Insurance Canada 100% Canadian Premier Holdings LTD Holding company Company Legacy General Insurance Company Canada 100% Canadian Premier Life Insurance Insurance Company Cornerstone International Holdings United Kingdom 100% AEGON DMS Holding B.V. Holding company LTD Cornerstone International Marketing United Kingdom 100% Cornerstone International Marketing company LTD Holdings, LTD Stonebridge International Insurance United Kingdom 100% Cornerstone International Insurance company LTD Marketing, LTD JCPenney Direct Asia Pacific Pty LTD Australia 100% AEGON DMS Holding B.V. Holding company JCPenney Direct Service Asia Australia 100% JCPenney Direct Asia Pacific Operations company Pacific Pty LTD Pty LTD JCPenney Insurance Marketing Asia Australia 100% JcPenney Direct Asia Pacific Marketing company Pacific Pty LTD Pty LTD Short Hills Management Company New Jersey 100% AEGON U.S. Holding Corporation Insurance Agent COPRA Reinsurance Company New York 100% AEGON U.S. Reinsurance Holding Corporation AEGON Management Company Indiana 100% AEGON U.S. Insurance holding Holding Corporation company AEGON U.S. Corporation Iowa 100% AEGON U.S. Holding Corporation Holding company Transamerica Corporation ("TAC") Delaware 100% AEGON NV Major interest in insurance and finance AEGON Funding Corp. II Delaware 100% TAC Commercial paper insurance Transamerica Pacific Insurance Hawaii 100% TAC Life insurance Company, Ltd. TREIC Enterprises, Inc. Delaware 100% TFC Investments Terrapoint, LLC Delaware 50% TREIC Enterprises, Inc. Data Processing ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty Insurance Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty Insurance Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications and data processing Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a pool of high-yield bonds Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only - Inactive Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial & Consumer Lending & equipment leasing Transamerica Public Finance, LLC Delaware 70% TCFCI, 30% TFC Finance TFC Properties, Inc. Delaware 100% Transamerica Finance Corp. Holding Company Transamerica Retirement Delaware 100% TFC Properties, Inc. Own property Communities, S.F., Inc. Transamerica Retirement Delaware 100% TFC Properties, Inc. Own property Communities, S.J., Inc. TA Leasing Holding Co., Inc. Delaware 100% Transamerica Finance Corp. Holding company Trans Ocean Ltd. Delaware 100% TA Leasing Holding Co. Inc. Holding company Trans Ocean Container Corp. ("TOCC") Delaware 100% Trans Ocean Ltd. Intermodal leasing SpaceWise Inc. Delaware 100% TOCC Intermodal leasing Trans Ocean Container Finance Corp. Delaware 100% TOL Intermodal leasing Trans Ocean Leasing Deutschland GmbH Germany 100% TOCC Intermodal leasing Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing Trans Ocean Regional Corporate California 100% TOCC Holding company Holdings Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services intermodal equipment Transamerica Leasing Holdings Inc. Delaware 100% Transamerica Leasing Inc. Holding company ("TLHI") Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal leasing Greybox L.L.C. ("G") Delaware 100% TLHI Intermodal freight container interchange facilitation service Transamerica Trailer Leasing S.N.C. France 100% Greybox L.L.C. Leasing Greybox Services Limited U.K. 100% TLHI Intermodal leasing Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc. Leasing Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc. Leasing Transamerica Distribution Services, Delaware 100% TLHI Dormant Inc. Transamerica Leasing Coordination Belg. 100% TLHI Leasing Center Transamerica Leasing do Brasil Ltda. Braz. 100% TLHI Container Leasing Transamerica Leasing GmbH Germany 100% TLHI Leasing Transamerica Trailer Leasing Sp. Poland 100% TLHI Leasing z.o.o Transamerica Leasing Limited U.K. 100% TLHI Leasing ICS Terminals (UK) Limited U.K. 100% Transamerica Leasing Limited Leasing Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing Transamerica Leasing (Proprietary) S. Africa 100% TLHI In Liquidation - Limited Intermodal leasing Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Trailer Holdings II Delaware 100% TLHI Holding company Inc. Transamerica Trailer Holdings III Delaware 100% TLHI Holding company Inc. Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing Transamerica Trailer Leasing AG Switzerland 100% TLHI Leasing Transamerica Trailer Leasing A/S + Denmark 100% TLHI Leasing C66 Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing Transamerica Trailer Leasing Belgium 100% TLHI Leasing (Belgium) N.V. Transamerica Trailer Leasing Netherlands 100% TLHI Leasing (Netherlands) B.V. Transamerica Alquiler de Trailer Spain 100% TLHI Leasing Spain S.L. Transamerica Transport Inc. New Jersey 100% TLHI Dormant Transamerica Commercial Finance Delaware 100% Transamerica Finance Corp. Holding company Corporation, I ("TCFCI") Transamerica Equipment Financial Delaware 100% TCFCI Investment in Various Services Corporation equipment leases and loans BWAC Credit Corporation Delaware 100% TCFCI Inactive BWAC International Corporation Delaware 100% TCFCI Retail Appliance and furniture stores BWAC Twelve, Inc. Delaware 100% TCFCI Holding company TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Insurance premium Corporation ("TIFC") financing Transamerica Insurance Finance California 100% TIFC Insurance premium Corporation, California Transamerica Insurance Finance Maryland 100% TIFC Insurance premium Company (Europe) Transamerica Insurance Finance Ontario 100% TIFC Insurance premium Corporation, Canada financing
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business T Holdings, Inc. DE 100% TCFCI Holding Company M Credit, Inc. Delaware 100% TCFCI Commercial lending Transamerica Mezzanine Financing, Delaware 100% T Holdings, Inc. Holding company Inc. Bay Capital Corporation Delaware 100% M Credit, Inc. Special purpose corporation Coast Funding Corporation Delaware 100% M Credit, Inc. Special purpose corporation Transamerica Small Business Delaware 100% M Credit, Inc. Holding company Capital, Inc. ("TSBC") Emergent Business Capital Holdings, Delaware 100% TSBC Dormant Inc. Gulf Capital Corporation Delaware 100% M Credit, Inc. Special purpose corporation Direct Capital Equity Investment, Delaware 100% M Credit, Inc. Small business loans Inc. TA Air East, Corp. Delaware 100% TEFSC Special purpose corporation TA Air I, Corp. Delaware 100% TEFS Special purpose corporation TA Air II, Corp. Delaware 100% TEFS Special purpose corporation TA Air III, Corp. Delaware 100% TEFS Special purpose corporation TA Air IV, Corp. Delaware 100% TEFS Special purpose corporation TA Air V, Corp. Delaware 100% TEFS Special purpose corporation TA Air VI, Corp. Delaware 100% TEFS Special purpose corporation TA Air VII, Corp. Delaware 100% TEFS Special purpose corporation TA Air VIII, Corp. Delaware 100% TEFS Special purpose corporation
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business TA Air IX, Corp. Delaware 100% TEFS Special purpose corporation TA Air X, Corp. Delaware 100% TEFS Special purpose corporation TA Air XI, Corp. Delaware 100% TEFS Special purpose corporation TA Air XII, Corp. Delaware 100% TEFS Special purpose corporation TA Air XIII, Corp. Delaware 100% TEFS Special purpose corporation TA Air XIV, Corp. Delaware 100% TEFS Special purpose corporation TA Air XV, Corp. Delaware 100% TEFS Special purpose corporation TA Air XVI, Corp. Delaware 100% TEFS Special purpose corporation TA Air XVII, Corp. Delaware 100% TEFS Special purpose corporation TA Air XVIII, Corp. Delaware 100% TEFS Special purpose corporation TA Air XIX, Corp. Delaware 100% TEFS Special purpose corporation Transamerica Aviation 803 Corp. Delaware 100% TEFS Special purpose corporation Transamerica Aviation 400 Corp. Delaware 100% TEFS Special purpose corporation Transamerica Aviation 429/448 Corp. Delaware 100% TEFS Special purpose corporation Transamerica Aviation 630 Corp. Delaware 100% TEFS Special purpose corporation TA Steel I, LLC Delaware 100% TEFS Special purpose corporation Transamerica Aviation 24245/24246 Delaware 100% TEFS Special purpose Corp. corporation TA Heli I, Inc. Delaware 100% TEFS Special purpose corporation
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business TA Marine I, Inc. Delaware 100% TEFS Special purpose corporation TA Marine II, Inc. Delaware 100% TEFS Special purpose corporation TA Marine IV, Inc. Delaware 100% TEFS Special purpose corporation TA Marine VI, Inc. Delaware 100% TEFS Special purpose corporation TA Marine V, Inc. Delaware 100% TEFS Special purpose corporation TA Marine III, Corp. Delaware 100% TEFS Special purpose corporation TA Public Finance Air I, Corp. Delaware 100% TEFS Special purpose corporation TBC I, Inc. Delaware 100% T Holdings, Inc. Special purpose corporation Facta, LLP Delaware 100% TBC I, Inc. Commercial finance TBC III, Inc. Delaware 100% T Holdings, Inc. Special purpose corporation Transcap Trade Finance Delaware 100% TBC III, Inc. Commercial finance TBC IV, Inc. Delaware 100% T Holdings, Inc. Special purpose corporation Transamerica Commercial Real Estate Delaware 100% T Holdings, Inc. Bridge financing Finance, LLC TBC V, Inc. Delaware 100% T Holdings, Inc. Special purpose corporation Breakthrough Funding LLP Delaware 100% TBC V, Inc. Commercial finance TBC Tax I, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax II, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax III, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax IV, Inc. Delaware 100% M Credit, Inc. Special purpose corporation
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business TBC Tax V, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax VI, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax VII, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax VIII, Inc. Delaware 100% M Credit, Inc. Special purpose corporation TBC Tax IX, Inc. Delaware 100% M Credit, Inc. Special purpose corporation The Plain Company Delaware 100% TEFS Special purpose corporation Transamerica Distribution Finance Delaware 100% TCFCI Holding company Corporation ("TDFC") Transamerica Accounts Holding Corp. Delaware 100% TDFC Holding company ARS Funding Corporation Delaware 100% Transamerica Accounts Holding Dormant Corporation Transamerica Commercial Finance Delaware 100% TIFC Finance company Corporation ("TCFC") Transamerica Acquisition Canada 100% TCFCC Holding company Corporation, Canada Transamerica Distribution Finance Delaware 100% TCFC Commercial Finance Corporation - Overseas, Inc. ("TDFOI") TDF Mauritius Limited Mauritius 100% TDFOI Mauritius holding company Transamerica Apple Distribution India 69.94% TDF-Mauritius, Limited Transamerica Finance Public Limited Distribution Finance Joint Venture Inventory Funding Trust Delaware 100% TCFC Delaware Business Trust Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust Holding company TCF Asset Management Corporation Colorado 100% TCFC A depository for foreclosed real and personal property
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Distribution Finance Illinois 100% TCFC Special purpose Insurance Services, Inc. corporation Transamerica Distribution Finance Mexico 99% TCFC Inactive Factorje S.A. DE C.V. Transamerica Joint Ventures, Inc. Delaware 100% TCFC Holding company Amana Finance Illinois 50% Transamerica Joint Ventures, Commercial finance Inc. American Standard Financial Services Illinois 50% Transamerica Joint Ventures, Finance Inc. Penske Financial Services LLC Delaware 50% Transamerica Joint Ventures, Commercial finance Inc. Polaris Acceptance Illinois 50% Transamerica Joint Ventures, Commercial finance Inc. Transamerica Inventory Finance Delaware 100% TDFC Holding company Corporation ("TIFC") Transamerica GmbH, Inc. Delaware 100% TIFC Holding company Transamerica Netherlands 100% Trans. GmbH, Inc. Commercial lending in Fincieringsmaatschappij B.V. Europe BWAC Seventeen, Inc. Delaware 100% TIFC Holding company Transamerica Commercial Finance Ontario 100% BWAC Seventeen, Inc. Dormant Canada, Limited Transamerica Commercial Finance Canada 100% BWAC Seventeen, Inc. Commercial finance Corporation, Canada Cantrex Group Inc. Quebec 76% TACC Buying group and retail merchant services 2953-9087 Quebec Inc. Quebec 100% Cantrex Group, Inc. Dormant Corbeil Electrique, Inc. Quebec 100% Cantrex Group, Inc. Dormant Prestex Marketing, Inc. Quebec 100% Cantrex Group, Inc. Dormant BWAC Twenty-One, Inc. Delaware 100% TIFC Holding company ODBH Ltd/Harley Davidson Acceptance United Kingdom 100% BWAC Twenty-One, Inc. Finance Transamerica Technology Services United Kingdom 100% TCFL Inactive Limited
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Commercial Finance U.K. 100% Transamerica Commercial Commercial lending Limited ("TCFL") Holdings Limited TDF Credit Insurance Services U.K. 100% TCFL Credit insurance Limited brokerage Whirlpool Financial Corporation Poland 100% TCFL Inactive - commercial Polska Spozoo finance Transamerica Commercial Holdings U.K. 33% BWAC Twenty-One Inc. Holding company Limited Transamerica Trailer Leasing Limited New York 100% Transamerica Commercial Special purpose Holdings Limited corporation Transamerica Distribution Capital Spain 100% Transamerica Commercial Inactive Services, Iberica Holdings Limited Transamerica Commercial Finance France 100% TIFC Factoring company France S.A. Transamerica GmbH Frankfurt, Germany 100% GmbH Commercial lending in Germany Transamerica Retail Financial Delaware 100% TDFC Provides retail Services Corporation ("TRFSC") financing Transamerica Bank, NA Delaware 100% TRFSC Bank Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance Holding Company ("TCFHC") holding company Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company Receivables Company Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages First Florida Appraisal Services, Florida 100% Metropolitan Mtg. Co. Appraisal and Inc. inspection services First Georgia Appraisal Services, Georgia 100% First FL App. Srvc, Inc. Appraisal services Inc. Freedom Tax Services, Inc. Florida 100%. Metropolitan Mtg. Co. Property tax information services J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and marketing services J.J. & W. Realty Services, Inc. Florida 100% Metropolitan Mtg. Co. To hold problem REO properties
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Liberty Mortgage Company of Ft. Florida 100% Metropolitan Mtg. Co. No active business/Name Myers, Inc. holding only Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name holding only Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name holding only Transamerica Vendor Financial Delaware 100% TDFC Provides commercial Service Corporation leasing Transamerica Distribution Finance Mexico 99% TCFC Holding company in Corporation de Mexico S. de R.L. Mexican subsidiaries de C.V. TDF de Mexico S. de R.L. de C.V. Mexico 99% TDFC Mex Service company for Whirlpool receivables Transamerica Corporate Services De Mexico 99% TDFC Mex Holds employees Mexico S. de R.L. de CV Transamerica Distribution Finance Mexico 99% TCFC Finance company Factorje S.A. de C.V. Transamerica Distribution Finance Illinois 100% TCFC Finance company Insurance Services, Inc. Transamerica Flood Hazard Delaware 100% TFC Flood Zone Certification, Inc. certification service Transamerica Home Loan California 100% TFC Consumer mortgages Transamerica Lending Company Delaware 100% TFC In liquidation - lending Transamerica Public Finance, LLC Delaware 70% TFC Financial Services Transamerica Financial Products, California 100% Transamerica Corp. Investments Inc. Transamerica Insurance Corporation Iowa 100% TIHI Holding company ("TIC") Plaza Insurance Sales Inc. California 100% TIC Casualty insurance placement Transamerica Advisors, Inc. California 100% TIC Retail sale of investment advisory services
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Annuity Services Corp. New Mexico 100% TIC Performs services required for structured settlements Transamerica Financial Advisors, Delaware 100% TIC Retail sale of Inc. securities products Financial Resources Insurance Texas 100% Transamerica Fin. Adv. Retail sale of Agency of Texas securities products TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin Adv. Variable insurance contract sales in state of Ohio Transamerica Financial Resources Alabama 100% Transamerica Fin. Adv. Insurance agent & broker Agency of Alabama, Inc. Transamerica Financial Resources Massachusetts 100% Transamerica Fin. Adv. Insurance agent & broker Ins. Agency of Massachusetts, Inc. Transamerica International Delaware 100% TIC Holding & administering Insurance Services, Inc. ("TIISI") foreign operations AEGON Canada Inc. ("ACI") Canada 100% TIHI Holding company Transamerica Life Canada Canada 100% ACI Life insurance company Home Loans and Finance Ltd. U.K. 100% TIISI Inactive Transamerica Occidental Life Iowa 100% TIC Life insurance Insurance Company ("TOLIC") NEF Investment Company California 100% TOLIC Real estate development Transamerica China Investments Hong Kong 99% TOLIC Holding company Holdings Limited Transamerica Life Insurance and N. Carolina 100% TOLIC Life insurance Annuity Company ("TALIAC") Transamerica Assurance Company Missouri 100% TALIAC Life and disability insurance Gemini Investments, Inc. Delaware 100% TALIAC Investment subsidiary Transamerica Life Insurance Company New York 100% TOLIC Insurance sales of New York Transamerica South Park Resources, Delaware 100% TOLIC Market analysis Inc.
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Variable Insurance Fund Maryland 100% TOLIC Mutual Fund USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator Transamerica Products, Inc. ("TPI") California 100% TIC Holding company Transamerica Products I, Inc. California 100% TPI Co-general partner Transamerica Securities Sales Corp. Maryland 100% TIC Life insurance sales Transamerica Service Company Delaware 100% TIC Passive loss tax service Transamerica International RE Bermuda 100% TAC Reinsurance (Bermuda) Ltd. Transamerica Intellitech, Inc. Delaware 100% TFC Real estate information and technology services Transamerica International Delaware 100% TAC Holding company Holdings, Inc. ("TIHI") Transamerica Investment Services, Delaware 100% TAC Investment adviser Inc. ("TISI") Transamerica Income Shares, Inc. Maryland 100% TISI Mutual fund Transamerica Real Estate Tax Delaware 100% TFC Real estate tax Service, Inc. reporting and processing services Transamerica Realty Services, Inc. Delaware 100% TAC Real estate investments ("TRS") Bankers Mortgage Company of CA California 100% TRS Investment management Pyramid Investment Corporation Delaware 100% TRS Real estate company The Gilwell Company California 100% TRS Ground lessee of 517 Washington Street, San Francisco Transamerica Affordable Housing, California 100% TRS General partner LHTC Inc. Partnership Transamerica Minerals Company California 100% TRS Owner and lessor of oil and gas properties
Name Jurisdiction of Percent of Voting Securities Incorporation Owned Business Transamerica Oakmont Corporation California 100% TRS General partner retirement properties Auto Funding Services, LLC Delaware 100% TBCC Commercial lending TBCC Funding II, L.L.C. Delaware 100% TBCC Funding Trust II Special purpose corporation Private Label Funding LLC Delaware 100% TBCC Funding Trust II Special purpose corporation TBCC Funding Trust II Delaware 100% TCFCI Trust TBCC Funding I, L.L.C. Delaware 100% TBCC Funding I, LLC Special purpose corporation TBCC Funding Trust I Delaware 100% TCFCI Trust Direct Capital Partners, LLC Delaware Various members Investment banking Inland Water Transportation LLC Delaware 100% Direct Capital Partners, L.P. Finance barges Direct Capital Partners, L.P. Delaware 100% Direct Capital Partners, LLC Investment banking Transamerica Business Capital Delaware 100% TCFCI Commercial lending Corporation Transamerica Technology Finance Delaware 100% TCFCI Commercial lending Corporation
Item 27. Number of Certificate Owners As of December 31, 2001 there were 29,369 Owners of Contracts. Item 28. Indemnification The Iowa Code (Sections 490.850 et. seq.) provides for permissive indemnification in certain situations, mandatory indemnification in other situations, and prohibits indemnification in certain situations. The code also specifies procedures for determining when indemnification payments can be made. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the Depositor of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the Depositor will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be goverened by the final adjudication of such issue. Item 29. Principal Underwriter AFSG Securities Corporation 4333 Edgewood Road N.E. Cedar Rapids, IA 52499-0001 The directors and officers of AFSG Securities Corporation are as follows/(5)/: Larry N. Norman Anne Spaes Director and President Director and Vice President Lisa Wachanedorf Darin Smith Director, Vice President and Vice President and Chief Compliance Officer Assistant Secretary Thomas R. Moriarty Emily Bates Vice President Assistant Treasurer Priscilla Hechler Clifton Flenniken Assistant Vice President and Assistant Treasurer Assistant Secretary Teresa Stolba Assistant Compliance Officer /(5)/ The principal business address of each person listed is AFSG Securities Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001. Prior to May 1, 2002, Transamerica Securities Sales Corporation ("TSSC") and Transamerica Financial Resources ("TFR") were co-principal underwriters of the contracts. TSSC and TFR received $15,913,242.07, $40,610,303.26 and $17,147,205.77 from the Registrant for the years ending December 31, 2001, December 31, 2000 and December 31, 1999 respectively, for its services in distributing the policies. No other commission or compensation was received by TSSC or TFR, directly or indirectly, from the Registrant during the fiscal year. As of May 1, 2002, AFSG Securities Corporation, an affiliate of Transamerica, is the principal underwriter of the contracts and may enter into agreements with broker-dealers for the distribution of the contracts. AFSG Securities Corporation serves as the principal underwriter for Separate Account VA B, the Retirement Builder Variable Annuity Account, Separate Account VA A, Separate Account VA C, Separate Account VA D, Separate Account VA E, Separate Account VA F, Separate Account VA I, Separate Account VA J, Separate Account VL A and Legacy Builder Variable Life Separate Account. These accounts are separate accounts of Transamerica Life Insurance Company. AFSG Securities Corporation serves as principal underwriter for Separate Account VA BNY, Separate Account C, AUSA Series Life Account, AUSA Series Annuity Account and AUSA Series Annuity Account B. These accounts are separate accounts of AUSA Life Insurance Company, Inc. AFSG Securities Corporation serves as principal underwriter for Separate Account I, Separate Account II and Separate Account V. These accounts are separate accounts of Peoples Benefit Life Insurance Company. AFSG Securities Corporation serves as principal underwriter for WRL Series Life Account, WRL Series Annuity Account and WRL Series Annuity Account B. These accounts are separate accounts of Western Reserve Life Assurance Company of Ohio. AFSG Securities Corporation also serves as principal underwriter for Separate Account VA G, Separate Account VA H, Separate Account VA-2L and Transamerica Occidental Life Separate Account VUL-3. These accounts are separate accounts of Transamerica Occidental Life Insurance Company. AFSG Securities Corporation also serves as principal underwriter for Separate Account VA-2LNY. This account is a separate account of Transamerica Life Insurance Company of New York. Item 30. Location and Accounts and Records All accounts and records required to be maintained by Section 31(a) of the 1940 Act and the rules under it are maintained by Transamerica or the Service Office at their administrative offices. Item 31. Management Services All management contracts are discussed in Parts A or B. Items 32. Undertakings (a) Registrant undertakes that it will file a post-effective amendment to this registration statement as frequently as necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. (b) Registrant undertakes that it will include either (1) as part of any application to purchase a Certificate or an Individual Contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. (c) Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request to Transamerica at the address or phone number listed in the Prospectus. (d) Registrant represents that it is relying on a no-action letter dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(i) and 27(d) of the Investment Company Act of 1940, in connection with redeemability restrictions on Section 403(b) policies, and that paragraphs numbered (1) through (4) of that letter will be complied with. (e) Transamerica hereby represents that the fees and the charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Transamerica. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant hereby certifies that this Amendment to the Registration Statement meets the requirements for effectiveness pursuant to paragraph (b) of Rule 485 and has caused this Registration Statement to be signed on its behalf, by the undersigned in the City of Cedar Rapids, State of Iowa on this 26th day of April, 2002. SEPARATE ACCOUNT VA-2L TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (DEPOSITOR) /s/ Frank A. Camp --------------------------------- Frank A. Camp Vice President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signatures Titles Date ---------- ------ ---- * Director _____________, 2002 ------------------------ Patrick S. Baird * Director _____________, 2002 ------------------------ Brenda K. Clancy * Director _____________, 2002 ------------------------ Douglas C. Kolsrud * Director _____________, 2002 ------------------------ Craig D. Vermie * Director and President _____________, 2002 ------------------------ Ron F. Wagley * Chief Financial Officer and _____________, 2002 ------------------------ Senior Vice President Bruce Clark /s/ Frank A. Camp Attorney -in-Fact pursuant to powers of April 26, 2002 ------------------------ attorney filed herewith, and in his own *By: Frank A. Camp capacity as Vice President.
Registration No. 33-49998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ EXHIBITS TO FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FOR DREYFUS/TRANSAMERICA TRIPLE ADVANTAGE _______________ EXHIBIT INDEX ------------- Exhibit No. Description of Exhibit Page No.* ----------- ---------------------- --------- (3)(n) Form of Amendment to Principal Underwriting Agreement (8)(k)(3) Form of Amendment No. 20 to Participation Agreement among AEGON/Transamerica Series Fund, Inc., Transamerica Life Insurance Company, AUSA Life Insurance Company, Inc., Peoples Benefit Life Insurance Company, Transamerica Occidental Life Insurance Company and Transamerica Life Insurance and Annuity Company (10)(a) Consent of Independent Auditors (10)(b) Opinion and Consent of Actuary __________________________ * Page numbers included only in manually executed original.