As filed with the Securities and Exchange Commission on April 29, 1999
Registration Nos. 2-34221
811-1902
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 Pre-Effective Amendment
No.
Post-Effective Amendment No. 47
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
(Check appropriate box or boxes)
Transamerica Occidental's
Separate Account Fund B
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(Name of Depositor)
1150 South Olive, Los Angeles, CA 90015-2211
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (213) 742-3065
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel and Sutherland, Asbill & Brennan LLP
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004-2415
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the
Registration Statement.
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on May 1, 1999 pursuant to paragraph (b) 60 days
after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on _________________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
this Post-Effective Amendment designates a new
effective date for a previously filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-3
<TABLE>
<CAPTION>
PART A
Item of Form N-4 Prospectus Caption
<S><C> <C>
1. Cover Page............................................... Cover Page
2. Definitions.............................................. Terms Used in this Prospectus
3...............Synopsis Synopsis of this Prospectus; Variable Annuity Fee Table
4. Condensed Financial Information.......................... Condensed Financial Information
5. General
.....................(a)Depositor Transamerica Occidental and the
Separate Account
.....................(b)Registrant Transamerica Occidental and the
Separate Account
.....................(c)Portfolio Company The Growth Portfolio
(d) Fund Prospectus.................................... The Growth Portfolio
(e) Voting Rights...................................... Voting Rights
(f) Administrator . Charges under the Contracts
6. Deductions and Expenses
(a) General............................................ Charges under the Contracts
(b) Sales Load %....................................... Charges under the Contracts
(c) Special Purchase Plan.............................. Not Applicable
.....................(d)Commissions Underwriter
(e) Fund Expenses...................................... Charges under the Contracts
(f) Operating Expenses................................. Variable Annuity Fee Table
7. Contracts
.....................(a)Persons with Rights Description of the
Contracts; Surrender of a Contract; Death Benefits; Voting
Rights
(b) (i) Allocation of Purchase Payments
Payments..................................... Description of the Contracts
(ii) Transfers.................................... Not Applicable
(iii) Exchanges.................................... Federal Tax Status
.....................(c)Changes The Growth Portfolio; Voting Rights
.....................(d)Inquiries Voting Rights
8. Annuity Period........................................... Annuity Period
9..........Death Benefit Death Benefits
10. Purchase and Contract Value
.....................(a)Purchases Description of the Contracts
(b) Valuation.......................................... Description of the Contracts
(c) Daily Calculation.................................. Description of the Contracts
(d) Underwriter........................................ Underwriter
11. Redemptions
.....................(a)By Contract Owners Surrender of a Contract
By Annuitant....................................... Not Applicable
.....................(b)Texas ORP Not Applicable
(c) Check Delay........................................ Surrender of a Contract
(d) Lapse.............................................. Not Applicable
.....................(e)Free Look Not Applicable
12. Taxes .................................Federal Tax Status
13. Legal Proceedings........................................ Legal Proceedings
14. Table of Contents for the
Statement of
..Additional Information Table of Contents of the Statement of Additional
Information
PART B
Item of Form N-4 Statement of Additional Information Caption
15. Cover Page............................................... Cover Page
16. Table of Contents........................................ Table of Contents
17. General Information
.............and History General Information and History
18. Services
(a) Fees and Expenses
........................of Registrant (Prospectus) Variable Annuity Fee
Table; (Prospectus) The Growth Portfolio
(b) Management Contracts............................... Not Applicable
.....................(c)Custodian Safekeeping of Separate Account
Assets; Records and Reports
Independent Auditors ............................. Accountants
(d) Assets of Registrant............................... Not Applicable
(e) Affiliated Person.................................. Not Applicable
(f) Principal Underwriter.............................. The Underwriter
19. Purchase of Securities
Being Offered............................................ (Prospectus) Description of the Contracts
Offering Sales Load...................................... Charges under the Contracts
20..........Underwriters The Underwriter
21. Calculation of Performance
....................Data Calculation of Yields and Total Returns
22......Annuity Payments (Prospectus) Annuity Period
23..Financial Statements Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits
.....................(a)Financial Statements Financial Statements
.....................(b)Exhibits Exhibits
25. Directors and Officers of
...........the Depositor Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant Persons Controlled By or Under
Common Control with the Depositor or Registrant
27.Number of Contract Owners Number of Contract Owners
28.......Indemnification Indemnification
29.Principal Underwriters Principal Underwriter
30. Location of Accounts
.............and Records Location of Accounts and Records
31...Management Services Management Services
32..........Undertakings Undertakings
..........Signature Page Signature Page
</TABLE>
<PAGE>
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 21
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)
TABLE
OF
CONTENTS
(LOGO)
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C> <C> <C> <C>
Terms Used in this Prospectus............... 2 Changes to Variable Annuity Contract........ 12
Summary..................................... 4 Inquiries................................. 12
Fee Table................................... 5 Annuity Period.............................. 12
Per Accumulation Unit Income and Capital.... Death Benefits.............................. 13
Changes.................................. 7 Before Retirement......................... 13
Transamerica Occidental and The Fund........ 8 After Retirement.......................... 13
Transamerica Occidental Life Insurance... Contract Values............................. 13
Company.................................. 8 Accumulation Unit Value................... 14
Written Requests 16
The Fund................................. 8 Preparing for Year 2000..................... 15
Investment Objectives and Policies....... 8 Underwriter................................. 15
Management of the Fund...................... 9 Surrender of a Contract..................... 15
The Investment Advisers.................. 9 Federal Tax Status.......................... 16
Charges Under the Contracts................. 10 Introduction.............................. 16
Charges Assessed Against the Deposits.... 10 Qualified Contracts....................... 17
Charges Assessed Against the Fund........ 10 Tax Status of the Contract................ 19
Premium Taxes............................ 10 Taxation of Annuities..................... 19
Description of the Contracts................ 10 Legal Proceedings......................... 20
Voting Rights............................ 11 Table of Contents of the Statement of
Additional Information 21
</TABLE>
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
14.
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.
Total Deposits under the Contract
Sales and Administrative Expneses as a percentage of Deposit Sales and
Administrative Expenses as a percentage of Net Deposit First $15,000 8 1/2%
9.28% Next $35,000 6% 6.38% Next $100,000 2 3/4% 2.83% Excess 1/2% 0.5%
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 mortalisty 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 2000ready. 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
<PAGE>
8
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- 8
Management........................................................ -3- 9
Investment Advisory and Other Services............................ -6- 9
Brokerage Allocations............................................. -6-
Underwriter....................................................... -7-
Annuity Payments.................................................. -7- 12
Federal Tax Matters............................................... -8- 16
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 1997, 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."
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 $150,000 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 .03% of average assets, and the aggregate dollar amounts were
$13,000, $16,312 and $17,110.24 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.
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 $3829 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.
<PAGE>
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.
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>
9
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
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
ANNUAL REPORT
Dear Investor:
Transamerica Occidental's Separate Account Fund B (the ""Fund") performed
extremely well in 1998.
A few large capitalization stocks were the key drivers contributing to the
strong success of the Fund over the past year. The reason is that there are very
few companies that have learned to deal with deflation, or the decline in the
prices of goods and services. Those companies that have learned to make
deflation their friend are winning the battle for customers, market share and
pro,,t growth. These are new winners in the stock market and we seek to own
them.
Great examples of companies that have learned to deal with deflation are found
within the Fund's top two holdings, Dell Computer and Charles Schwab. Dell has
mastered the direct model of delivering desktop PC's by holding little inventory
and custom manufacturing so as to always deliver the best technology at the
lowest price to their customers. Schwab made a remarkable transition this
year. The company chose to go to their flat rate pricing for electronic trading
over the Internet and telephone. Average revenue per trade dropped from over $70
to around $50, yet the company's profitability blossomed. This is how companies
win in the world of deflation -- delivering the best possible customer service
or product, at a low price.
We expect weaker world economies and continued pressure on prices in 1999. Given
our outlook, our equity selection strategy is focused on high quality companies
that have the wherewithal to withstand weak economies, and have a business model
that works well in a deflationary environment.
Gary U. Rolle
President and
Chairman Board of Managers
Transamerica Occidental's
Separate Account Fund B
1
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
Accumulation Accumulation
End of Quarter Unit Value End of Quarter Unit Value
December, 1988 $ 2.974378 March, 1994 $ 6.629959
March, 1989 3.222322 June, 1994 6.325672
June, 1989 3.704618 September, 1994 6.905430
September, 1989 4.126660 December, 1994 7.364882
December, 1989 3.975169 March, 1995 8.376121
March, 1990 3.879319 June, 1995 9.806528
June, 1990 4.124224 September, 1995 11.275672
September, 1990 3.268967 December, 1995 11.163517
December, 1990 3.518587 March, 1996 11.495829
March, 1991 4.337042 June, 1996 12.356950
June, 1991 4.288242
September, 1996 13.007681 September, 1991 4.480883
December, 1996 14.289273 December, 1991 4.908113
March, 1997 14.574090 March, 1992 4.895752
June, 1997 18.948025 June, 1992 4.798707
September, 1997 22.762719 September, 1992 4.981578
December, 1997 20.822981 December, 1992 5.580041
March, 1998 24.769837 March, 1993 5.893141
June, 1998 26.122076 June, 1993 6.139891
September, 1998 24.532238 September, 1993 6.868266
December, 1993 6.851062 December, 1998 31.039623
The table above covers the period from December, 1988, to December, 1998. The
results shown should not be considered a representation of the gain or loss
which may be realized from an investment made in the Fund today. 2
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Number Number
of Market of Market
Shares Common Stocks Value(1) Shares Common Stocks Value(1) BROADCASTING (3.02%)
HOTELS & RESTAURANTS (3.48%)
55,000 Clear Channel Communications* $ 2,997,500 45,000 McDonalds Corporation $
3,448,125 BUSINESS SERVICES (3.24%) HUMAN RESOURCES (1.80%) 101,576 First Data
Corporation 3,218,639 40,000 Robert Half International, Inc.* 1,787,480
CHEMICALS (2.48%) 60,000 Minerals Technologies, Inc. 2,456,220 LEISURE &
ENTERTAINMENT (2.65%) 75,000 Pixar, Inc.* 2,625,000 COMMERCIAL SERVICES (4.05%)
145,000 Sodexho Marriott Services, Inc.* 4,014,615 RETAIL (9.11%) COMPUTERS &
BUSINESS EQUIPMENT (11.07%) 150,000 Fred Meyer, Inc.* 9,037,500 150,000 Dell
Computer Corporation* 10,978,050 RETAIL GROCERY(3.75%) CONGLOMERATES (2.92%)
61,000 Safeway, Inc.* 3,717,157 60,000 Gillette Company 2,898,720 SOFTWARE
(16.86%) DRUGS & HEALTH CARE (4.87%) 60,000 IMS Health, Inc. 4,526,220 35,000
Mckesson Corporation 2,767,170 75,000 Microsoft Corporation* 10,401,525 14,000
Merck & Co., Inc. 2,067,618 50,000 SAP AG(ADR)* 1,803,100 4,834,788 16,730,845
ELECTRONICS (13.86%) TRANSPORTATION (3.47%) 100,000 Applied Materials, Inc.*
4,268,700 70,000 Kansas City Southern Ind., Inc. 3,443,090 80,000 Intel
Corporation 9,484,960 13,753,660 TOTAL COMMON STOCKS (99.79%) 99,002,207
FINANCIAL SERVICES (13.16%) Cash, Cash Equivalents and Receivables 175,500
Charles Schwab Corporation 9,860,818 Less Liabilities (0.21%) 207,780 100,000
Franklin Resources, Inc. 3,200,000 NET ASSETS (100%) $99,209,987 13,060,818 (1)
Common stocks are valued at the last closing price for securities traded on a
national stock exchange and the bid price for unlisted securities. * Indicates
non-income producing stocks. See notes to financial statements. 3
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS:
Investments in common stock at market value (cost $42,429,049) $99,002,207 Cash
and cash equivalents 207,427 Dividend and interest receivable 27,987
Miscellaneous receivables 274,540 TOTAL ASSETS 99,512,161 LIABILITIES: Due to
Transamerica Occidental's general account 381,643 NET ASSETS $99,130,518 Net
assets attributed to variable annuity contractholders i3,159,651 units at
$31.039623 per unit $98,074,366 Reserve for retired annuitants (Note C)
1,056,152 $99,130,518 STATEMENT OF CHANGES IN NET ASSETS Year ended Year ended
December 31, December 31, 1998 1997 Net investment loss $ (750,527) $ (565,561)
Net realized gain from security transactions 18,511,981 7,534,255 Net unrealized
appreciation (depreciation) on investments 15,435,710 15,133,358 Net increase in
net assets resulting from operations 33,197,164 22,102,052 Variable annuity
deposits (net of sales and administration expenses and applicable state premium
taxes) 84,604 55,296 Payments to Contract Owners: Annuity payments (71,998)
(48,722) Terminations and withdrawals (3,006,584) (2,779,706) Adjustment for
mortality guarantees on retired annuitants 37,352 14,543 Total increase in net
assets 30,240,539 19,343,463 Balance at beginning of period 68,889,980
49,546,517 Balance at end of period $99,130,518 $68,889,980 See notes to
financial statements. 4
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
December 31, 1998
NET INVESTMENT INCOME
INCOME:
Dividends $ 265,364
Interest 52,461
Total investment income 317,825 EXPENSES:
Mortality and expense risk charges 1,063,881 Investment management services
4,471 Total expenses 1,068,352 Net investment (750,527) NET REALIZED AND
UNREALIZED GAIN ON INVESTMENTS Net realized gain from security transactions
18,511,981 Net change in unrealized appreciation on investments 15,435,710 Net
realized and unrealized gain on investments 33,947,691 Net increase in Net
Assets resulting from operations $33,197,164 See notes to financial statements.
5
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
NOTES TO FINANCIAL STATEMENTS
NOTE A ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as an open-end
diversified investment company. The Fund's investment objective is long-term
capital growth. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
additional information becomes known which could impact the amounts reported and
disclosed herein. Investment in Securities Common stocks are valued at the last
closing price for securities traded on a national stock exchange and the bid
price for unlisted securities. The cost of securities purchased (excluding
short-term investments) and proceeds from sales aggregated $43,495,410 and
$43,769,914, respectively, in 1998. The Fund had gross unrealized gains of
$56,573,158 at December 31, 1998 related to these investments. Realized gains
and losses on investments are determined using the average cost method. Cash
Equivalents Cash equivalents consist of money market funds invested daily from
excess cash balances on deposit. Federal Income Taxes Operations of the Fund
will form a part of, and be taxed with, those of Transamerica Occidental Life,
which is taxed as a ""life insurance company" under the Internal Revenue Code.
Transamerica Occidental Life will not charge the Fund for income taxes
applicable to its investment in the Fund. Under current law, income from assets
maintained in the Fund for the exclusive bene,,t of Participants is in general
not subject to federal income tax. Expenses The value of the Fund has been
reduced by charges on each Valuation Date for investment management services on
the basis of an annual rate of 0.3% and mortality and expense risks on the basis
of an annual rate of 1.0%. These charges are paid to Transamerica Occidental
Life. Other The Fund follows industry practice and records security transactions
on the trade date. Dividend income is recognized on the ex-dividend date, and
interest income is recognized on an accrual basis. 6 NOTE B TRANSAMERICA
OCCIDENTAL LIFE INVESTMENT As of December 31, 1998, Transamerica Occidental Life
had deposited $2,000,000 (current fund value of $66,345,858) in the Fund under
an amendment to the California Insurance Code which permits domestic life
insurers to allocate amounts to such accounts. Transamerica Occidental Life is
entitled to withdraw all but $100,000 of its proportionate share of the Fund, in
whole or in part, at any time. NOTE C RESERVES FOR RETIRED ANNUITANTS Reserves
for retired annuitants are computed using The Annuity Table for 1949, ultimate,
one year age set back and an assumed investment earnings rate of 31/2%. NOTE D
REMUNERATION No remuneration was paid during 1998 by Transamerica Occidental's
Separate Account Fund B to any member of the Board of Managers or o,cer of Fund
B or any a,liated person of such members or officers. FINANCIAL HIGHLIGHTS
Selected data for an accumulation unit outstanding throughout each period are as
follows: 1998 1997 1996 1995 1994 1993 Investment income $ 0.098 $ .077 $ .071 $
.044 $ .040 $ .046 Expenses 0.328 0.244 .163 .125 .089 .081 Net investment loss
(0.230) (0.167) (.092) (.081) (.049) (.035) Net realized and unrealized gain on
investments 10.447 6.701 3.217 3.880 .563 1.306 Net increase in accumulation
unit Value 10.217 6.534 3.125 3.799 .514 1.271 Accumulation unit value:
Beginning of period 20.823 14.289 11.164 7.365 6.851 5.580 End of period $31.040
$20.823 $14.289 $11.164 $7.365 $6.851 Ratio of expenses to average accumulation
fund balance(a) 1.32 % 1.33 % 1.31 % 1.32 % 1.31 % 1.30 % Ratio of net
investment loss to average accumulation fund balance(a) (.92)% (0.91)% (0.74)%
(0.86)% (0.72)% (0.57)% Portfolio turnover 53.78 % 15.21 % 32.94 % 17.17 % 30.62
% 41.39 % Number of accumulation units outstanding at end of period (000's
omitted) 3,193 3,273 3,431 3,598 3,749 3,820 (a) On an annualized basis. 7
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
REPORT OF INDEPENDENT AUDITORS
Unitholders and Board 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 statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five 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 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. 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 and financial highlights 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 net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
Charlotte, North Carolina
February 12, 1999
8
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
Managers and Officers
GARY U. ROLLE, President, Chairman of Board
RICHARD N. LATZER, Manager
DONALD E. CANTLAY, Manager
PETER J. SODINI, Manager
JON C. STRAUSS, Manager
MATT R. COBEN, Vice President
SALLY S. YAMADA, Treasurer, Assistant Secretary
THOMAS M. ADAMS, Secretary
REGINA M. FINK, Assistant Secretary
Distributor:
Transamerica Financial Resources, Inc.
1150 South Olive
Los Angeles, California 90015-2211
Tel. (800) 245-8250
Custodian:
Mellon Bank Securities Trust
1 Mellon Bank Ctr.
Pittsburgh, PA 15258
Tel. (800) 234-6356
Transamerica Occidental
Life Insurance Company
Annuity Service Center
P.O. Box 31848
Charlotte, NC 28231-1848
800 258-4260
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B ANNUAL FINANCIAL REPORT
DECEMBER 31, 1998
This report cannot be used as sales literature.
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1998
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1998
Audited Consolidated Financial Statements
Report of Independent Auditors.................................. 1
Consolidated Balance Sheet...................................... 2
Consolidated Statement of Income................................ 3
Consolidated Statement of Shareholder's Equity.................. 4
Consolidated Statement of Cash Flows............................ 5
Notes to Consolidated Financial Statements...................... 6
<PAGE>
-28-
04/21/99 3:12 PM
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying consolidated balance sheets of Transamerica
Occidental Life Insurance Company and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and subsidiaries at December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
January 22, 1999
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1998 1997
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 28,997,454 $ 29,231,998
Equity securities available for sale 880,141 791,221
Mortgage loans on real estate 789,959 706,939
Policy loans 455,481 451,023
Other long-term investments 121,107 89,426
Short-term investments 1,186,166 324,672
--------------------- ---------------------
32,430,308 31,595,279
Cash 87,125 36,656
Accrued investment income 449,289 481,913
Other receivables 292,694 294,542
Reinsurance recoverable on paid and unpaid losses 1,172,022 920,847
Deferred policy acquisitions costs 2,082,506 2,102,588
Other assets 342,129 299,500
Separate account assets 9,101,014 5,494,703
--------------------- ---------------------
$ 45,957,087 $ 41,226,028
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy and contract liabilities:
Policyholder contract deposits $ 24,077,627 $ 24,061,811
Reserves for future policy benefits 5,689,577 5,468,611
Policy claims and other 452,534 557,822
--------------------- ---------------------
30,219,738 30,088,244
Income tax liabilities 992,667 814,088
Accounts payable and other liabilities 843,988 482,716
Separate account liabilities 9,101,014 5,494,703
--------------------- ---------------------
41,157,407 36,879,751
Shareholder's equity:
Common stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587 27,587
Additional paid-in capital 374,968 422,342
Retained earnings 3,175,020 2,738,151
Foreign currency translation adjustments (49,168) (33,440)
Net unrealized investment gains 1,271,273 1,191,637
--------------------- ---------------------
4,799,680 4,346,277
--------------------- ---------------------
$ 45,957,087 $ 41,226,028
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1998 1997 1996
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,804,896 $ 1,777,371 $ 1,641,985
Net investment income 2,243,321 2,165,565 2,077,232
Net realized investment gains 277,654 40,263 17,471
--------------- --------------- ---------------
TOTAL REVENUES 4,325,871 3,983,199 3,736,688
Benefits:
Benefits paid or provided 2,782,127 2,727,064 2,558,792
Increase in policy reserves and liabilities 70,221 59,246 57,968
--------------- --------------- ---------------
2,852,348 2,786,310 2,616,760
Expenses:
Amortization of deferred policy acquisition costs 269,261 265,264 235,180
Salaries and salary related expenses 166,832 165,768 158,699
Other expenses 264,198 284,220 224,084
--------------- --------------- ---------------
700,291 715,252 617,963
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,552,639 3,501,562 3,234,723
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 773,232 481,637 501,965
Provision for income taxes 256,363 149,581 164,685
--------------- --------------- ---------------
NET INCOME $ 516,869 $ 332,056 $ 337,280
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Foreign Unrealized
Additional Currency Investment
Common Stock Paid-in Comprehensive Retained Translation Gains
Shares Amount Capital Income Earnings Adjustments (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 2,206,933 $ 27,587 $ 333,578 $ 2,171,412 $ (23,618) $ 938,932
Comprehensive income
Net income $ 337,280 337,280
Other comprehensive income,
net of tax:
Unrealized losses from
investments marked to
fair value (377,804) (377,804)
Reclassification adjustment
for (gains) included in
net income (11,356) (11,356)
Foreign currency
translation adjustment (854) (854)
-------------
Comprehensive loss $ (52,734)
=============
Capital contributions from
parent 2,041
Dividends declared (41,286)
Balance at December 31,
1996 2,206,933 27,587 335,619 2,467,406 (24,472) 549,772
Comprehensive income
Net income $ 332,056 332,056
Other comprehensive income,
net of tax:
Unrealized gains from
investments marked
to fair value 668,036 668,036
Reclassification adjustment
for (gains) included in
net income (26,171) (26,171)
Foreign currency
translation adjustment (8,968) (8,968)
-------------
Comprehensive income $ 964,953
=============
Capital transactions with
parent 86,723
Dividends declared (61,311)
Balance at December 31,
1997 2,206,933 27,587 422,342 2,738,151 (33,440) 1,191,637
Comprehensive income
Net income $ 516,869 516,869
Other comprehensive income,
net of tax:
Unrealized gains (losses)
from investments
marked to fair value (47,374) 260,111 260,111
Reclassification adjustment
for (gains) included in
net income (180,475) (180,475)
Foreign currency
translation adjustment (15,728) (15,728)
------------- -----------
Comprehensive income $ 580,777
=============
Dividends declared (80,000)
Balance at December 31,
1998 2,206,933 $ 27,587 $ 374,968 $ 3,175,020 $ (49,168) $1,271,273
============ ========== =========== ============= ============ ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1998 1997 1996
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 516,869 $ 332,056 $ 337,280
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (251,175) (91,194) (73,328)
Accounts receivable 130,229 (15,983) (159,309)
Policy liabilities 989,989 1,102,246 949,108
Other assets, accounts payable and other
liabilities, and income taxes 530,661 (89,954) (32,662)
Policy acquisition costs deferred (512,599) (467,730) (388,003)
Amortization of deferred policy acquisition costs 427,203 256,303 268,770
Net realized gains on investment transactions (435,596) (31,302) (51,061)
Other (73,788) (64,651) (15,758)
---------------- ---------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,321,793 929,791 835,037
INVESTMENT ACTIVITIES
Purchases of fixed and equity securities (6,040,371) (9,825,763) (7,362,635)
Purchases of other investments (244,907) (127,437) (334,895)
Sales of fixed and equity securities 6,317,188 8,193,409 5,064,780
Sales of other investments 128,315 129,671 175,001
Maturities of securities 489,280 559,361 506,941
Net change in short-term investments (861,494) (188,946) 75,774
Other (40,665) (53,478) (21,358)
---------------- ---------------- ---------------
NET CASH USED IN
INVESTING ACTIVITIES (252,654) (1,313,183) (1,896,392)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 9,538,924 6,851,644 6,260,653
Withdrawals from policyholder contract deposits (10,477,594) (6,411,213) (5,173,419)
Capital contributions from parent - 3,800 -
Dividends paid to parent (80,000) (60,000) (40,000)
---------------- ---------------- ----------------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES (1,018,670) 384,231 1,047,234
---------------- --------------- ---------------
INCREASE (DECREASE) IN CASH 50,469 839 (14,121)
Cash at beginning of year 36,656 35,817 49,938
--------------- --------------- ---------------
CASH AT END OF YEAR $ 87,125 $ 36,656 $ 35,817
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engage in providing life insurance,
pension and annuity products, reinsurance, structured settlements and
investments, 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 Canada. TOLIC is a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which is a wholly owned
subsidiary of Transamerica Corporation.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Reclassification: Certain prior year amounts have been reclassified to conform
with current year presentation.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In 1997, the Financial Accounting Standards Board
issued a new standard on reporting comprehensive income, which establishes
standards for reporting and displaying comprehensive income and its components
in the financial statements. This standard is effective for 1998; 1997 and 1996
have been reclassified to reflect the 1998 presentation. Application of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's consolidated results of operations or
financial position.
In 1998, the Financial Accounting Standards Board issued a new standard on
accounting for derivative instruments and hedging activities. This standard is
effective for all quarters of fiscal years beginning after June 15, 1999
(effective for year 2000 for the Company). Application of the statement is not
expected to have a material impact on TOLIC's combined financial position or
results of operations.
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TOLIC and its subsidiaries, all of which operate
primarily in the life insurance industry. TOLIC is a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which is a wholly owned
subsidiary of Transamerica Corporation. All significant intercompany balances
and transactions have been eliminated in consolidation.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments: Investments are reported on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note L - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes, as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC related to
non-traditional and investment type products is adjusted as if unrealized gains
or losses on securities available for sale were realized. Changes in such
adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Substantially all investment risks associated
with fair value changes are borne by the contract holders. Accordingly,
investment income and realized gains and losses attributable to Separate
Accounts are not reported in the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, funding
agreements, and other deposit contracts that do not have mortality or morbidity
risk. Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 2.8% to 13.5% in 1998, 3.0% to 9.7% in 1997 and 2.6% to 9.8% in
1996.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and certain annuities with life
contingencies. The reserve for future policy benefits for traditional life
insurance products has been provided on a net-level premium method based upon
estimated investment yields, withdrawals, mortality, and other assumptions which
were appropriate at the time the policies were issued. Such estimates are based
upon past experience with a margin for adverse deviation. Interest assumptions
range from 2.25% to 12.0%. Reserves for future policy benefits are evaluated as
if unrealized gains or losses on securities available for sale were realized and
adjusted for any resultant premium deficiencies. Changes in such adjustments are
included in net unrealized investment gains or losses on an after tax basis as a
separate component of shareholder's equity and, accordingly, have no effect on
net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating the foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1998, 1997 or 1996.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
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. Yearly renewable term reinsurance is accounted for the
same as direct business. The revenue as well as the receivables and payables
under certain modified coinsurance arrangements are presented on a net basis to
the extent that such receivables and payables are with the same ceding company.
Premiums ceded and recoverable losses have been reported as a reduction of
premium income and benefits, respectively. The ceded amounts related to policy
liabilities have been reported as an asset.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns filed by Transamerica Corporation, which
by the terms of a tax sharing agreement generally requires TOLIC to accrue and
settle income tax obligations in amounts that would result if TOLIC filed
separate tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturates consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities available for sale and equity
securities are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1998
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 297,609 $ 112,717 $ 34 $ 410,292
Obligations of states and political
subdivisions 235,529 23,292 - 258,821
Foreign governments 62,000 7,417 - 69,417
Corporate securities 18,901,026 1,692,527 153,029 20,440,524
Public utilities 3,949,600 426,218 2,255 4,373,563
Mortgage-backed securities 2,988,703 304,073 3,238 3,289,538
Redeemable preferred stocks 148,783 15,519 9,003 155,299
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 26,583,250 $ 2,581,763 $ 167,559 $ 28,997,454
================ ================ ================ ================
Equity securities $ 313,490 $ 578,708 $ 12,057 $ 880,141
================ ================ ================ ================
December 31, 1997
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 273,949 $ 78,390 $ - $ 352,339
Obligations of states and political
subdivisions 219,391 16,765 31 236,125
Foreign governments 81,425 6,996 2 88,419
Corporate securities 18,596,027 1,438,385 57,729 19,976,683
Public utilities 4,017,154 340,580 811 4,356,923
Mortgage-backed securities 3,795,464 342,805 1,977 4,136,292
Redeemable preferred stocks 69,773 24,326 8,882 85,217
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 27,053,183 $ 2,248,247 $ 69,432 $ 29,231,998
================ ================ ================ ================
Equity securities $ 309,637 $ 488,322 $ 6,738 $ 791,221
================ ================ ================ ================
</TABLE>
The cost and fair value of fixed maturities available for sale at December 31,
1998, by contractual maturity, are shown below. Expected maturities will differ
from contractual
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1999 $ 736,903 $ 776,522
Due in 2000-2003 3,440,803 3,602,491
Due in 2004-2008 5,852,742 6,235,162
Due after 2008 13,415,316 14,938,442
---------------- ----------------
23,445,764 25,552,617
Mortgage-backed securities 2,988,703 3,289,538
Redeemable preferred stock 148,783 155,299
---------------- ----------------
$ 26,583,250 $ 28,997,454
================ ================
</TABLE>
As of December 31, 1997, the Company held a total investment in one issuer,
other than the United States Government or a United States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands):
Name of Issuer Carrying Value
Hill Street Funding LP $ 989,283
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $21.4 million and $21.7 million at
December 31, 1998 and 1997, respectively.
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
Net investment income by major investment category is summarized as follows (in
thousands):
1998 1997 1996
---------------- ---------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 2,138,442 $ 2,096,543 $ 2,005,764
Equity securities 11,153 5,339 5,458
Mortgage loans on real estate 65,350 62,877 58,165
Real estate 9,344 10,886 12,821
Policy loans 27,408 28,080 27,012
Other long-term investments 16,365 511 978
Short-term investments 25,401 12,770 10,616
---------------- ---------------- ----------------
2,293,463 2,217,006 2,120,814
Investment expenses (50,142) (51,441) (43,582)
----------------- ----------------- ----------------
$ 2,243,321 $ 2,165,565 $ 2,077,232
================ ================ ================
Significant components of net realized investment gains (losses) are as follows
(in thousands):
1998 1997 1996
---------------- ---------------- ----------
Net gains (losses) on disposition of investments in:
Fixed maturities $ 74,887 $ (14,482) $ 40,967
Equity securities 402,542 59,834 15,750
Other 5,958 3,459 3,424
---------------- ---------------- ----------------
483,387 48,811 60,141
Provision for impairment (47,791) (17,509) (9,080)
Accelerated amortization of DPAC (157,942) 8,961 (33,590)
----------------- ---------------- ----------------
$ 277,654 $ 40,263 $ 17,471
================ ================ ================
The components of net gains (losses) on disposition of investment in fixed maturities are as follows (in thousands):
1998 1997 1996
Gross gains $ 89,655 $ 82,452 $ 74,817
Gross losses (14,768) (96,934) (33,850)
----------------- ---------------- ----------------
$ 74,887 $ (14,482) $ 40,967
================ ================= ================
</TABLE>
Proceeds from disposition of investment in fixed maturities available for sale
were $5,702.4 million in 1998, $7,896.5 million in 1997 and $4,969.2 million in
1996.
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1998 1997
---------------- -----------
<S> <C> <C>
Fixed maturities $ 70,123 $ 64,168
Mortgage loans on real estate 24,697 24,508
Real estate 665 5,854
Other long-term investments 5,737 5,900
---------------- ----------------
$ 101,222 $ 100,430
================ ================
</TABLE>
<TABLE>
<CAPTION>
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1998 1997
---------------- ----------
Unrealized gains on investment in:
<S> <C> <C>
Fixed maturities $ 2,414,204 $ 2,178,815
Equity securities 566,651 481,584
---------------- ----------------
2,980,855 2,660,399
Fair value adjustments to:
DPAC (633,795) (546,111)
Reserves for future policy benefits (377,000) (281,000)
Reserves for guaranteed index fund (14,255) -
----------------- ----------------
(1,025,050) (827,111)
Related deferred taxes (684,532) (641,651)
----------------- ----------------
$ 1,271,273 $ 1,191,637
================ ================
</TABLE>
<PAGE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
<TABLE>
<CAPTION>
Significant components of changes in DPAC are as follows (in thousands):
1998 1997 1996
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 2,102,588 $ 2,138,203 $ 1,974,211
Amounts deferred:
Commissions 398,578 352,300 290,512
Other 114,021 115,431 97,491
Amortization attributed to:
Net gain on disposition of investments (157,942) 8,961 (33,590)
Operating income (269,261) (265,264) (235,180)
Fair value adjustment (87,684) (239,509) 48,969
Foreign currency translation adjustment (17,794) (7,534) (4,210)
----------------- ----------------- ----------------
Balance at end of year $ 2,082,506 $ 2,102,588 $ 2,138,203
================ ================ ================
</TABLE>
NOTE D--POLICY AND CONTRACT LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1998 1997
---------------- -----------
Liabilities for investment-type products:
Guaranteed investment contracts and
<S> <C> <C>
funding agreements $ 7,444,192 $ 7,766,601
Annuity contracts 11,034,394 11,531,365
Liabilities for non-traditional life insurance
products 5,599,041 4,763,845
--------------- ---------------
$ 24,077,627 $ 24,061,811
=============== ===============
</TABLE>
Obligations under guaranteed investment contracts and funding agreements are
recorded as liabilities at the face value of the agreement, adjusted for draws
paid and interest credited to the account.
<PAGE>
NOTE D-- POLICY AND CONTRACT LIABILITIES (Continued)
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $377 million as of December 31, 1998, $281 million as of
December 31, 1997, and $195 million as of December 31, 1996.
NOTE E--COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
The components of comprehensive income in the statement of shareholder's equity
are shown net of the following tax provision (benefit) (in thousands):
December 31
1998 1997 1996
---------------- ---------------- -----------
<S> <C> <C> <C>
Unrealized investment gains (losses) $ 140,060 $ 359,712 $ (203,433)
Reclassification adjustment for (gains) included in
net income (97,179) (14,092) (6,115)
Foreign currency transaction adjustments (8,469) (4,829) (460)
----------------- ----------------- -----------------
Income tax effect on comprehensive income $ 34,412 $ 340,791 $ (210,008)
================ ================ =================
</TABLE>
NOTE F--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1998 1997
---------------- -----------
<S> <C> <C>
Current tax liabilities $ 64,412 $ 44,510
Deferred tax liabilities 928,255 769,578
---------------- ----------------
$ 992,667 $ 814,088
================ ================
<PAGE>
NOTE F--INCOME TAXES (Continued)
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1998 1997
---------------- -----------
Deferred policy acquisition costs $ 802,953 $ 783,624
Unrealized investment gains 684,532 641,651
---------------- --------------
Total deferred tax liabilities 1,487,485 1,425,275
Life insurance policy liabilities (517,130) (613,874)
Provision for impairment of investments (35,428) (35,151)
Other-net (6,672) (6,672)
---------------- --------------
Total deferred tax assets (559,230) (655,697)
---------------- --------------
$ 928,255 $ 769,578
================ ==============
</TABLE>
<TABLE>
<CAPTION>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
Components of provision for income taxes are as follows (in thousands):
1998 1997 1996
----------------- ---------------- -----------
<S> <C> <C> <C>
Current tax expense $ 132,398 $ 122,201 $ 99,692
Deferred tax expense:
Domestic 112,139 14,731 55,261
Foreign 11,826 12,649 9,732
---------------- ---------------- ---------------
$ 256,363 $ 149,581 $ 164,685
================ ================ ===============
<PAGE>
NOTE F--INCOME TAXES (Continued)
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1998 1997 1996
---------------- ---------------- -----------
Income before income taxes:
Income from U.S. operations $ 724,702 $ 430,449 $ 474,160
Income from foreign operations 48,530 51,189 27,805
--------------- --------------- ---------------
773,232 481,638 501,965
Tax rate 35% 35% 35%
---------------- --------------- ---------------
Federal income taxes at statutory rate 270,631 168,573 175,688
Income not subject to tax (1,949) (3,284) (2,262)
Low income housing credits (17,604) (10,156) (8,175)
Other, net 5,285 (5,552) (566)
--------------- --------------- ---------------
$ 256,363 $ 149,581 $ 164,685
=============== =============== ===============
</TABLE>
Income not subject to tax represents permanent differences between financial
statements and tax income and is composed principally of dividends on common
stock for which a dividend received deduction is taken for federal income tax
purposes. Low income housing credits are recognized over the productive life of
acquired assets. In 1998, the Company recognized a $3.3 million tax expense,
included in other differences, related to an unfavorable settlement of prior
year tax matters.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1998 was $138 million. At
December 31, 1998, $2,305 million was available for payment of dividends without
such tax consequences. No income taxes have been provided on the policyholders'
surplus account since the conditions that would cause such taxes are remote.
Income taxes of $107.3 million, $58.5 million and $149.1 million were paid
principally to the Company's parent in 1998, 1997 and 1996, respectively.
NOTE G--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses; however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
NOTE G--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1998
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 232,996,314 $ 315,629,686 $ 307,192,042 $ 224,558,670
==================== =================== =================== ===================
Premiums and other
considerations $ 1,465,483 $ 1,196,972 $ 1,536,385 $ 1,804,896
==================== =================== =================== ===================
Benefits paid or
provided $ 2,392,139 $ 1,243,706 $ 1,633,694 $ 2,782,127
==================== =================== =================== ===================
1997
Life insurance in force,
at end of year $ 241,379,957 $ 207,533,095 $ 225,685,653 $ 259,532,515
==================== =================== =================== ===================
Premiums and other
considerations $ 1,854,918 $ 1,116,613 $ 1,039,066 $ 1,777,371
==================== =================== =================== ===================
Benefits paid or
provided $ 2,287,025 $ 940,461 $ 1,380,500 $ 2,727,064
==================== =================== =================== ===================
1996
Life insurance in force,
at end of year $ 220,162,932 $ 195,158,214 $ 201,560,322 $ 226,565,040
==================== =================== =================== ===================
Premiums and other
considerations $ 1,702,975 $ 1,033,201 $ 972,211 $ 1,641,985
==================== =================== =================== ===================
Benefits paid or
provided $ 2,292,822 $ 1,344,790 $ 1,610,760 $ 2,558,792
==================== =================== =================== ===================
</TABLE>
<PAGE>
NOTE H--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly traded stocks and
bonds.
The Company's total pension benefits recognized for all plans were $9.1 million
in 1998, $5.4 million in 1997 and $3.1 million in 1996, of which $9.1 million in
1998, $6.1 million in 1997 and $3.7 million in 1996, respectively, related to
the plan sponsored by Transamerica Corporation. The plans sponsored by the
Company are not material to the consolidated financial position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1998, 1997 and 1996.
NOTE I--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include loans and advances, a fixed maturity investment in a special purpose
subsidiary of Transamerica, investments in a money market fund managed by an
affiliated company, rental of space, and other specialized services, including
administration of pension funds. At December 31, 1998, pension funds
administered for these related companies aggregated $1,969.0 million, the
investment in the special purpose subsidiary was $413.9 million and the
investment in an affiliated money market fund, included in short-term
investments, was $29.5 million. In December 1998, the Company reinsured certain
life insurance obligations totaling $59.0 million with a subsidiary of
Transamerica Corporation.
During 1997, equity securities with a fair value of $177.2 million were received
from Transamerica Corporation. $50 million was used as a partial paydown on a
$200 million note due from Transamerica Corporation. The excess of fair value
over cost less the amount applied to the note was recorded as additional paid-in
capital. During 1998, the Company refined its accounting for this transaction
and decreased the cost of the equity securities obtained and charged paid-in
capital in the amount of $47.4 million. The remaining balance on the note, which
is due in 2013 and bears interest at 7% is $150 million.
In addition, during 1997 the Company received a capital contribution of $15
million from Transamerica corporation.
<PAGE>
NOTE J--REGULATORY MATTERS
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of TOLIC and each subsidiary's state of
incorporation. Such regulations include the risk-based capital requirement and
the restriction on the payment of dividends. Generally, dividends during any
year may not be paid, without prior regulatory approval, in excess of the
greater of 10% of the Company's statutory capital and surplus as of the
preceding year end or the Company's statutory net income from operations for the
preceding year. The insurance department of the domiciliary state recognizes
these amounts as determined in conformity with statutory accounting practices
prescribed or permitted by the insurance department, which vary in some respects
from generally accepted accounting principles. The Company's statutory net
income and statutory capital and surplus which are represented by TOLIC's net
income and capital and surplus are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 200,482 $ 96,472 $ 112,296
Statutory capital and surplus, at
end of year 1,844,161 1,556,228 1,249,045
</TABLE>
NOTE K-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guarantee, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1998, commitments to maintain liquidity for
benefit payments on notional amounts of $5.2 billion were outstanding ($3.3
billion at December 31, 1997).
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by the National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1998 and 1997, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
<PAGE>
NOTE K-COMMITMENTS AND CONTINGENCIES (Continued)
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $31.0
million in 1998, $28.7 million in 1997 and $20.6 million in 1996. The following
is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1998 (in thousands):
Year ending December 31:
1999 $ 17,731
2000 14,913
2001 12,452
2002 11,450
2003 11,499
Later years 56,549
$ 124,594
==================
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 plaintiffs' 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 $31 million pre-tax were accrued in 1997 and $12 million of
additional costs were incurred in 1998. Additional costs related to the
settlement, which are not currently determinable, 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.
<PAGE>
NOTE L--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
-----------------------------------------
1998 1997
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 28,997,454 $ 28,997,454 $ 29,231,998 $ 29,231,998
Equity securities available for sale 880,141 880,141 791,221 791,221
Mortgage loans on real estate 789,959 870,173 706,939 774,556
Policy loans 455,481 432,929 451,023 427,924
Short-term investments 1,186,166 1,186,166 324,672 324,672
Cash 87,125 87,125 36,656 36,656
Accrued investment income 449,289 449,289 481,913 481,913
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,180,292 5,828,950 6,779,951 6,261,707
Single premium immediate annuities 4,382,389 5,305,667 4,361,311 5,122,562
Guaranteed investment contracts 3,112,929 3,183,266 3,211,834 3,265,384
Funding agreements and other 4,616,150 4,624,033 4,944,870 4,992,906
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 20,435 - 8,189
Payable position - (3,507) - (5,247)
</TABLE>
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment income. The
differential to be paid or
<PAGE>
NOTE L--FINANCIAL INSTRUMENTS (Continued)
received on those interest rate swap agreements that are designated as hedges of
financial liabilities is recorded on an accrual basis as a component of benefits
paid or provided. While the Company is not exposed to credit risk with respect
to the notional amounts of the interest rate swap agreements, the Company is
subject to credit risk from potential nonperformance of counterparties
throughout the contract periods. The amounts potentially subject to such credit
risk are much smaller than the notional amounts. The Company controls this
credit risk by entering into transactions with only a selected number of high
quality institutions, establishing credit limits and maintaining collateral when
appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
NOTE L--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1998
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 577,973 5.37% $ (16,484)
Floating rate interest 325,000 4.75% 22,279
Floating rate interest based on one index and
receives floating rate interest based on
another index 147,562 - 1,096
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest 28,600 5.54% 177
Floating rate interest 2,718,089 5.41% 18,891
Floating rate interest based on one index and
receives floating rate interest based on
another index 262,666 - (2,140)
Interest rate floor agreements 560,500 6.45% 38,380
Swaptions 8,270,000 5.27% 140,482
Others 35,576 .55% 28,536
December 31, 1997
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 419,715 6.81% $ 1,820
Floating rate interest 280,905 6.48% 3,000
Floating rate interest based on one index and
receives floating rate interest based on
another index 337,371 - (320)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest - - -
Floating rate interest 2,252,089 6.17% 4,507
Floating rate interest based on one index and
receives floating rate interest based on
another index 304,820 - (1,565)
Interest rate floor agreements 560,500 6.46% 25,254
Swaptions 8,326,030 4.50% 103,018
Others 29,117 - 15,314
</TABLE>
<PAGE>
NOTE L--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
<TABLE>
<CAPTION>
Activities with respect to the notional amounts are summarized as follows (in
thousands):
Beginning End
of Year Additions Maturities Terminations of Year
1998:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 1,037,991 $ 469,126 $ 268,364 $ 188,218 $ 1,050,535
Interest rate swap agreements
designated as hedges of
financial liabilities 2,556,909 3,748,545 207,345 3,088,754 3,009,355
Interest rate floor agreements 560,500 - - - 560,500
Swaptions 8,326,030 - 56,030 - 8,270,000
Others 7,359 - 900 35,576
------------------------------- -------------- ------------ ----------------
29,117
$ 12,510,547 $ 4,225,030 $ 531,739 $ 3,277,872 $ 12,925,966
============== ============== ============== ============ ================
1997:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 847,584 $ 322,165 $ 91,858 $ 39,900 $ 1,037,991
Interest rate swap agreements
designated as hedges of
financial liabilities 1,829,301 2,297,133 1,554,525 15,000 2,556,909
Interest rate floor agreements 560,500 - - - 560,500
Swaptions 8,327,570 - - 1,540 8,326,030
Others 20,572 100,200 - 29,117
------------------------------- -------------- ------------ ----------------
108,745
$ 11,673,700 $ 2,639,870 $ 1,746,583 $ 56,440 $ 12,510,547
============== ============== ============== ============ ================
1996:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 440,173 $ 566,023 $ 143,554 $ 15,058 $ 847,584
Interest rate swap agreements
designated as hedges of
financial liabilities 1,146,678 1,887,348 1,103,525 101,200 1,829,301
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,267,140 7,170,000 109,570 - 8,327,570
Others 8,745 - - 108,745
------------------------------- -------------- ------------ ----------------
100,000
$ 3,764,491 $ 9,632,116 $ 1,606,649 $ 116,258 $11,673,700
============== ============== ============== ============ ===========
</TABLE>
<PAGE>
NOTE L--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, derivatives,
fixed maturities and mortgage loans on real estate. The Company places its
temporary cash investments and enters into derivative transactions with high
credit quality financial institutions. Concentrations of credit risk with
respect to investments in fixed maturities and mortgage loans on real estate are
limited due to the large number of such investments and their dispersion across
many different industries and geographic areas. At December 31, 1998, the
Company had no significant concentration of credit risk.
NOTE M--SUBSEQUENT EVENT(Unaudited)
On February 18, 1999, Transamerica Corporation announced that it had signed an
agreement with AEGON N.V. (AEGON) providing for AEGON's acquisition of
Transamerica Corporation for cash and stock worth $9.7 billion. In addition,
AEGON N.V. will assume on a consolidated basis approximately $1.1 billion of
Transamerica Corporation's debt. Transamerica Corporation's corporate and
insurance operations will merge with AEGON USA's operations immediately after
closing, which is expected to occur during the summer of 1999.
NOTE N--YEAR 2000 (Unaudited)
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar business
activities.
Based upon recent assessments, the Company has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Company presently believes that with modifications and replacements of
existing software and certain hardware, disruptions to business activities
caused by the Year 2000 Issue can be mitigated. However, if such modifications
and replacements are not made, or are not completed on time, the Year 2000 Issue
could have an impact on the operations of the Company.
The Company's plan to address the Year 2000 Issue involves the following four
phases: (1) problem determination, (2) planning and resource acquisition, (3)
remediation, and (4) testing and acceptance. The Company has completed phase one
and phase two. A significant portion of the remediation phase was completed as
of December 31, 1998, and remediation is expected to be substantially complete
by March 1999. As of December 31, 1998, Year 2000 readiness testing was well
underway and is expected to be substantially complete by June 1999.
The Company's Year 2000 project also addresses issues related to non-information
technology, embedded software and equipment, the readiness of key business
partners and updating business continuity plans.
<PAGE>
OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a) Financial Statements:
Registrant
Included in Part B
All required financial statements are hereby incorporated by reference
to the Annual Report to shareholders filed in accordance with Rule
30d-1 of the Investment Company Act of 1940. (File No.
2-34221)________________.
Transamerica Occidental Life Insurance Company and Subsidiaries
Included in Part B
Report of Independent Auditors
Consolidated Balance Sheet, December 31, 1998
Consolidated Statement of Income, Three years ended December 31, 1998
Consolidated Statement of Shareholder's Equity, Three years ended
December 31, 1998
Consolidated Statement of Cash Flows, Three years ended
December 31, 1998
Notes to Financial Statements
(b) Exhibits:
Exhibit
Number Description of Document*
1 Resolutions of Board of Directors of Transamerica Occidental
Life Insurance Company creating
Registrant.
2(i) Rules and Regulations of Registrant.
2(ii) Rules and Regulations of Registrant, as amended April 27, 1989.
3 Form of Custodian Agreement between Registrant, Transamerica
Occidental Life Insurance Company
and Boston Safe Deposit and Trust Company of California.
4(a) Form of Agreement between Transamerica Occidental Life
Insurance Company and Registrant entitled "Investment Services
Agreement" and dated January 1, 1981.
4(b) Revised Form of Agreement between Transamerica Occidental Life
Insurance Company and Registrant entitled "Investment Advisory
Agreement" and dated April 20, 1971.
5 Form of Agreement between Transamerica Financial Resources,
Inc., Transamerica Occidental Life Insurance Company and
Registrant entitled "Marketing Agreement" and dated July 1,
1969.
6 Contracts:
6(i) Annual Deposit Individual Equity Investment Fund Contract.
6(ii) Single Deposit Individual Equity Investment Fund Contract
to provide a deferred Variable
Annuity.
6(iii) Single Deposit Individual Equity Investment Fund Contract
to provide an immediate Variable
Annuity.
6(iv) Endorsement to Immediate Annuity Contracts--changes
definition of Valuation Date.
6(v) Endorsement to Annuity Contracts issued in connection with
408 Plans.
<PAGE>
Exhibit
Number Description of Document*
6(vi) Endorsement to Annual Deposit and Deferred Annuity Contracts
issued in connection with 403(b)
and H.R. 10 Plans.
6(vii) Endorsement to define the term "Deposit" in some Contracts to mean
"Purchase Payment." 6(viii) Endorsement to modify definition of "Valuation
Period." 6(ix) Deposit Continuation on Total and Permanent Disability Rider.
6(x) Endorsement for State of Michigan to define investment factors filed as
part of this
Registration Statement.
6(xi) Disclosure document used in the sale of Individual
Retirement Annuity Contracts.
6(xii) TSA Compliance Endorsement (form 1-00720-188).
6(xiii) TSA Compliance Endorsement-PA (form 1-00720-188PA).
7(i) Application for Individual Equity Investment Fund Contracts.
7(ii) Revised Application for Individual Equity Investment Fund
Contracts.
8 Resolutions of the Board of Directors of Transamerica
Occidental Life Insurance Company
adopting Rules and Regulations of Registrant and electing the
first Board of Managers of
Registrant.
9 Not applicable.
10 Not applicable.
11 Prototype Plan documents.
12 Opinion and Consent of Counsel.
13 Consent of Independent Auditors.****
14 Not Applicable.
15 Letter from Transamerica Occidental regarding its investment
in the Fund.
16(i) Power of Attorney.
16(ii) Power of Attorney.
16(iii) Power of Attorney.
16(iv) Power of Attorney.
16(v) Power of Attorney.
16(vi) Power of Attorney.
16(vii) Power of Attorney.
16(viii) Power of Attorney.
16(ix) Power of Attorney.
16(x) Power of Attorney.
16(xi) Power of Attorney.
16(xii) Power of Attorney.
16(xiii) Power of Attorney.
16(xiv) Power of Attorney.
16(xv) Power of Attorney.
16(xvi) Power of Attorney.
16(xvii) Power of Attorney.
16(xviii) Power of Attorney.
16(xix) Power of Attorney.
16(xx) Power of Attorney.
16(xxi) Power of Attorney.
16(xxii) Power of Attorney.
16(xxiii) Power of Attorney.
16(xxiv) Power of Attorney.
16(xxv) Power of Attorney.
17(i) Acknowledgement of Restrictions on Redemptions Imposed by
I.R.C. Section 403(b).
17(ii) Acknowledgement of Restrictions on Redemptions Imposed by
the I.R.C. and Texas Educational
Code.
18 Representation of Reliance Upon No-Action Letter Regarding
I.R.C. Section 403(b).
27 Financial Data Schedule.****
- ----------------------
*With the exception of Exhibits 2(ii), 4(b), 6(iv), (v), (vi),
(vii), (viii), (ix), (xii), (xiii), 7(ii), 12, 13, 15, 16(i),
17(i), (ii) and 18 these are exhibits to Registrant's
Registration Statement on Form N-8B-1 and were formerly
numbered 1(a), (b), 2, 4(a)(i) I, II, III, 4(a)(ii), 5, 6, 8
and 13, are incorporated herein by reference. Exhibits 6(iv),
(v), (vi), (vii), (viii), 6(x), 7(i), (ii), (iii), 12 formerly
numbered 1(d)(i) V, VI, VII, VIII, IX, 8, 6, 7, 5, 3 and 9
respectively, have been previously filed as exhibits to
Registrant's Registration Statement on Form S-5 and are
incorporated herein by Reference. Exhibits 4(a), 4(b), 5,
6(i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x),
(xi), 7(i), 7(ii), 8, 11, 12, 13, 14 and 15, formerly 8, 5(a),
5(b), 6, 4(a)(i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xi), 4(b)(i), 4(b)(ii), 1(b), 14, 10(a), 10(b), 11
and 12, respectively, have been previously filed as exhibits
to the Registrant's Registration Statement on Form N-1 and are
incorporated herein by reference. Exhibit 16(ii) is
incorporated by reference herein from Exhibit 7(b) of
Registration File #33-28107, filed on April 14, 1989 on behalf
of Transamerica Occidental Life Insurance Company and Separate
Account VL of Transamerica Occidental Life Insurance Company.
Exhibit 16(iii) is incorporated by reference herein from
Exhibit 14(d) of Registration File #33-49998 filed in April
1993 on behalf of Transamerica Occidental Life Insurance
Company and Separate Account VA-2L of Transamerica Occidental
Life Insurance Company. Exhibits 16(v) and (vi) are
incorporated by reference to the like-numbered Exhibits to
Post-Effective Amendment No. 43 to this Registration Statement
on Form N-3 (April 25, 1996).
**Exhibits 3, 13, 16(vii), 16(viii) and 27 are incorporated by reference to the
like-numbered exhibits to Post-Effective Amendment No. 44 to this Registration
Statement on Form N-3 (April 28, 1997).
***.Exhibits 3 and 27 are incorporated by reference to the like-numbered
exhibits to Post-Effective Amendment No. 45 to this Registration Statement on
Form N-3 (April 27, 1998).
****Filed herewith.
<PAGE>
Items 29 and 33.
Directors and Officers of the Company and Business and other connections of the
Investment Adviser.
The names of Directors and Executive Officers of the Company, their
positions and offices with the Company, and their other affiliations are as
follows. The address of Directors and Executive Officers is 1150 South Olive
Street, Los Angeles, California 90015-2211, unless indicated by asterisk.
<TABLE>
<CAPTION>
Other
business and business
address, profession, vocation or
employment of a substantial
nature engaged in for
Position and his
own account during last two
Name and Principal Position and Offices Offices with fiscal years or as director, officer,
Business Address with the Company Registrant employee, partner or trustee
<S> <C> <C> <C>
Thomas J. Cusack Director, President None Executive Vice President
and Chief Executive of Transamerica
Officer Corporation
James W. Dederer Director, Executive None None
Vice President, General
Counsel and Corporate
Secretary
Frank Beardsley President-Transamerica None
Asset Management None
and Director
George A. Foegele Director and None ***President and CEO -
Senior Vice President Canadian Operations
David E. Gooding Director, Executive None None
Vice President and
Chief Information Officer
Edgar H. Grubb Director None *Executive Vice President
and Chief Financial
Officer of Transamerica
Corporation
Frank C. Herringer Director None *Director, President and
Chief Executive Officer of
Transamerica Corporation
Richard N. Latzer Director and Chief Director Senior Vice President and
Investment Officer Chief Investment Officer
of Transamerica
Corporation; Director,
President and Chief
Executive Officer of
Transamerica Investment
Services, Inc.
Karen MacDonald Director, Senior Vice None None
President and Corporate
Actuary
Gary U. Rolle Director and Chief Chairman, Executive Vice President
Investment Officer Board of the and
Chief Investment
Managers Officer of
Transamerica Investment
Services, Inc.
Paul E. Rutledge III Director and President- None **None
Reinsurance Division
T. Desmond Sugrue Director and Executive None None
Vice President
Nooruddin S. Veerjee Director and President, None President of Transamerica
Group Pension Division Life Insurance and
Annuity Company
Robert A. Watson Director None *Executive Vice President
of Transamerica Corporation
- --------------------
</TABLE>
* 600 Montgomery Street, San Francisco, California 94111
** 100 N. Tryon Street, Suite 2500, Charlotte, N.C. 28202-4004
*** 300 Consilium Place, Scarborough, Ontario MIH362, Canada
Item 30. Persons Controlled by or Under Common Control with the Insurance
Company or Registrant
Registrant is a separate account controlled by the Contract Owners, and is not
controlled by or under common control with any other person. The Company, the
Fund's Investment Adviser, may be deemed to be in control of the Fund, and the
Company and Transamerica Investment Services, Inc., may be deemed to be
controlled by their parent, Transamerica Corporation.
The following chart indicates the persons controlled by or under common control
with Transamerica.
<PAGE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
ARC Reinsurance Corporation
Transamerica Management, Inc. -- DE
BWAC Seventeen, Inc.
Transamerica Commercial Finance Canada, Limited -- ON Transamerica Commercial
Finance Corporation, Canada -- Can.
BWAC Twelve, Inc.
TIFCO Lending Corporation -- IL
Transamerica Insurance Finance Corporation -- MD
BWAC Twenty-One, Inc.
Transamerica Commercial Holdings Limited -- U.K.
First Florida Appraisal Services, Inc.
First Georgia Appraisal Services, Inc. -- GA
Greybox L.L.C.
Transamerica Trailer Leasing S.N.C. -- Fra.
Intermodal Equipment, Inc.
Transamerica Leasing N.V. -- Belg.
Transamerica Leasing SRL -- Itl.
Inventory Funding Trust
Inventory Funding Company, LLC -- DE
Metropolitan Mortgage Company
Easy Yes Mortgage, Inc. -- FL
Easy Yes Mortgage, Inc. -- GA
First Florida Appraisal Services, Inc. -- FL
Freedom Tax Services, Inc. -- FL
J.J. & W. Advertising, Inc. -- FL
J.J. & W. Realty Services, Inc. -- FL
Liberty Mortgage Company of Ft. Myers, Inc. -- FL
Metropolis Mortgage Company -- FL
Perfect Mortgage Company -- FL
Pyramid Insurance Company, Ltd.
Pacific Cable Ltd. -- Bmda.
TA Leasing Holding Co., Inc.
Trans Ocean Ltd. -- DE
Transamerica Leasing Inc. -- DE
Trans Ocean Container Corp.
SpaceWise Inc. -- DE
Trans Ocean Container Finance Corp. -- DE
Trans Ocean Leasing Deutschland GmbH -- Ger.
Trans Ocean Leasing PTY Limited -- Aust.
Trans Ocean Management S.A. -- SWTZ
Trans Ocean Regional Corporate Holdings -- CA
Trans Ocean Tank Services Corporation -- DE
Trans Ocean Ltd.
Trans Ocean Container Corp. -- DE
Transamerica Accounts Holding Corporation
ARS Funding Corporation -- DE
Transamerica Acquisition Corporation
Camtrex Group, Inc. --
Transamerica Business Credit Corporation
Bay Capital Corporation -- DE
Coast Funding Corporation -- DE
Direct Capital Equity Investment, Inc. -- DE
Gulf Capital Corporation -- DE
TA Air East, Corp. --
TA Air III, Corp. -- DE
TA Air IV, Corp. -- DE
TA Air IX, Corp. -- DE
TA Air I, Corp. -- DE
TA Air VIII, Corp. --
TA Air VII, Corp. --
TA Air VI, Corp. --
TA Air V, Corp. --
TA Air X Corp. -- DE
TA Marine I Corp. -- DE
TA Marine II Corp. -- DE
TBC III, Inc. -- DE
TBC II, Inc. -- DE
TBC IV, Inc. -- DE
TBC I, Inc. -- DE
TBC Tax III, Inc. -- DE
TBC Tax II, Inc. -- DE
TBC Tax IV, Inc. -- DE
TBC TAX IX, Inc. -- DE
TBC Tax I, Inc. -- DE
TBC Tax VIII, Inc. -- DE
TBC Tax VII, Inc. -- DE
TBC Tax VI, Inc. -- DE
TBC Tax V, Inc. -- DE
TBC V, Inc. -- DE
TBCC Funding Trust I --
TBCC Funding Trust II --
The Plain Company -- DE
Transamerica Mezzanine Financing, Inc. --
Transamerica Small Business Services, Inc. --
Transamerica Business Credit Corporation - DE
TA Air II, Corp. -- DE
Transamerica Commercial Finance Canada, Limited
Transamerica Acquisition Corporation -- Can.
Transamerica Commercial Finance Corporation
Inventory Funding Trust -- DE
TCF Asset Management Corporation -- CO
Transamerica Distribution Finance Corporation de Mexico --
Transamerica Joint Ventures, Inc. -- DE
Transamerica Commercial Finance Corporation, I
BWAC Credit Corporation -- DE
BWAC International Corporation -- DE
BWAC Twelve, Inc. -- DE
Transamerica Business Credit Corporation -- DE
Transamerica Distribution Finance Corporation -- DE
Transamerica Equipment Financial Services Corporation --
Transamerica Commercial Finance Limited
WFC Polska Sp. Zo.o --
Transamerica Commercial Holdings Limited
Transamerica Commercial Finance Limited -- U.K.
Transamerica Trailer Leasing Limited -- NY
Transamerica Trailer Leasing Limited -- U.K.
Transamerica Consumer Finance Holding Company
Metropolitan Mortgage Company -- FL
Pacific Agency, Inc. -- IN
Transamerica Consumer Mortgage Receivables Corporation -- DE
Transamerica Mortgage Company -- DE
Transamerica Corporation
ARC Reinsurance Corporation -- HI
Inter-America Corporation -- CA
Pyramid Insurance Company, Ltd. -- HI
RTI Holdings, Inc. -- DE
Transamerica Airlines, Inc. -- DE
Transamerica Business Technologies Corporation -- DE
Transamerica CBO I, Inc. -- DE
Transamerica Corporation (Oregon) -- OR
Transamerica Delaware, L.P. -- DE
Transamerica Finance Corporation -- DE
Transamerica Financial Products, Inc. -- CA
Transamerica Foundation -- CA
Transamerica Insurance Corporation of California -- CA
Transamerica Intellitech, Inc. -- DE
Transamerica International Holdings, Inc. -- DE
Transamerica Investment Services, Inc. -- DE
Transamerica LP Holdings Corp. -- DE
Transamerica Pacific Insurance Company, Ltd. -- HI
Transamerica Real Estate Tax Service (A Division of Transamerica Corporation)
-- N/A
Transamerica Realty Services, Inc. -- DE
Transamerica Senior Properties, Inc. -- DE
TREIC Enterprises, Inc. -- DE
Transamerica Distribution Finance Corporation Transamerica Accounts Holding
Corporation -- DE Transamerica Commercial Finance Corporation -- DE
Transamerica Inventory Finance Corporation -- DE Transamerica Retail Financial
Services Corporation -- DE Transamerica Vendor Financial Services Corporation
-- DE
Transamerica Distribution Finance Corporation de Mexico
TDF de Mexico --
Transamerica Distribution Finance Corporation de Mexico and TDF de Mexico
Transamerica Corporate Services de Mexico --
Transamerica Finance Corporation
TA Leasing Holding Co., Inc. -- DE
Transamerica Commercial Finance Corporation, I -- DE
Transamerica Home Loan -- CA
Transamerica HomeFirst, Inc. -- CA
Transamerica Lending Company -- DE
Transamerica Financial Resources, Inc.
Financial Resources Insurance Agency of Texas -- TX
TBK Insurance Agency of Ohio, Inc. -- OH
Transamerica Financial Resources Insurance Agency of Alabama Inc. -- AL
Transamerica Financial Resources Insurance Agency of Massachusetts Inc. -- MA
Transamerica GmbH Inc.
Transamerica Financieringsmaatschappij B.V. -- Neth.
Transamerica GmbH - Germany -- Ger.
Transamerica Insurance Corporation of California
Arbor Life Insurance Company -- AZ
Bulkrich Trading --
Gemini Investments, Inc. --
Plaza Insurance Sales, Inc. -- CA
Transamerica Advisors, Inc. -- CA
Transamerica Annuity Service Corporation -- NM
Transamerica Financial Resources, Inc. -- DE
Transamerica International Insurance Services, Inc. -- DE
Transamerica Occidental Life Insurance Company -- CA
Transamerica Products, Inc. -- CA
Transamerica Securities Sales Corporation -- MD
Transamerica Service Company -- DE
Transamerica Insurance Finance Corporation
Transamerica Insurance Finance Company (Europe) -- MD
Transamerica Insurance Finance Corporation
Transamerica Insurance Finance Corporation, California -- CA
Transamerica Insurance Finance Corporation - MD
Transamerica Insurance Finance Corporation, Canada -- ON
Transamerica Intellitech, Inc.
Information Service Corp. --
Transamerica International Insurance Services, Inc.
Home Loans and Finance Ltd. -- U.K.
Transamerica Inventory Finance Corporation
BWAC Seventeen, Inc. -- DE
BWAC Twenty-One, Inc. -- DE
Transamerica Commercial Finance France S.A. -- Fra.
Transamerica GmbH Inc. -- DE
Transamerica Investment Services, Inc.
Transamerica Income Shares, Inc. (managed by TA Investment Services) -- MD
Transamerica Leasing Holdings Inc.
Greybox Logistics Services Inc. -- DE
Greybox L.L.C. -- DE
Greybox Services Limited -- U.K.
Intermodal Equipment, Inc. -- DE
Transamerica Distribution Services Inc. -- DE
Transamerica Leasing Coordination Center -- Belg.
Transamerica Leasing do Brasil Ltda. -- Braz.
Transamerica Leasing GmbH -- Ger.
Transamerica Leasing Limited -- U.K.
Transamerica Leasing Pty. Ltd. -- Aust.
Transamerica Leasing (Canada) Inc. -- Can.
Transamerica Leasing (HK) Ltd. -- H.K.
Transamerica Leasing (Proprietary) Limited -- S.Afr.
Transamerica Tank Container Leasing Pty. Limited -- Aust.
Transamerica Trailer Holdings I Inc. -- DE
Transamerica Trailer Holdings II Inc. -- DE
Transamerica Trailer Holdings III Inc. -- DE
Transamerica Trailer Leasing AB -- Swed.
Transamerica Trailer Leasing AG -- SWTZ
Transamerica Trailer Leasing A/S -- Denmk.
Transamerica Trailer Leasing GmbH -- Ger.
Transamerica Trailer Leasing (Belgium) N.V. -- Belg.
Transamerica Trailer Leasing (Netherlands) B.V. -- Neth.
Transamerica Trailer Spain S.A. -- Spn.
Transamerica Transport Inc. -- NJ
Transamerica Leasing Inc.
Better Asset Management Company LLC -- DE
Transamerica Leasing Holdings Inc. -- DE
Transamerica Leasing Limited
ICS Terminals (UK) Limited -- U.K.
Transamerica Life Insurance and Annuity Company
Transamerica Assurance Company -- MO
Transamerica Management, Inc.
Criterion Investment Management Company -- TX
Transamerica Occidental Life Insurance Company
NEF Investment Company -- CA
Transamerica China Investments Holdings Limited -- H.K.
Transamerica International RE (Bermuda) Ltd. -- Bmda.
Transamerica Life Insurance and Annuity Company -- NC
Transamerica Life Insurance Company of Canada -- Can.
Transamerica Life Insurance Company of New York -- NY
Transamerica South Park Resources, Inc. -- DE
Transamerica Variable Insurance Fund, Inc. -- MD
USA Administration Services, Inc. -- KS
Transamerica Products, Inc.
Transamerica Products II, Inc. -- CA
Transamerica Products IV, Inc. -- CA
Transamerica Products I, Inc. -- CA
Transamerica Real Estate Tax Service
Transamerica Flood Hazard Certification (A Division of TA Real Estate Tax
Service) -- N/A Transamerica Realty Services, Inc.
Bankers Mortgage Company of California -- CA
Pyramid Investment Corporation -- DE
The Gilwell Company -- CA
Transamerica Affordable Housing, Inc. -- CA
Transamerica Minerals Company -- CA
Transamerica Oakmont Corporation -- CA
Ventana Inn, Inc. -- CA
Transamerica Retail Financial Services Corporation
Transamerica Consumer Finance Holding Company -- DE
Whirlpool Financial National Bank -- DE
Transamerica Senior Properties, Inc.
Transamerica Senior Living, Inc. -- DE
Transamerica Small Business Services, Inc.
Emergent Business Capital Holdings, Inc. --
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
<PAGE>
Item 31. Number of Holders of Securities
As of December 31, 1998 there were Contract Owners of Registrant's
Contracts.
Item 32. Indemnification
In general, pursuant to the Rules and Regulations of the Registrant,
each member of the Board and each Officer and agent of the Fund shall be
indemnified by the Fund for expenses incurred in connection with the defense of
any proceeding in which he is made a party by reason of the fact that he holds
or held such position with the Fund. However, there shall be no indemnification
in relation to matters as to which such person shall be finally adjudged in such
proceeding to be liable for negligence or misconduct in the performance of
duties. No person shall be protected against liability to the Fund or to
Contract Owners to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
Pursuant to the Marketing Agreement with the Underwriter, Transamerica
Occidental will indemnify and hold harmless the Underwriter and each person who
controls it against any liabilities to the extent that they arise from
inaccurate or misleading statements in material provided by Transamerica
Occidental.
In compliance with Section 17(g) of the 1940 Act and Rule 17g-1
thereunder, the Fund maintains a blanket fidelity bond against larceny,
embezzlement and similar losses covering each Officer and employee who may have
access to securities or funds of the registrant.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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 that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Additionally, the Company's Bylaws provide in Article V as follows:
Section 1. Right to Indemnification.
Each person who was or is a party or is threatened to be made a party to or is
involved, even as a witness, in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation that
was predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expense, liability, and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. [It is the Corporation's
intent that the bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the Corporation's Articles of Incorporation.]
Section 2. Authority to Advance Expenses.
Expenses incurred by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by the
California General Corporation Law, as amended, such Expenses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article or otherwise. Expenses incurred by other Agents of the corporation
(or by the directors or officers not acting in their capacity as such, including
service with respect to employee benefit plans) may be advanced upon the receipt
of a similar undertaking, if required by law, and upon such other terms and
conditions as the Board of Directors deems appropriate. Any obligation to
reimburse the corporation for Expense advances shall be unsecured and no
interest shall be charged thereon.
Section 3. Right of Claimant to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full by the
corporation within 30 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. The burden of proving such a defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
Section 4. Provisions Nonexclusive.
The rights conferred on any person by this Article shall not be exclusive of any
other rights that such person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
The corporation may purchase and maintain insurance to protect itself and any
Agent against any Expense asserted against or incurred by such person, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article [provided that,
in cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the California
General Corporation Law, as amended].
Section 6. Survival of Rights.
The rights provided by this Article shall continue as to a person who has ceased
to be an Agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Section 7. Settlement of Claims.
The corporation shall not be liable to indemnify any Agent under this Article
(a) for any amounts paid in settlement of any action or claim effected without
the corporation's written consent, which consent shall not be unreasonably
withheld; or (b) for any judicial award, if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
Section 8. Effect of Amendment
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
Section 9. Subrogation.
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the Agent, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring suit to enforce such rights.
Section 10. No Duplication of Payments.
The corporation shall not be liable under this Article to make any payment in
connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling person of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Occidental Life Insurance
Company are covered under a Directors and Officers liability program which
includes direct coverage to directors and officers (Coverage A) and corporate
reimbursement (Coverage B) to reimburse the Company for indemnification of its
directors and officers. Such directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers. In general, the term "loss" means any amount which the
insureds are legally obligated to pay for a claim for Wrongful Acts. In general,
the term "Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
Item 33. See Item 29.
Item 34. Principal Underwriter
(a) Transamerica Financial Resources, Inc., the principal Underwriter
is also an underwriter and distributor for Annuity Contracts funded by
Transamerica Occidental Life Insurance Company's Separate Account VA-2L and
Transamerica Life Insurance Company of New York's Separate Account VA-2LNY. The
Underwriter is wholly-owned by Transamerica Insurance Corporation of California.
(b) The following table furnishes information with respect to each
director and officer of the principal Underwriter currently distributing
securities of the registrant:
<TABLE>
<CAPTION>
Position and Position and
Names and Principal Offices with Offices with
Business Address Principal Underwriter Registrant
<S> <C> <C> <C>
Gilbert F. Cronin Director None
1150 South Olive Street
Los Angeles, California
Barbara A. Kelley President and Director President
1150 South Olive Street
Los Angeles, California
Monica Suryapranata Treasurer None
1150 South Olive Street
Los Angeles, California
James W. Dederer Director None
1150 South Olive Street
Los Angeles, California
Ronald F. Wagley Director None
1150 South Olive Street
Los Angeles, California
Regina M. Fink Secretary and Counsel Assistant Secretary
1150 South Olive Street
Los Angeles, California
Dan Trivers Vice President, None
1150 South Olive Street Director of Administration and
Los Angeles, California Chief Compliance Officer
Kerry Rider Vice President, None
1150 South Olive Street Director of Compliance
Los Angeles, California and Assistant Secretary
Susan Vivino
1150 South Olive Street Assistant Secretary None
Los Angeles, California
</TABLE>
The Underwriter received in 1998, $2,641.00 from Fund B.
Item 35. Location of Accounts and Records
The Company maintains physical possession of each account, book, or
other document required to be maintained at its offices at 401 North Tryon
Street, Charlotte, North Carolina 28202.
Item 36. Management Services
Not applicable.
Item 37. Undertakings
(a) Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is 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 hereby undertakes to include either (1) as part of any
application to purchase a 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 hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be made
available under Form N-3 promptly upon written or oral request.
(d) Transamerica Occidental Life Insurance Company hereby represents
that the fees and charges deducted under Contracts are reasonable in the
aggregate in relation to services rendered, expenses expected to be incurred and
risks assumed by Transamerica.
(e) Transamerica hereby represents that the fees and the charges deducted
under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the
risks assumed by Transamerica.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Transamerica Occidental's Separate Account Fund B certifies
that it meets the requirements of Rule 485(b) under the Securities Act of 1933
for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf in the City of Los Angeles and
State of California on the 29th day of April, 1999.
TRANSAMERICA OCCIDENTAL'S
SEPARATE ACCOUNT FUND B
*By _____________________________________
Gary U. Rolle', President
As required by the Securities Act of 1933, this amendment to its
Registration Statement has been signed below on April 29, 1999 by the following
persons in the capacities:
Signature Title
________________________*
Susan R. Hughes Assistant Treasurer
_______________________*
Sally S. Yamada Treasurer
_______________________*
Donald E. Cantlay Member of the Board of Managers
_______________________*
Richard N. Latzer Member of the Board of Managers
_______________________*
Gary U. Rolle' President and Chairman
_______________________*
Peter J. Sodini Member of the Board of Managers
_______________________*
Jon C. Strauss Member of the Board of Managers
*By James W. Dederer, pursuant to Power of Attorney
- -------------------------------------------
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, Transamerica Occidental Life Insurance Company certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and has caused this Registration Statement to be signed
on its behalf in the City of Los Angeles and State of California on the 29th day
of April, 1999.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
-------------------------------------------------
David M. Goldstein
Vice President
*Attorney-in Fact
As required by the Securities Act of 1933, this amendment to its
Registration Statement has been signed below on April 29, 1999 by the following
persons or by their duly appointed attorney-in-fact in the capacities specified:
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* Director, President, Chairman April 29, 1999
Thomas J. Cusack and Chief Executive Officer
______________________* Director, Executive Vice President April 29, 1999
James W. Dederer General Counsel and
Corporate Secretary
______________________* Director and April 29, 1999
Karen MacDonald and Acting Chief Financial Officer
_____________________* Director April 29, 1999
Frank Beardsley
______________________* Director April 29, 1999
George A. Foegele
______________________* Director April 29, 1999
David E. Gooding
______________________* Director April 29, 1999
Edgar H. Grubb
______________________* Director April 29, 1999
Frank C. Herringer
______________________* Director April 29, 1999
Richard N. Latzer
______________________* Director April 29, 1999
Gary U. Rolle'
______________________* Director April 29, 1999
Paul E. Rutledge III
______________________* Director April 29, 1999
T. Desmond Sugrue
______________________* Director April 29, 1999
Robert A. Watson
</TABLE>
___________________________ On April 29, 1999 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney previously filed and filed
herewith, and in his own capacity as Vice President.
<PAGE>
Exhibit 13
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Per Accumualtion Unit
Income and Captial Changes" in the Prospectus and "Investment Advisory and Other
Services" in the Statement of Addition Information in Post-Effective Amendment
No. 46 under the Securities Act of 1933 and the Post-Effective Amendment No. 27
under the Investment Company Act of 1940 (Form N-3 No. 2-34221 and 811-1902) of
Transamerica Occidental's Separate Account Fund B and to the use of our report
dated January 21, 1999 and February 12, 1999 of Transamerica Occidental Life
Insurance Company and Transamerica Occidental's Separate Account Fund B,
respectively, both included in the Statement of Additional Information.
/s/Ernst & Young LLP
Los Angeles, California
April 26, 1999
<PAGE>
Exhibit 16
<PAGE>
POWER OF ATTORNEY
The undersigned director Transamerica Occidental Life Insurance Company, a
California corporation (the Company), hereby constitutes and appoints James W.
Dederer, David M. Goldstein, David E. Gooding, and William M. Hurst and each of
them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him and
on his behalf and in his name, place and stead, to execute and file any of the
documents referred to below relating to registrations under the Securities Act
of 1933 and under the Investment Company Act of 1940 with respect to any life
insurance and annuity policies: registration statements on any form or forms
under the Securities Act of 1933 and under the Investment Company Act of 1940,
and any and all amendments and supplements thereto, with all exhibits and all
instruments necessary or appropriate in connection therewith, each of said
attorneys-in-fact and agents and his or their substitutes being empowered to act
with or without the others or other, and to have full power and authority to do
or cause to be done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect thereto to be
done in and about the premises in order to effectuate the same, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this 24th day of
February, 1999.
______________________________
Frank Beardsley
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073710
<NAME> TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
<SERIES>
<NUMBER> 0
<NAME> N/A
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 42429
<INVESTMENTS-AT-VALUE> 99002
<RECEIVABLES> 302
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 207
<TOTAL-ASSETS> 99512
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 382
<TOTAL-LIABILITIES> 382
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3194
<SHARES-COMMON-PRIOR> 3308
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56573
<NET-ASSETS> 99131
<DIVIDEND-INCOME> 265
<INTEREST-INCOME> 52
<OTHER-INCOME> 0
<EXPENSES-NET> 1068
<NET-INVESTMENT-INCOME> (751)
<REALIZED-GAINS-CURRENT> 18512
<APPREC-INCREASE-CURRENT> 15436
<NET-CHANGE-FROM-OPS> 33197
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84
<NUMBER-OF-SHARES-REDEEMED> 3018
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 30241
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 245
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1068
<AVERAGE-NET-ASSETS> 81137
<PER-SHARE-NAV-BEGIN> 20.82
<PER-SHARE-NII> (.23)
<PER-SHARE-GAIN-APPREC> 10.45
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.04
<EXPENSE-RATIO> 2.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
