Transamerica Occidental's Separate Account Fund B
Individual Equity Investment Fund Contracts
For Tax Deferred Individual Retirement Plans
Issued by Transamerica Occidental Life Insurance Company
(LOGO)
1150 South Olive Street, Los Angeles, California 90015-2211 (213) 742-3065
Transamerica Occidental's Separate Account Fund B (the "Fund") offered three
types of variable annuity contracts, which are called Individual Equity
Investment Fund Contracts. These Contracts are Annual Deposit, Single Deposit
Deferred and Single Deposit Immediate. These Contracts are for tax qualified
plans only. New Contracts are no longer being issued, but additional deposits
may be made to existing Contracts.
The investment objective of the Fund is long-term capital growth. The Fund
pursues its investment objective by investing primarily in common stocks. Any
income and realized capital gains will be reinvested. There are no assurances
that the investment objective will be met. The Contract Owner bears all of the
investment risk.
This Prospectus contains information about the Fund and the related Contracts,
which you should know before investing.
This Prospectus should be kept for future reference.
A Statement of Additional Information, is incorporated herein by reference and
has been filed with the Securities and Exchange Commission. The Statement of
Additional Information is available free by contacting Transamerica Annuity
Service Center at 401 North Tryon Street, Suite 700, Charlotte, North Carolina
28202, or at 800-420-7749.
The table of contents for the Statement of Additional Information is on page 23
of this Prospectus. The date of the Statement of Additional Information is May
1, 1999.
The securities and exchange commission has not approved or disapproved these
securities nor passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is May 1, 1999
The contracts are not deposits of, or guaranteed or endorsed by, any bank, nor
are the contracts federally insured by the federal deposit insurance
corporation, the federal reserve board or any other government agency. The
contracts involve investment risk including possible loss of principal.
TABLE
OF
CONTENTS
(LOGO)
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Page
Page
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Terms Used in this Prospectus............... 2 Changes to Variable Annuity Contract...... 13
Summary..................................... 4 Inquiries................................. 13
Fee Table................................... 5 Annuity Period.............................. 13
Per Accumulation Unit Income and Capital... Death Benefits.............................. 14
Changes.................................. 7 Before Retirement......................... 14
Financial Statements for the Fund and After Retirement......................... 15
Transamerica Occidental ............. 7 Contract Values............................. 15
Transamerica Occidental and The Fund........ 8 Annual Deposit Contract..................... 15
Transamerica Occidental Life Insurance Single Deposit Deferred Contract............ 15
Company............................. 8 Single Deposit Immediate Contract......... 15
Insurance Marketplace Standards Accumulation Unit Value................... 16
Association ........................ 8 Written Requests............................ 16
The Fund................................. 8 Preparing for Year 2000..................... 17
Investment Objectives and Underwriter............................... 17
Policies............................ 9 Surrender of a Contract..................... 17
Strategies............................... 9 Federal Tax Matters......................... 18
Risks.................................... 10 Introduction.............................. 18
Management of the Fund...................... 10 Qualified Contracts....................... 19
The Investment Advisers.................. 10 Tax Status of the Contract................ 21
Charges Under the Contracts................. 11 Taxation of Annuities..................... 21
Charges Assessed Against the Deposits.... 11 Legal Proceedings........................... 22
Charges Assessed Against the Fund........ 11 Table of Contents of the Statement of
Premium Taxes............................ 12 Additional Information.................... 23
Description of the Contracts................ 12
Voting Rights............................ 12
</TABLE>
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This Prospectus is not an offer to purchase the Contracts in any state in which
it is unlawful to make such offer. No salesperson or any other person has been
authorized to give any information or to make any representations other than
those contained in this Prospectus. If such representations are made, do not
rely on them.
TERMS USED IN THIS PROSPECTUS
Accumulation Account: The account maintained under each Contract comprising all
Accumulation Units purchased under a Contract and, if applicable, any Net
Deposit not yet applied to purchase Accumulation Units.
Accumulation Account Value: The dollar value of an Accumulation Account.
Accumulation Unit: A unit purchased by the investment of a Net Deposit in the
Fund and used to measure the value of an Owner's interest under a Contract prior
to the Retirement Date.
Annuitant: The individual on whose behalf a Contract is issued. Generally, the
Annuitant will be the Contract Owner.
Annuity: A series of monthly payments provided under a Contract for the
Annuitant or his beneficiary. Annuity payments will be due and payable only on
the first day of a calendar month.
Annuity Conversion Rate: The rate used in converting the Accumulation Account
Value to an Annuity expressed as the amount of the first Annuity payment to
which the Participant or the beneficiary is entitled for each $1,000 of
Accumulation Account Value.
Annuity Unit: A unit used to determine the amount of each Variable Annuity
payment after the first.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
Contract: Any one of the Individual Equity Investment Fund Contracts (Annual
Deposit, Single Deposit Deferred, or Single Deposit Immediate) described in this
Prospectus.
Contract Owner: The party to the Contract who is the owner of the Contract.
Generally, the Contract Owner will be the Annuitant.
Deposit: An amount paid to Transamerica Occidental pursuant to a
Contract.
Net Deposit: That portion of a Deposit remaining after deduction of any premium
for Contract riders, charges for sales and administration expense and for any
applicable premium taxes.
Retirement Date: The date on which the first Annuity payment is payable under a
Contract.
Variable Annuity: An Annuity with payments which vary in dollar amount
throughout the payment period in accordance with the investment experience of
the Fund.
Valuation Date: Each day on which the New York Stock Exchange is open for
trading.
Valuation Period: The period from the close of trading on the New York Stock
Exchange on one Valuation Date to the close of trading on the New York Stock
Exchange on the next following Valuation Date.
SUMMARY
The Fund was established on June 26, 1968, as an open-end diversified investment
company. The Fund's investment objective is long-term capital growth. It invests
primarily in equity securities. See "Investment Objective and Policies" on Page
9.)
Risks of investing in the Fund include fluctuation in value and possible
loss of principal due, in part, to fluctuation of stock prices.
The Fund receives investment advice from both Transamerica Occidental
Life Insurance Company ("Transamerica Occidental"), which is the Fund's Adviser,
and from Transamerica Investment Services, Inc. ("Investment Services"), which
serves as Sub-Adviser.
The Fund issued Contracts designed for qualified plans. Three types of Contracts
were offered--Annual Deposit, Single Deposit Deferred and Single Deposit
Immediate. (See "Description of the Contracts" on page 10.) The Contracts are no
longer being offered, but additional deposits may be made to outstanding
Contracts.
A maximum 6 1/2% sales expense and 2% administration expense, plus state premium
taxes currently ranging from 0 to 3.5%, are deducted from each deposit. This is
equivalent to 9.28% of the net deposit after deducting sales and administrative
expenses but before deducting premium taxes. (See page 5.)
A mortality and expense risk charge is charged the Fund at an annual rate of
1.00% of the value of the average daily net assets. The Fund also pays the
Adviser an investment management fee at an annual rate of 0.30% of the Fund's
average daily net assets. (See pages 6 and 10.)
Annual Deposit and Single Deposit Deferred Contracts may be surrendered prior to
the selected retirement date. The surrender value is determined when the written
request for surrender is received. See page 17. There is no surrender charge.
Withdrawals may be taken and may be taxable and a federal penalty tax may be
assessed upon withdrawals of amounts accumulated under the Contract before age
59 1/2.
You may also choose to receive benefits in the form of an annuity. See page 13.
FEE TABLE
The following table and examples, are included to assist you in understanding
the transaction and operating expenses imposed under the Contracts. The
standardized tables and examples assume the highest deductions possible under
the Contracts, whether or not such deductions actually would be made from your
contract.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases: 6 1/2%
Total Deposits
Under the Sales Expense
Contract as a percent of Deposit
First $15,000 61/2%
Next $35,000 41/2%
Next $100,000 2 %
Excess 1/2%
Administration Expense Imposed on Purchases: 2%
Total Deposits
Under the Administration Expense
Contract as a percent of Deposit
First $15,000 2 %
Next $35,000 11/2%
Next $100,000 3/4%
Excess None
Maximum Total Contract Owner Transaction Expenses:1 8 1/2%
Total Contract
Owner
Transaction
Total Deposits Expenses
Under the as % of
Contract Total Deposit
First $15,000 8 1/2%
Next $35,000 6 %
Next $100,000 2 3/4%
Excess 1/2%
- --------------------
1 Premium taxes are not shown.
Charges for premium taxes, if any, are deducted when paid which may be upon
annuitization. In certain states, a premium tax charge will be deducted from
each deposit.
Annual Contract Fee: None
Annual Expenses
(as a percentage of average daily net assets)
Management Fee: . 0.30%
Mortality and Expense Risk Charge: 1.00%
Other Expenses: None
Total Annual Expenses: 1.30%
Example #1 Assuming the Contract is surrendered at the end of the periods
shown,2
a $1,000 investment would be subject to the following expenses, assuming
a 5% annual return on assets.
1 Year 3 Years 5 Years 10 Years
$97 $123 $150 $228
Example #2 Assuming the Contract is not surrendered through the periods shown,
a $1,000 investment would be subject to the following expenses, assuming
a 5% annual return on assets.
1 Year 3 Years 5 Years 10 Years
$97 $123 $150 $228
These examples should not be considered a representation of past or future
expenses and charges. Actual expenses may be greater or less than those shown.
Similarly, the assumed 5% annual rate of return is not an estimate or a
guarantee of future investment performance. See "Charges Under the Contract" in
this Prospectus.
- ------------------- 2 The Contracts are designed for retirement planning.
Surrenders prior to the retirement date are not consistent with the long-term
purposes of the Contracts and income tax and tax penalties may apply. Premium
taxes may be applicable.
PER ACCUMULATION UNIT INCOME AND CAPITAL CHANGES
On a per unit basis for an Accumulation Unit outstanding throughout the year,
the Fund's income and capital changes have been as shown below. Data for each of
the years presented below was included in the financial statements audited by
Ernst & Young LLP, the Fund's independent auditors. Ernst & Young's report for
the year ended December 31, 1998 appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
INCOME AND EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income $0.98 $ .77 $.071 $.044 $.040 $ .046 $ .082 $ .074 $ .080 $ .057
Expenses 0.328 .244 .163 .125 .089 .081 .064 .055 .049 .047
Net investment (loss) income (0.230) (0.167) (.092) (.081) (.049) (.035) .018 .019 .031 .010
CAPITAL CHANGES
Net realized and unrealized
gains (loss) on investments 10.447 6.701 3.217 3.880 .563 1.306 .654 1.370 (.487) .991
Net increase (decrease) in
accumulation unit value 10.217 6.534 3.125 3.799 .514 1.271 .672 1.389 (.456) 1.001
Accumulation unit value:
Beginning of year 20.823 14.289 11.164 7.365 6.851 5.580 4.908 3.519 3.975 2.974
End of year $31.040 $20.823 $14.289 $11.164 $7.365 $6.851 $5.580 $4.908 $3.519 $3.975
Ratio of expenses to average
accumulation fund balance 1.32% 1.33% 1.31% 1.32% 1.31% 1.30% 1.30% 1.32% 1.32% 1.32%
Ratio of net investment (loss)
income to average
accumulation fund balance (0.92%) (0.91%) (.74%) (.86%) (.72%) (.57%) .37% 0.48% .85% .31%
Portfolio turnover rate 53.78% 15.21% 32.94% 17.17% 30.62% 41.39% 43.48% 32.20% 47.43% 24.73%
Number of accumulation units
outstanding at end of year
(000 omitted) 3,193 3,273 3,431 3,598 3,749 3,820 4,062 4,232 4,310 4,463
</TABLE>
Financial Statements for the Fund and Transamerica Occidental
The audited financial statements and reports of independent auditors for the
Fund and Transamerica Occidental may be found in the Statement of Additional
Information which may be obtained, without charge, by contacting the
Transamerica Annuity Service Center at 401 North Tryon Street, Suite 700,
Charlotte, North Carolina, 28202 or by calling 800-258-4260. TRANSAMERICA
OCCIDENTAL AND THE FUND
Transamerica Occidental Life Insurance Company
Transamerica Occidental Life Insurance Company ("Transamerica Occidental") is a
stock life insurance company incorporated in the state of California on June 30,
1906. It is principally engaged in the sale of life insurance and annuity
policies. Its home office is at 1150 South Olive Street, Los Angeles, California
90015-2211. It is a wholly-owned indirect subsidiary of Transamerica
Corporation, 600 Montgomery Street, San Francisco, California 94111.
On February 18, 1999, Transamerica Corporation announced that it had
signed a merger agreement with AEGON N.V., one of the world's leading
international insurance groups, providing for AEGON's acquisition of all of
Transamerica's outstanding common stock for a combination of cash and AEGON
stock worth $9.7 billion. The closing of the transaction is expected to occur
during the summer of 1999.
Insurance Marketplace Standards Association
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry establihed the Insurance Marketplace Standards Association (IMSA).
As an IMSA member, we agree to follow a set of standrds in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
The Fund
The Fund was established under California law on June 26, 1968 as a
separate account by the Board of Directors of Transamerica Occidental.
The assets of the Fund are owned by Transamerica Occidental, but they
are held separately from other assets of Transamerica Occidental. California law
requires the Fund's assets to be held in Transamerica Occidental's name, but
Transamerica Occidental is not a trustee with respect to the Fund's assets.
Income, gains and losses, whether or not realized, from assets allocated to the
Fund are, in accordance with the Contracts, credited to or charged against the
Fund without regard to other income, gains or losses of Transamerica Occidental.
The Fund is not affected by the investment or use of other Transamerica
Occidental assets. Section 10506 of the California Insurance Law provides that
the assets of a separate account are not chargeable with liabilities incurred in
any other business operation of the insurance company (except to the extent
assets in the separate account exceed the reserves and the liabilities of the
separate account).
The Fund is registered as an open-end, diversified, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act") and
meets the definition of a separate account under the federal securities laws.
There are no sub-accounts of the Fund.
Obligations under the Contracts are obligations of Transamerica
Occidental.
The Fund is managed by a Board of Managers (the "Board").
Investment Objective and Policies
The Fund has certain fundamental investment policies which may not be
changed unless authorized by a majority vote (as that term is defined in the
1940 Act) of Contract Owners.
The Fund's investment objective is long-term capital growth. This
objective may not be achieved.
The Fund pursues its investment objective by investing principally in
listed and unlisted common stock, that is, stocks that are listed on an exchange
and those that trade in the over-the-counter market.
The Fund may also invest in debt securities and convertible or preferred
stock having a call on convertible to common stock, by means of a conversion
privilege or attached warrants and warrants or other rights to purchase common
stock. Unless market conditions indicate otherwise, the Fund's portfolio will be
invested in such equity-type securities. However, when market conditions warrant
it, a portion of the Fund's assets may be held in cash or debt securities.
As to 75% of the value of its total assets, the Fund will not invest
more than 5% of the value of its total assets in the securities of any one
issuer, except obligations of the United States Government and instrumentalities
thereof. However, holdings may exceed the 5% limit if it results from investment
performance, and is not the result, wholly or partially, of purchases.
Not more than 10% of the voting securities of any one issuer will be acquired.
Investments will not be made in the securities of a company for the purpose of
exercising management or control in that company.
The Fund does not currently intend to make investments in the securities
of other investment companies. The Fund does reserve the right to purchase such
securities, subject to the following limitations: the Fund will not purchase
such securities if it would cause (1) more than 10% of the value of the total
assets of the Fund to be invested in securities of registered investment
companies; or (2) the Fund to own more than 3% of the total outstanding voting
stock of any one investment company; or (3) the Fund to own securities of any
one investment company that have a total value greater than 5% of the value of
the total assets of the Fund; or (4) together with other investment companies
advised by Transamerica Occidental, the Fund to own more than 10% of the
outstanding voting stock of a closed-end investment company.
Purchases or acquisitions may be made of securities which are not
readily marketable by reason of the fact that they are subject to the
registration requirements of the Securities Act of 1933 or the saleability of
which is otherwise conditioned ("restricted securities"), as long as any such
purchase or acquisition will not immediately result in the value of all such
restricted securities exceeding 10% of the value of the Fund's net assets. It is
the policy of the Board not to invest more than 10% of the Fund's total assets
in restricted securities.
Strategies
Investment Services uses a "bottom up" approach to investing. It studies
industry and economic trends, but focuses on researching individual companies.
The fund is constructed one stock at a time. Each company passes through a
research process and stands on its own merits as a viable investment in the
Investment Services opinion. We generally limit the portfolio to fewer than 50
companies that we feel have the best long-term growth opportunities. The Fund
will invest in companies Investment Services believes have the definitive
features of premier growth companies that are under-valued in the stock market.
These companies have many of these features:
* Outstanding management
* Superior track record
* Well-defined plans for the future
* Unique low cost products
* Dominance in market share or products in specialized markets * Strong earnings
and cash flows to foster future growth * Focus on shareholders through
increasing dividends, stock repurchases and strategic acquisitions
Companies are also selected for their growth potential in relation to major U.S.
trends. These trends include:
* The aging of baby boomers
* The rapid growth in communication and information technologies
* The shift toward financial assets versus real estate or other tangible assets
* The contuing increase in U. S. productivity
Risks
Since the portfolio invests principally in equity securities, the value of its
shares will fluctuate in response to general economic and market conditions.
Financial risk comes from the possibility that current earnings of a company we
invest in may fall, or that its overall financial circumstances may decline,
causing the security to lose value. Since the portfolio may invest in foreign
securities, these prices are subject to fluctuation due to instability in
political, economic and social structures in those countries.
MANAGEMENT OF THE FUND
The Fund is managed by the Board. The affairs of the Fund are conducted in
accordance with Rules and Regulations adopted by the Board of Directors of
Transamerica Occidental and the Board of the Fund. Transamerica Occidental
develops and implements and investment program subject to the supervision of the
Board.
The Investment Advisers
Transamerica Occidental is adviser to the Fund. In addtion to the Fund,
Transamerica Occidental also serves as adviser to Transamerica Variable
Insurance Fund, Inc., a registered management investment company.
Transamerica Occidental has contracted with an affiliate, Transamerica
Investment Services, Inc. ("Investment Services"), a wholly-owned subsidiary of
Transamerica Corporation, to render investment services to the Fund. Investment
Services has been in existence since 1967 and has provided investment services
to the Fund and other Transamerica Life Companies since 1981. These services
include providing recommendations on management of assets of the Fund, providing
investment research reports and information, determining those securities to be
bought or sold and placing orders for the purchase or sale of securities.
Investment decisions regarding the composition of the Fund's portfolio and the
nature and timing of changes in the portfolio are subject to the control of the
Board. Investment Services' address is 1150 South Olive Street, Los Angeles,
California 90015-2211. CHARGES UNDER THE CONTRACTS
Charges Assessed Against The Deposits
Transamerica Occidental makes a deduction from each deposit for sales and
administrative expenses. No such charges will be assessed against deposits made
from insurance or annuity policies issued by Transamerica Occidental which are
transferred to the Fund. The charge for sales expense ranges from 6 1/2% to
1/2%, and the charge for the administration expense is from 2% to none. (See
"Fee Table" on page 5.) The sales expense plus the administative expense are
equivalent to the following percentages of the net deposit after deduction of
these expenses.
<TABLE>
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Sales and Administrative Sales and Administrative Expenses
Total Deposits under the Expenses as a percentage of as a percentage
Contract Deposit of Net Deposit
------------------------------ ----------------------------- ------------------------------------
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<S> <C> <C> <C>
First $15,000 81/2% 9.28%
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------------------------------ ----------------------------- ------------------------------------
Next $35,000 6% 6.38%
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------------------------------ ----------------------------- ------------------------------------
Next $100,000 23/4% 2.83%
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------------------------------ ----------------------------- ------------------------------------
Excess 1/2% 0.5%
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</TABLE>
The sales expense charge is retained by Transamerica Occidental as compensation
for the cost of selling the Contracts. Transamerica Occidental pays the
Underwriter and the Underwriter's registered representatives for the sale of the
Contracts. (See "Contract Values" for more information about the Underwriter.)
The distribution expenses may exceed amounts deducted from Deposits as sales
expenses. Transamerica Occidental will bear any such additional expense from
surplus, including profits, if any, from the mortality and expense risk charges.
Transamerica Occidental pays the sales expense charge to the Underwriter as full
commission.
The administrative expense charge will be retained by Transamerica
Occidental for its administrative service.
Charges Assessed Against The Fund
At the end of each Valuation Period, the Accumulation and Annuity Unit
values are reduced by a mortality and expense risk charge at an annual rate of
1.00% and an investment management charge at an annual rate of 0.30% of the
value of the aggregate net assets of the Fund. Amounts of such charges may be
withdrawn periodically from the Fund. The mortality risks assued by Transamerica
Occidental arise from its contractual obligations to make settlement option
payments determined in accordance with the settlement option tables and other
provisions contained in the Contracts and to pay death benefits prior to
Retirement Dates. The expense risk assumed by Transamerica Occidental is the
risk that Transamerica Occidental's actual expenses in administering the
contracts will exceed the amount recovered through the administrative expense
charge. The investment management charge is paid to Transamerica Occidental as
adviser to the Fund.
Transamerica Occidental may realize a profit from the mortality and expense rick
charge.
There are no other fees assessed against the Fund.
Premium Taxes
Transamerica may be required to pay premium or retaliatory taxes
currently ranging from 0% to 3.5% in connection with deposits or values under
the Contracts. Depending upon applicable state law, Transamerica may deduct the
premium taxes which are payable with respect to a particular Contract from the
deposits, from amounts withdrawn, or from amounts applied on the Annuity Date.
In some states, charges for both direct premium taxes and retaliatory premium
taxes may be imposed at the same or different times with respect to the same
deposit, depending upon applicable state law.
DESCRIPTION OF THE CONTRACTS
The Fund offered three types of variable annuity contracts, which are called
Individual Equity Investment Fund Contracts. These Contracts were Annual
Deposit, Single Deposit Deferred and Single Deposit Immediate. These Contracts
are for tax qualified plans only. New Contracts are no longer being issued, but
additional deposits may be made to existing Contracts.
The Contract Owner has all rights under the Contract during the accumulation
period. These include: voting rights, selection of the proposed annuitant;
surrendering any portion of the Accumulation Account Value; electing a
Retirement Date and an annuity option; and selecting of beneficiaries.
The Contract Owner retains his or her voting rights and right to select
beneficiaries, if the annuity option permits, once the annuity begins.
After the death of the annuitant, the beneficiaries have the right to
the Accumulation Account Value, if any, remaining in the Contract.
Voting Rights
Pursuant to the Rules and Regulations of the Fund, as amended by the
Board, the Fund is generally not required to hold regular meetings of Contract
Owners and does not anticipate holding annual meetings. Under the Rules and
Regulations of the Fund, however, Contract Owners' meetings will be held in
connection with the following matters: (1) the election or removal of a member
or members of the Board if a meeting is called for such purpose; (2) the
approval of any contract for which approval is required by the Investment
Company Act of 1940 ("1940 Act"); and (3) such additional matters as may be
required by law, the Rules and Regulations of the Fund, or any registration of
the Fund with the Securities and Exchange Commission or any state, or as the
Board may consider necessary or desirable. Contract Owners may apply to the
Board to hold a meeting under circumstances provided for in the Rules and
Regulations of the Fund. The Contract Owners also would vote upon any changes in
fundamental investment objectives, policies or restrictions.
Contract Owners are entitled to vote in person or by proxy at the Fund's
meetings.
If Contract Owners hold a meeting, the method to calculate votes is
shown below:
The number of votes which a Contract Owner may cast is based on the
Accumulation Account Value established on a Valuation Date not more than 100
days prior to a meeting of Contract Owners.
(1) When the Valuation Date is prior to the Retirement Date, the number of votes
will equal the Contract Owner's Accumulation Account Value divided by 100.
(2) When the Valuation Date is on or after the Retirement Date, the number of
votes will equal the amount of the reserve established to meet Variable Annuity
obligations related to the Contract divided by 100. (Accordingly, as the amount
of the reserve diminishes during the Annuity payment period, the number of votes
which a Contract Owner may cast decreases.)
The number of votes will be rounded to the nearest vote; however, each
Contract Owner will have at least one vote.
Contract Owners other than those described herein, the reserves for which are
maintained in the Fund, shall also be entitled to vote. The number of votes
which such persons shall be entitled to cast shall be computed in the same
manner as described above.
To be entitled to vote, a Contract Owner must have been a Contract Owner
on the date on which the number of votes was determined.
Each Contract Owner shall receive a notice of the meeting of Contract Owners and
a statement of the number of votes attributable to his/her Contract. Such notice
will be mailed to the Contract Owner at the address maintained in the Fund's
records at least 20 days prior to the date of the Contract Owners' meeting.
Contract Owners acting as trustees for pension and profit sharing plans wishing
to solicit instructions as to their vote from plan Participants will be
furnished additional copies of the Notice of Meetings and Proxy Statement upon
request.
Changes To Variable Annuity Contracts
Transamerica Occidental has the right to amend the Contracts to meet current
applicable federal or state law or regulations or to provide more favorable
annuity Conversion Rates. Each Contract Owner will be notified of any amendment
to the Contract relating to any changes in federal or state laws.
The Contract Owner may change beneficiaries, Annuity commencement date
or Annuity option prior to the Annuity commencement date.
Transamerica Occidental reserves the right to deregister the Fund under
the 1940 Act.
Inquiries
A Contract Owner may request information concerning a Contract by
written request to Transamerica Annuity Service Center at 401 North Tryon
Street, Suite 700 Charlotte, North Carolina 28202.
ANNUITY PERIOD
Subject to limitations under federal law, Contract Owners may select an annuity
option at any age, by Written Request to Transamerica Occidental at least 60
days prior to commencement of an Annuity. The monthly annuity benefit is
determined by the age of the Annuitant, any joint annuitant and the option
selected.
The Contracts have three standard annuity options:
(1) A variable annuity with monthly payments during the lifetime of the
Annuitant. No minimum number of payments is guaranteed, so that only one such
payment is made if the Annuitant dies before the second payment is due;
(2) A variable annuity paid monthly to the Annuitant and any joint annuitant as
long as either shall live. No minimum number of payments is guaranteed, so that
only one such payment is made if both the Annuitant and joint annuitant die
before the second payment is due; and
(3) A variable annuity paid monthly during the lifetime of the Annuitant with a
minimum guaranteed period of 60, 120 or 180 months. If a Annuitant dies during
the minimum period, the unpaid installments for the remainder of the minimum
period will be payable to the beneficiary. However, the beneficiary may elect
the commuted value to be paid in one sum. The lump sum value will be determined
on the Valuation Date the written request is received in the Home Office.
Upon Transamerica Occidental's approval, other options may be selected. The form
of Annuity with the fewest number of guaranteed monthly payments will provide
the largest monthly payments.
If the Contract Owner does not select any annuity option, or a lump-sum payment,
the funds remain in the Accumulation Account. There may be adverse tax
consequences if the funds remain in the Accumulation Account subsequent to the
calendar year following the year of the Annuitant's attainment of age 70 1/2.
The minimum amount on the first monthly payment is $20. If the first monthly
payment would be less than $20, Transamerica Occidental may make a single
payment equal to the total value of the Contact Owner's Accumulation Account.
For qualified plans under Section 401, 403(b), and 457 of the internal
Revenue Code of 1986 (the "Code"), distributions from a Contract generally must
commence no later than the later of April 1 of the calendar year following the
calendar year in which the Annuitant (i) reaches age 701/2 or (ii) retires, and
must be made in a specified form or manner. If the plan is an IRA described in
Section 408, or if the Annuitant is a "5 percent owner" (as described in the
Code), distributions generally must begin no later than April 1 of the calendar
year following the calendar year in which the owner (or plan participant)
reaches age 701/2.
For information regarding the calculation of annuity payments, see the
Annuity Payments section of the Statement of Additional Information.
DEATH BENEFITS
Death Benefits--Before Retirement
(1) FOR SINGLE AND ANNUAL DEPOSIT CONTRACTS:
In the event an Annuitant dies prior to the selected Retirement Date,
Transamerica Occidental will pay to the Annuitant's beneficiary the Accumulation
Account Value based on the Accumulation Unit value determined on the Valuation
Date coinciding with or next following the later of (i) the date adequate proof
of death is received by Transamerica Occidental or (ii) the date Transamerica
Occidental receives notice of the method of payment selected by the beneficiary.
Subject to certain limitations imposed by the Code, upon Written Request after
the death of the Annuitant, the beneficiary may elect, in lieu of the payment of
such value in one sum, to have all or a part of the Accumulation Account Value
applied under one of the forms of Annuities described under "Annuity Period," or
elect an optional method of payment subject to agreement by Transamerica
Occidental and to compliance with applicable federal and state law.
(2) FOR IMMEDIATE CONTRACTS:
In the event an Annuitant dies prior to the selected Retirement Date,
Transamerica Occidental will pay to the Annuitant's beneficiary the Accumulation
Account Value based on the Accumulation Unit value determined on the Valuation
Date coinciding with or next following the date proof of death is received by
Transamerica Occidental.
Death Benefit--After Retirement
If the Annuitant's death occurs on or after the Retirement Date, death
benefits, if any, payable to the beneficiary shall be as provided under the
Annuity option or elected optional method of payment then in effect.
CONTRACT VALUES
Annual Deposit Contract-
This Contract provides for Deposits to be made annually or more frequently, but
no Deposit may be less than $10 and the aggregate minimum Deposit must be $120
in any Contract year. Deposits may be increased on a Contract anniversary, but
annual Deposits may not be increased to more than three times the first year's
Deposit without consent from Transamerica Occidental. The non-forfeiture
provision of the Contract will be applied if annual Deposits are not paid when
due or during a 31-day grace period. The effect of this provision is that if a
Deposit is not received within five years of the last Deposit date, Deposits may
not be resumed, but Contract benefits remain in full force.
Single Deposit Deferred Contract -
This Contract provides for a single Deposit when the Contract is issued.
Additional Deposits of at least $20 each may be made anytime within the first
five Contract years. Thereafter, Transamerica Occidental must give its consent
to further Deposits. The minimum initial Deposit is $1,000; Transamerica
Occidental reserves the right to reduce the minimum.
A Retirement Date is specified in the application for Annual Deposit and
Single Deposit Individual Equity Investment Fund Contracts, but may be changed
by a Written Request to Transamerica Occidental at its Home Office at least 60
days before an Annuity is to commence.
Single Deposit Immediate Contract-
This Contract provides for a single Deposit to be accepted when the Contract is
issued which will begin an Annuity. The issue date of the Contract is the last
Valuation Date of the second calendar month preceding the Retirement Date
specified in the Contract. The minimum Deposit is $2,500. Transamerica
Occidental reserves the right to reduce the minimum. The Retirement Date may not
be changed.
Net Deposits are immediately credited to the Contract Owner's
Accumulation Account in the Valuation Period in which they are received at
Transamerica Occidental's Home Office.
The number of Accumulation Units created by a Net Deposit is determined
on the Valuation Date on which the Net Deposit is invested in the Fund by
dividing the Net Deposit by the Accumulation Unit Value on that Valuation Date.
The number of Accumulation Units resulting from each Net Deposit will not
change.
Accumulation Unit Value
The Accumulation Unit Value was set at $1.00 on November 26, 1968. The
Accumulation Unit Value is determined at the end of a Valuation Period by
multiplying the Accumulation Unit Value determined at the end of the immediate
preceding Valuation Period by the Investment Performance Factor for the current
Valuation Period and reducing the result by the mortality and expense risk
charges.
The Investment Performance Factor is determined at the end of each
Valuation Period and is the ratio of A/B where "A" and "B" mean the following:
"A" is the value of the Fund as of the end of such Valuation Period immediately
prior to making any Deposits into and any withdrawals from the Fund, reduced by
the investment management charge assessed against such value at an annual rate
of 0.30%.
"B" is the value of the Fund as of the end of the preceding Valuation Period
immediately after making any Deposits into and any withdrawals from the Fund,
including any charges for expense and mortality risks assessed against the Fund
on that date.
The market value of the Fund's assets for each Valuation Period is
determined as follows: (1) each security's market value is determined by the
last closing price as reported on the Consolidated Tape; (2) securities that are
not reported on the Consolidated Tape but where market quotations are available,
i.e., unlisted securities, are valued at the most recent bid price; (3) value of
the other assets and securities where no quotations are readily available is
determined in a manner directed in good faith by the Board.
The Consolidated Tape is a daily report listing the last closing price
quotations of securities traded on all national stock exchanges including the
New York Stock Exchange and reported by the National Association of Securities
Dealers, Inc. and Instinet.
The Fund's net value is calculated by reducing the market value of the
assets by liabilities at the end of a Valuation Period.
WRITTEN REQUESTS
Written Request is an original signature is required on all Written Requests. If
a signature on record does not compare with that on the Written Request,
Transamerica Occidental reserves the right to request a Bank Signature Guarantee
before processing the request. Written Requests and other communications are
deemed to be received by Transamerica Occidental on the date they are actually
received at the Transamerica Annuity Service Center in Charlotte, North
Carolina, unless they are received on a day when, or after the time that, the
New York Stock Exchange is closed. In this case, the Written Request will be
deemed to be received on the next day when the unit value is calculated.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 1/1/00 as
the year 1900 rather than the year 2000, disruptions of business activities may
occur with the year 2000. In response, Transamerica established in 1997 a "Y2K"
committee to address this issue. With regard to the systems and software which
administer and affect the Contracts, Transamerica Occidental and Investment
Services anticipates that is own internal systems will be Year 2000 ready.
Additionally, Transamerica requires any third party vendor which supplies
software or administrative services to Transamerica or the Fund in connection
with the administration of the contracts or the management of the Fund, to
certify that the software or services will be Year 2000 ready. As of the date of
this prospectus, it is not anticipated that contract owners will experience
negative afffects on the services received in connection with their contracts,
as a result of Year 2000 issues. However, especially when taking into account
interaction with other systems, it is difficult to predict with precision that
there will be no distruption of services in connection with the year 2000. We
are also developing contingency plans to minimize any potential distruption to
operations, especially from externally interfaced systems over which we have
limited or no control.
This issue could also adversly impact the value of securities in which
the Fund invests if the issuing companies systems do not operate properly after
January 1, 2000.
The information provided herein is subject to the Year 2000 Readiness Disclosure
Act. This Act may limit your legal rights in the event of a dispute.
UNDERWRITER
Transamerica Financial Resources, Inc., is the principal Underwriter for the
Contracts. Its address is 1150 South Olive Street, Los Angeles, California
90015-2211. It is a wholly-owned subsidiary of Transamerica Insurance
Corporation of California, which is wholly-owned by Transamerica Corporation.
SURRENDER OF A CONTRACT
Surrender and withdrawal privileges apply only to Annual Deposit and Single
Deposit Deferred Contracts prior to the Retirement Date. There are no surrender
or withdrawal privileges for Immediate Contracts.
A Written Request by the Contract Owner must be received at the Annuity
Service Center at 401 North Tryon Street, Suite 700, Charlotte, North Carolina
28202, for either a withdrawal from or the surrender of Accumulation Account
Value. Accumulation Units will be cancelled with the equivalent dollar amount
withdrawn or surrendered. The Accumulation Unit value used to determine the
number of Accumulation Units cancelled shall be the value established at the end
of the Valuation Period in which the Written Request was received. The
Accumulation Account Value less any applicable premium tax charge will be paid
within seven days following receipt of the Written Request which includes
verification of spousal consent as required by any applicable law or
regulations. However, Transamerica Occidental may postpone such payment: (1) if
the New York Stock Exchange is closed or trading on the Exchange is restricted,
as determined by the Securities and Exchange Commission; (2) when an emergency
exists, as defined by the Commission's rules, and fair market value of the
assets cannot be determined; or (3) for other periods as the Commission may
permit.
There are no charges for withdrawals or surrender of the Contract.
However, withdrawals and surrenders may be taxable and subject to penalty taxes.
The Contract must be surrendered if a withdrawal reduces the
Accumulation Account Value below $10 for an Annual Deposit Deferred Contract or
$20 for a Single Deposit Deferred Contract.
Any Contract withdrawal may be repaid within five years after the date
of each withdrawal (other than Contracts issued under Code Section 401(a),
403(b), 408, or 457, or an H.R. 10 Plan) but only one repayment can be made in
any twelve month period. Transamerica Occidental must be given a concurrent
Written Request of repayment. The sales charges will not be deducted from the
Deposit repayment, but the administrative charge will be assessed.
A Participant in the Texas Optional Retirement Program ("ORP") is required to
obtain a certificate of termination from the Participant's employer before a
Contract can be surrendered. This requirement is imposed because the Attorney
General of Texas has ruled that Participants in the ORP may surrender their
interest in a Contract issued pursuant to the ORP only upon termination of
employment in Texas public institutions of higher education, or upon retirement,
death or total disability.
Restrictions may apply to variable annuity contracts used as funding vehicles
for Code Section 403(b) retirement plans and Section 401(k) plans. The Code
restricts the distribution under Section 403(b) annuity contracts of (i)
elective contributions made in years beginning after December 31, 1988, and (ii)
earnings on those contributions and (iii) earnings on amounts attributable to
elective contributions held as of the end of the last plan year beginning before
January 1, 1989. Other funding alternatives may exist under a 403(b) plan to
which a Participant may transfer his/her investment from the Contract.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of Federal tax considerations
relating to the Contract and is not intended as tax advice. This discussion is
not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a Contract. Any person concerned about these tax implications should
consult a competent tax adviser before initiating any transaction. This
discussion is based upon Transamerica Occidental's understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Contracts may be purchased and used only in connection with plans
qualifying for favorable tax treatment ("Qualified Contracts"). The Contracts
are designed for use by individuals whose premium payments are comprised solely
of proceeds from and/or contributions under retirement plans which are intended
to qualify as plans entitled to special income tax treatment under Sections
401(a), 403(b), 408, or 457 of the Code. The ultimate effect of Federal income
taxes on the amounts held under a Contract, on annuity payments, and on the
economic benefit to the Contract Owner, Participant, the Annuitant, or the
beneficiary depends on the type and terms of the retirement plan, on the tax and
employment status of the individual concerned and on the Employer's tax status.
In addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of the Contracts should seek competent legal
and tax advice regarding the suitability of the Contract for their situation,
the applicable requirements, and the tax treatment of the rights and benefits of
the Contract. The following discussion assumes that a Qualified Contract is
purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special Federal income tax treatment.
Qualified Contracts
The Contract is designed for use with several types of qualified plans.
The tax rules applicable to Annuitants in qualified plans, including
restrictions on contributions and benefits, taxation of distributions, and any
tax penalties, vary according to the type of plan and the terms and conditions
of the plan itself. Various tax penalties may apply to contributions in excess
of specified limits, aggregate distributions in excess of certain amounts
annually, distributions prior to age 59 1/2 (subject to certain exceptions),
distributions that do not satisfy specified requirements, and certain other
transactions with respect to qualified plans. Therefore, no attempt is made to
provide more than general information about the use of the Contract with the
various types of qualified plans. Annuitants and beneficiaries are cautioned
that the rights of any person to any benefits under qualified plans may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the Contract. Some retirement plans are subject to
distribution and other requirements that are not incorporated into our Contract
administration procedures. Annuitants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Following are brief
descriptions of the various types of qualified plans. The Contract may be
amended as necessary to conform to the requirements of the plan.
1. Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans
Code section 401(a) permits employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish
retirement plans for themselves and their employees. These retirement plans may
permit the purchase of the Contracts to accumulate retirement savings under the
plans. Adverse tax consequences to the plan, to the Annuitant or to both may
result if this Contract is assigned or transferred to any individual as a means
to provide benefit payments. Under certain circumstances, 20% withholding will
apply to distributions from these retirement plans, unless the distribution is
directly transferred to another eligible retirement plans.
2. Individual Retirement Annuities and Individual Retirement Accounts
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as "IRA").
Individual Retirement Annuities are subject to limitations on the amount which
may be contributed and deducted and the time when distributions must commence.
Also, distributions from certain other types of qualified plans may be "rolled
over" on a tax-deferred basis into an IRA. Owners of the Contract for use with
IRAs should have supplemental information required by the Internal Revenue
Service or any other appropriate agency. Owners should seek competent advice
regarding use of the Contract for IRAs.
3. Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees
of certain types of religious, charitable, educational, and scientific
organizations specified in Section 501(c)(3) of the Code to purchase annuity
contracts and, subject to certain limitations, exclude the amount of premiums
from gross income for tax purposes. These annuity contracts are commonly
referred to as "Tax Sheltered Annuities." Premiums paid pursuant to salary
reduction agreements and excluded from gross income will be subject to Social
Security and Medicare taxes. Subject to certain exceptions, withdrawals under
Tax Sheltered Annuities which are attributable to contributions made pursuant to
salary reduction agreements are prohibited unless made after the Annuitant
attains age 59 1/2, upon the Annuitant's separation from service, upon the
Annuitant's death or disability, or for an amount not greater than the total of
such contributions in the case of hardship.
4. Section 457 Deferred Compensation ("Section 457") Plans
Under Section 457 of the Code, employees of (and independent contractors
who perform services for) certain state and local governmental units or certain
tax-exempt employers may participate in a Section 457 plan of their employer
allowing them to defer part of their salary or other compensation. The amount
deferred and any income on such amount will be taxable as ordinary income when
paid or otherwise made available to the employee.
The maximum amount that can be deferred under a Section 457 plan in any tax year
is ordinarily one-third of the employee's includible compensation, up to a
specified dollar amount. Includible compensation means earnings for services
rendered to the employer which is includible in the employee's gross income, but
excluding any contributions under the Section 457 plan or a Tax- Sheltered
Annuity. During the last three years before an individual attains normal
retirement age additional "catch-up" deferrals are permitted.
The deferred amounts can be used by the employer to purchase the Contract. For
plans in effect prior to August 20, 1996, the Contract was issued to the
employer, to be held by the employer in trust for the exclusive benefit of the
employee and/or the employee's beneficiaries and effective January 1, 1999, such
Contract may be held in the employee's name or transferred to a trust.. For
Section 457 plans, established after August 20, 1996, the contract can be issued
to the employee or to a trust established by the employer. In all instances, the
employee is treated as having no rights or vested interest in the Contract and
is only entitled to payment in accordance with the Section 457 plans provisions.
Current Federal income tax law does not allow tax-free transfers or rollovers
for amounts accumulated in a Section 457 plan, except for transfers to other
Section 457 plans in certain limited cases. Distributions may not be made under
a Section 457 plan under the Contract Owner attains age 591/2, separates from
service, or is faced with an unforeseeable emergency.
5. Restrictions under Qualified Contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
6. General
Additional Deposits under a Contract must qualify for the same Federal
income tax treatment as the initial Deposit under the Contract; Transamerica
Occidental will not accept an additional Deposit under a Contract if the Federal
income tax treatment of such Deposit would be different from that of the initial
Deposit.
Tax Status of the Contract
The following discussion is based on the assumption that the Contracts
qualify as annuity contracts for Federal income tax purposes.
Taxation of Annuities
1. In General
Section 72 of the Code governs taxation of annuities in general. Transamerica
Occidental believes that a Contract Owner generally is not taxed on increases in
the value of a Qualified Contract until distribution occurs by withdrawing all
or part of the Accumulation Account Value (e.g., partial withdrawals and
surrenders) or as Annuity Payments under the Annuity option elected. For this
purpose, if such is allowed for the Qualified Contract, the assignment, pledge,
or agreement to assign or pledge any portion of the Accumulation Account Value
or any portion of an interest in the qualified plan generally will be treated as
a distribution. The taxable portion of a distribution (in the form of a single
sum payment or an annuity) is taxable as ordinary income.
2. Surrenders
In the case of a surrender under a Qualified Contract, under section 72(e) of
the Code a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit or balance under the retirement plan. The "investment in the contract"
generally equals the portion, if any, of any premium payments paid by or on
behalf of any individual under a Contract which was not excluded from the
individual's gross income. For a Contract issued in connection with qualified
plans, the "investment in the contract" can be zero. Special tax rules may be
available for certain distributions from a Qualified Contract.
3. Annuity Payments
Although tax consequences may vary depending on the annuity option elected under
the Contract, under Code section 72(b), generally gross income does not include
that part of any amount received as an annuity under an annuity contract that
bears the same ratio to such amount as the "investment in the contract" bears to
the expected return at the date annuity payments begin. In this respect (prior
to recovery of the "investment in the contract"), there is generally no tax on
the amount of each payment which represents the same ratio that the "investment
in the contract" bears to the total expected value of the annuity payments for
the term of the payments; however, the remainder of each income payment is
taxable. In all cases, after the "investment in the contract" is recovered, the
full amount of any additional annuity payments is taxable.
4. Penalty Tax
In the case of a distribution pursuant to a Qualified Contract, there may be
imposed a Federal penalty tax under Section 72(t) of the Code, which may depend
on the type of qualified plan and the particular circumstances. Competent tax
advice should be sought before a distribution is requested.
5. Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a Contract, the designation of an Annuitant
or other beneficiary who is not also the Owner, or the exchange of a Contract
are generally prohibited for Qualified Contracts and if made may result in
certain tax consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, assignment, or exchange of a Contract should
contact a competent tax adviser with respect to the potential tax effects of
such a transaction.
6. Withholding
Pension and annuity distributions generally are subject to withholding for the
recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions, except that withholding may be mandatory with respect to
distributions from Contracts issued in connection with Section 401(a), 403(a)
and 403(b) plans.
7. Death Benefits
Amounts may be distributed from a Contract because of the death of a Annuitant
or Owner. Generally, such amounts are includable in the income of the recipient
as follows: (i) if distributed in a lump sun, they are treated like a surrender,
or (ii) if distributed under an annuity option, they are treated like an annuity
payment.
8. Other Tax Consequences
As noted above, the foregoing discussion of the Federal income tax consequences
under the Contract is not exhaustive and special rules are provided with respect
to other tax situations not discussed in this prospectus. Further, the Federal
income tax consequences discussed herein reflect Transamerica Occidental's
understanding of current law and the law may change. Federal gift and estate and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the Contract depend on the individual
circumstances of each Annuitant or recipient of the distribution. A competent
tax adviser should be consulted for further information.
9. Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would adversely modify
the federal taxation of certain insurance and annuity contracts. For example,
one proposal would reduce the "invesment in the contract" under cash value life
insurance and certain annuity contracts by certain amounts, thereby increasing
the amount of income for puspoe of computing gain. Although the likelihood of
there being any changes is uncertain, there is always the possibility that the
tax treatment of the contracts could change by legislation or other means.
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of change). You should consult a tax adviser with
respect to legislative developments and their effect on the Contract.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Fund is a
party; nor are there material legal proceedings involving the Fund to which
Transamerica Occidental, Investment Services, or the Underwriter are parties.
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Page
GENERAL INFORMATION AND HISTORY -2-
INVESTMENT OBJECTIVES AND POLICIES -2-
MANAGEMENT -3-
INVESTMENT ADVISORY AND OTHER SERVICES -6-
BROKERAGE ALLOCATIONS -6-
UNDERWRITER -7-
ANNUITY PAYMENTS -7-
FEDERAL TAX MATTERS -8-
FINANCIAL STATEMENTS -9-
A Statement of Additional Information, which is incorporated herein by
reference, has been filed with the Securities and Exchange Commission (the
"Commission"). The Statement of Additional Information may be obtained, without
charge, by contacting the Transamerica Annuity Service Center at 401 North Tryon
Street, Suite 700, Charlotte, North Carolina, 28202 or by calling 800-258-4260.
(This page intentionally left blank)
(LOGO)
(a prospectus)
CUSTODIAN--Boston Safe Deposit and Trust Company of California
- ----------------------------------------------------------------
AUDITORS--Ernst & Young LLP May 1, 1999
- ----------------------------------------------------------------
ISSUED BY
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015-2211
(213) 742-3065
(LOGO)
Transamerica Occidental
Life Insurance Company
TFM-1006 ED. 5-98
2
1
<PAGE>
5
STATEMENT OF ADDITIONAL INFORMATION
for
Transamerica Occidental's Separate Account Fund B
Individual Equity Investment Fund Contracts
For Tax Deferred Individual Retirement Plans
Issued by Transamerica Occidental Life Insurance Company
1150 South Olive Street, Los Angeles, California 90015-2211
This Statement of Additional Information is not a Prospectus, but
should be read with the Prospectus for Transamerica Occidental's Separate
Account Fund B (the "Fund"). A copy of the Prospectus may be obtained by writing
to the Transamerica Annuity Service Center at 401 North Tryon Street, Suite 700,
Charlotte, North Carolina 28202 or by calling 800-258-4260, extension 5560.
The date of this Statement of Additional Information is May 1, 1999 The date of
the Prospectus is May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Cross
Reference
to Prospectus
Page Page
<S> <C> <C>
General Information and History................................... -2- 8
Investment Objectives and Policies................................ -2- 9
Management........................................................ -3- 10
Investment Advisory and Other Services............................ -6- 10
Brokerage Allocations............................................. -6-
Underwriter....................................................... -7- 17
Annuity Payments.................................................. -7- 13
Federal Tax Matters............................................... -8- 18
Financial Statements.............................................. -9-
</TABLE>
GENERAL INFORMATION AND HISTORY
Transamerica Occidental Life Insurance Company (the "Company") was
formerly known as Occidental Life Insurance Company of California. The name
change occurred approximately on September 1, 1981.
The Company is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn wholly-owned by Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in life insurance, consumer lending, commercial
lending, leasing, and real estate services.
On November 26, 1968, the Company invested $1,000,000 in Transamerica
Occidental's Separate Account Fund B (the "Fund") pursuant to California law. In
September 1969, the Company invested an additional $1,000,000 in the Fund. On
December 31, 1997, the Company's share in the Fund was approximately 64.61% of
the total Contract Owner's equity.
INVESTMENT OBJECTIVES AND POLICIES
Certain investment policies are described on page 9 of the Prospectus
for the Fund. These fundamental policies may not be changed unless authorized by
a majority vote of Contract Owners. Policies and investment restrictions which
are fundamental to the Fund are as follows.
Borrowings will not be made except as a temporary measure for
extraordinary or emergency purposes provided that such borrowings shall not
exceed 5% of the value of the Fund's total assets.
Securities of other issuers will not be underwritten provided
that this shall not prevent the purchase of securities the sale of which may
result in the Fund being deemed to be an "underwriter" for purposes of the
Securities Act of 1993.
Investments will not be concentrated in any one industry nor
will more than 25% of the value of the Funds assets be invested in issuers all
of which conduct their principal business activities in the same general
industry.
The purchase and sale of real estate or interests in real
estate is not intended as a principal activity. However, the right is reserved
to invest up to 10% of the value of the assets of the Fund in real properties,
including property acquired in satisfaction of obligations previously held or
received in part payment on the sale of other real property owned.
The purchase and sale of commodities or commodity contracts will not be
engaged in.
Loans may be made but only through the acquisition of all or a portion
of an issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased for investment by institutional investors, whether
publicly or privately distributed. (It is not presently intended to invest more
than 10% of the value of the Fund in privately distributed loans. Furthermore,
it is possible that the acquisition of an entire issue may cause the Fund to be
deemed an "underwriter" for purposes of the Securities Act of 1993.) The
securities of the Fund may also be loaned provided that any such loan is
collateralized with cash equal to or in excess of the market value of such
securities. (It is not presently intended to engage in the lending of
securities.)
The Fund does not intend to issue senior securities.
The Fund does not intend to write put and call options.
Purchases of securities on margin may not be made, but such short-term
credits as may be necessary for the clearance of purchases and sales of
securities are permissible. Short sales may not be made and a short position may
not be maintained unless at all times when a short position is open and the fund
owns at least an equal amount of such securities or securities currently
exchangeable, without payment of any further consideration, for securities of
the same issue as, and at least equal in amount to, the securities sold short
(generally called a "short sale against the box") and unless not more than 10%
of the value of the Fund's net assets is deposited or pledged as collateral for
such sales at any one time.
Portfolio Turnover Rate
Changes will be made in the portfolio if such changes are considered
advisable to better achieve the Fund's investment objective of long term capital
growth. Generally, long-term rather than short-term investments will be made and
trading for short-term profits is not intended. However, it should be recognized
that although securities will initially be purchased with a view to their
long-term potential, a subsequent change in the circumstances of a particular
company or industry or in general economic conditions may indicate that a sale
of a security is desirable. It is anticipated that annual portfolio turnover
should not exceed 75%. However, stocks being sold to meet redemptions and
changes in market conditions could result in portfolio activity greater than
anticipated.
MANAGEMENT
<TABLE>
<CAPTION>
Board of Managers and Officers of the Fund are:
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation
During the Past Five Years
<S> <C> <C>
Donald E. Cantlay (77) Board of Directors Director, Managing General Partner of Cee 'n' Tee
Company; Director
of California
Trucking
Association and
Western Highway
Institute;
Director of FPA
Capital Fund and
FPA New Income
Fund.
Richard N. Latzer (62)* Board of Directors President, Chief Executive Officer and Director of
Transamerica Investment Services, Inc.; Senior
Vice President and Chief Investment Officer of
Transamerica Corporation. Director and Chief
Investment Officer of Transamerica Occidental Life
Insurance Company.
Jon C. Strauss (59) Board of Directors President of Harvey Mudd College; Previously Vice
President and Chief Financial Officer of Howard
Hughes Medical Institute; President of Worcester
Polytechnic Institute; Vice President and Professor
of Engineering at University of Southern
California; Vice President Budget and Finance,
Director of Computer Activities and Professor of
Computer and Decision Sciences at University of
Pennsylvania.
Gary U. Rolle (58)* President and Chairman Executive Vice President and Chief Investment
Board of Directors Officer of Transamerica Investment Services, Inc.;
Director and Chief Investment Officer of
Transamerica Occidental Life Insurance Company.
Peter J. Sodini (58) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive Officer and
Director, The Pantry, Inc. (a supermarket).
Director Pamida Holdings Corp. (a retail
merchandiser) and Buttrey Food and Drug Co. (a
supermarket).
Matt Coben (38)*** Vice President Vice President, Broker/Dealer Channel of the
Institutional Marketing Services Division of
Transamerica Life Insurance and Annuity Company
and prior to 1994, Vice President and National
Sales Manager of the Dreyfus Service Organization .
Sally S. Yamada (48) Assistant Secretary Vice President and Treasurer of Transamerica
Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Regina M. Fink (43) Secretary Counsel for Transamerica Occidental Life Insurance
Company and prior to 1994 Counsel and Vice
President for Colonial Management Associates, Inc.
Thomas M. Adams (64) Assistant Secretary Partner in the law firm of Lanning, Adams &
Peterson.
Susan R. Hughes (43) Treasurer Vice President and Chief financial Officer,
Transamerica Investment Services, Inc., since 1997;
Independent Financial Consultant 1992-1997,
</TABLE>
* These members of the Board are or may be interested persons as defined by
Section 2(a) (19) of the 1940 Act. ** The mailing address of each Board member
and officers is Box 2438, Los Angeles, California 90051.
The principal occupations listed above apply for the last five years,
except Regina Fink who, prior to 1994 was Vice President and Counsel for
Colonial Management Associates, Inc. and Matt Coben who prior to 1994 was Vice
President and National Sales Manager of the Dreyfus Service Organization.
However, in some instances, occupation listed above is the current position and
prior positions with the same company or affiliate are not indicated.
Messrs. Cantlay, Moore, and Sodini are not parties to either the Investment
Advisory Agreement or the Investment Services Agreement nor are they interested
persons of any such party.
Remuneration of Board of Managers, Officers and Employees of the Fund
The following table shows the compensation paid during the most
recently completed fiscal year to all directors of the Fund by the Company
pursuant to its Investment Advisory Agreement with the Fund.
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Total Pension or From Registrant
Aggregate Retirement Benefits and Fund Complex
Compensation Accrued As Part of Fund Paid to Directors3/
Name of Person From Fund Expenses(1)
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer(2) -0- -0- -0-
DeWayne W. Moore $1,500 -0- $6,250
Gary U. Rolle(2) -0- -0- -0-
Peter J. Sodini $1,500 -0- $4,750
Jon C. Strauss $500 -0- -0-
</TABLE>
No member of the Board, no Officer, no other individual affiliated with
the Fund and no person affiliated with any member of the Board, the Company or
any Contract Owner is expected to receive aggregate remuneration in excess of
$1,500 from the Company during its current fiscal year by virtue of services
rendered to the Fund. Members of the Board, Officers or other individuals
affiliated with the Fund, who are also Officers, Directors or employees of the
Company, are not entitled to any compensation from the Fund for their services
to the Fund.
- --------------------------------
(1) None of the members of the Board of Managers currently receives any pension
or retirement benefits from the Company due to services rendered to the Fund and
thus will not receive any benefits upon retirement from the Fund.
(2) Will receive Pension/Retirement benefits as an employee of Transamerica
Investment Services, Inc. .
(3) During 1998, each of the Board members was also a member of the Board of
Transamerica Variable Insurance Fund, Inc., an open-end management company,
advised by the Company and sub-advised by Transamerica Investment Services,
Inc., and of Transamerica Income Shares, Inc., a closed-end management company
advised by Transamerica Investment Services, Inc. Mr. Rolle' is a director of
Transamerica Investors, Inc. These registered investment companies comprise the
"Fund Complex."
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Company is the investment adviser to the Fund.
The Company provides investment management to the Fund pursuant to an
investment Advisory Agreement between the Company and the Fund, and Transamerica
Investment Services provides investment advice. The annual charge for such
services is 0.3% of the value of the Fund. In the past three years the Fund paid
the Company $131,807 in 1996, $2,641 in 1997 and $4,471 in 1998.
The Company performs all record keeping and administrative functions
related to the Contracts and each Participant's account, including issuing
Contracts, valuing Participant's accounts, making Annuity payments and other
administrative functions. In addition, the Company supplies or pays for
occupancy and office rental, clerical and bookkeeping, accounting, legal fees,
registration and filing fees, stationery, supplies, printing, salaries and
compensation of the Fund's Board and its officers, reports to Contract Owners,
determination of offering and redemption prices and all ordinary expenses
incurred in the ordinary course of business.
Boston Safe Deposit and Trust Company of California, 1 Embarcadero Center, San
Francisco, California 94111-9123 is the Fund's custodian of the Securities.
Boston Safe Deposit and Trust Company of California holds the securities for the
Fund. The Company pays all fees for this service.
The financial statements of the Company and the Fund appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing. Ernst & Young LLP's address
is 725 South Figueroa Street, Los Angeles, California 90017.
BROKERAGE ALLOCATIONS
The Company and Transamerica Investment Services, Inc. ("Investment
Services") have no formula for brokerage business distribution for purchases and
sale of portfolio securities of the Fund. The primary objective is to place
orders for the most favorable prices and execution. Investment Services will
engage only those brokers whose commissions it believes to be reasonable in
relation to the services provided. The overall reasonableness of commissions
paid will be evaluated by rating brokers primarily on price, and such general
factors as execution capability and reliability, quality of research (including
quantity and quality of information provided, diversity of sources utilized,
nature and frequency of communication, professional experience, analytical
ability and professional nature of the broker), financial standing, as well as
net results of specific transactions, taking into account such factors as
promptness, size of order and difficulty of execution. To the extent such
research services are used, it would tend to reduce the Company and Investment
Services expenses. However, there is no intention to place portfolio
transactions for services performed by a broker in furnishing statistical data
and research, and thus such services are not expected to significantly reduce
expenses. During 1997, commissions were fully negotiated and paid on a best
execution basis. In 1996, 1997 and 1998 respectively, brokerage commissions were
.03%, .03% and .04% of average assets, and the aggregate dollar amounts were
$13,000, $16,312 and $38,000 respectively.
Investment Services furnishes investment advice to the Fund as well as
other institutional clients. Some of Investment Services' other clients have
investment objectives and programs similar to those of the Fund. Accordingly,
occasions may arise when sales or purchases of securities which are consistent
with the investment policies of more than one client come up for consideration
by Investment Services at the same time. When two or more clients are engaged in
the simultaneous sale or purchase of securities, Investment Services will
allocate the securities in question so as to be equitable as to each client.
Investment Services will effect simultaneous purchase or sale transactions only
when it believes that to do so is in the best interest of the Fund, although
such concurrent authorizations potentially may, in certain instances, be either
advantageous or disadvantageous to the Fund. Investment Services has advised the
Fund's Board regarding this practice, and will report to them on a periodic
basis concerning its implementation.
<PAGE>
UNDERWRITER
Transamerica Financial Resources, Inc., is the principal Underwriter
for the Fund's Contracts. Its address is 1150 South Olive Street, Los Angeles,
California 90015-2211. It is a wholly-owned subsidiary of Transamerica Insurance
Corporation of California, which is wholly-owned by Transamerica Corporation.
The past three years, the Underwriter received from the sales of the
Fund's Contracts total payments of $1,453 in 1996, $2,641 in 1997 and $4,471 in
1998.
ANNUITY PAYMENTS
Amount of First Annuity Payment
SINGLE AND ANNUAL DEPOSIT CONTRACTS:
At a Annuitant's selected Retirement Date, the Accumulation Account
Value based on the Accumulation Unit value established on the last Valuation
date in the second calendar month preceding the Retirement Date is applied to
the appropriate Annuity Conversion Rate under the Contract, according to the
Annuitant's, and any joint annuitant's, attained age at nearest birthday and the
selected form of Annuity, to determine the dollar amount of the first Variable
Annuity payment. The Annuity Conversion rates are based on the following
assumptions: (i) Investment earnings at 3.5% per annum, and (ii) Mortality - The
Annuity Table for 1949, ultimate two year age setback.
IMMEDIATE CONTRACT:
The Net Deposit applicable under the Contract is applied to the Annuity
Conversion Rate for this Contract by the Company according to the Annuitant's,
and any joint annuitant's, attained age at nearest birthday and selected form of
Annuity, to determine the dollar amount of the first Variable Annuity payment.
The Annuity Conversion Rates are based on the following assumptions: (i)
Investment earnings at 3.5% per annum, and (ii) Mortality - The Annuity Table
for 1949, one year age setback.
Amount of Subsequent Annuity Payments
The amount of a Variable Annuity payment after the first is determined
by multiplying the number of Annuity Units by the Annuity Unit value established
on the last Valuation Date in the second calendar month preceding the date such
payment is due.
The Annuity Conversion Rates reflect the assumed net investment
earnings rate of 3.5%. Each annuity payment will vary as the actual net
investment earnings rate varies from 3.5%. If the actual net investment earnings
rate were equal to the assumed rate, Annuity payments would be level. If the
actual Net Investment Rate were lower than the assumed rate, Annuity payments
would decrease.
Number of Annuity Units
The number of the Contract Owner's Annuity Units is determined at the
time the Variable Annuity is effected by dividing the dollar amount of the first
Variable Annuity payment by the Annuity Unit Value established on the last
Valuation Date in the second calendar month preceding the Retirement Date. The
number of Annuity Units, once determined, will remain fixed except as affected
by the normal operation of the form of Annuity, or by a late Deposit. Late
Deposit means a Deposit received by the Company after the Valuation Date in the
second calendar month preceding the Retirement Date.
<PAGE>
Annuity Unit Value
On November 26, 1968, the value of an Annuity Unit was set at $1.00.
Thereafter, at the end of each Valuation Period, the Annuity Unit value is
established by multiplying the value of an Annuity Unit determined at the end of
the immediately preceding Valuation Period by the Investment Performance Factor
for the current Valuation Period, and then multiplying that product by an
assumed earnings offset factor for the purpose of offsetting the effect of an
investment earnings rate of 3.5% per annum which is assumed in the Annuity
Conversion Rates for the Contracts. The result is then reduced by a charge for
mortality and expense risks (see "Charges under the Contract" at page 11 of the
Prospectus).
FEDERAL TAX MATTERS
Taxation of the Company
The Company at present is taxed as a life insurance company under Part
I of Subchapter L of the Code. The Fund is treated as part of the Company and,
accordingly, will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. The Company 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 Fund retained as part of the reserves under
the Contract. Based on this expectation, it is anticipated that no charges will
be made against the Fund for Federal income taxes. If, in future years, any
Federal income taxes are incurred by the Company with respect to the Fund, then
the Company may make a charge to the Fund.
Under current laws, the Company may incur state and local taxes in
certain jurisdictions. At present, these taxes are not significant. If there is
a material change in applicable state or local tax laws, charges may be made for
such taxes or reserves for such taxes, if any, attributable to the Fund.
<PAGE>
10
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
REPORT OF INDEPENDENT AUDITORS
Unitholders and Board of Managers, Transamerica Occidental's Separate Account
Fund B Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of net assets of
Transamerica Occidental's Separate Account Fund B, including the portfolio of
investments, as of December 31, 1998, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights on page 7 of the
Prospectus for each of the ten years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental's Separate Account Fund B at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights on page 7
of the Prospectus for each of the ten years in the period then ended, in
conformity with generally accepted accounting principles.
Los Angeles, California
February 12, 1999
Ernst & Young LLP
