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) 742-2111
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. Before June 5, 2000, the Annuity Service
Center is at 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202.
After June 5, 2000, the address is P.O. Box 3183, Cedar Rapids, Iowa 52406-3183
or, if by overnight mail, 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499. The
phone number is 877-717-8861.
The table of contents for the Statement of Additional Information is on
page 22 of this Prospectus. The date of the Statement of Additional Information
is May 1, 2000.
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, 2000
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.
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TABLE
OF
CONTENTS
(LOGO)
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Page
Page
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Terms Used in this Prospectus............... 2 Changes to Variable Annuity Contract...... 13
Summary..................................... 4 Inquiries................................. 13
Fee Table................................... 5 Annuity Period.............................. 13
Per Accumulation Unit Income and Capital... Death Benefits.............................. 14
Changes.................................. 7 Before Retirement......................... 14
Financial Statements for the Fund and After Retirement......................... 15
Transamerica Occidental ............. 7 Contract Values............................. 15
Transamerica Occidental and The Fund........ 8 Annual Deposit Contract..................... 15
Transamerica Occidental Life Insurance Single Deposit Deferred Contract............ 15
Company............................. 8 Single Deposit Immediate Contract......... 15
Insurance Marketplace Standards Accumulation Unit Value................... 16
Association ........................ 8 Written Requests............................ 16
The Fund................................. 8 Underwriter................................. 17
Investment Objectives and Surrender of a Contract................... 17
Policies............................ 9 Federal Tax Matters......................... 17
Risks.................................... 10 Introduction.............................. 18
Management of the Fund...................... 10 Qualified Contracts....................... 18
The Investment Advisers.................. 10 Tax Status of the Contract................ 20
Charges Under the Contracts................. 11 Taxation of Annuities..................... 20
Charges Assessed Against the Deposits.... 11 Legal Proceedings........................... 22
Charges Assessed Against the Fund........ 11 Table of Contents of the Statement of
Premium Taxes............................ 12 Additional Information.................... 22
Description of the Contracts................ 12
Voting Rights............................ 12
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THIS PROSPECTUS IS NOT AN OFFER TO PURCHASE THE CONTRACTS IN ANY STATE IN WHICH
IT IS UNLAWFUL TO MAKE SUCH OFFER. NO SALESPERSON OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. IF SUCH REPRESENTATIONS ARE MADE, DO NOT
RELY ON THEM.
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TERMS USED IN THIS PROSPECTUS
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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 SERVICE CENTER: The Annuity Service Center, before June 5, 2000, is
Transamerica Annuity Service Center, 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202. After June 5,
2000, the address is P.O. Box 3183, Cedar Rapids, Iowa
52406-3183 or, if by overnight mail, 4333 Edgewood Road NE,
Cedar Rapids, Iowa 52499. The phone number is
877-717-8861.
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.
</TABLE>
<PAGE>
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 Transamerica Investment
Management, LLC, ("TIM"), the Fund's Adviser, and from Transamerica Investment
Services, Inc. ("Investment Services"), 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 12.) The
Contracts are no longer being offered, but additional deposits may be made to
outstanding Contracts.
A maximum 6 1/2% sales expense and 2% administration expense, plus
state premium taxes currently ranging from 0 to 3.5%, are deducted from each
deposit. This is equivalent to 9.28% of the net deposit after deducting sales
and administrative expenses but before deducting premium taxes. (See page 5.)
A mortality and expense risk charge is charged the Fund at an annual
rate of 1.00% of the value of the average daily net assets. The Fund also pays
the Adviser an investment management fee at an annual rate of 0.30% of the
Fund's average daily net assets. (See pages 6 and 10.)
Annual Deposit and Single Deposit Deferred Contracts may be surrendered
prior to the selected retirement date. The surrender value is determined when
the written request for surrender is received. See page 17. There is no
surrender charge. Withdrawals may be taken and may be taxable and a federal
penalty tax may be assessed upon withdrawals of amounts accumulated under the
Contract before age 59 1/2.
You may also choose to receive benefits in the form of an annuity. See
page 13.
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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.............. 6 1/2%
Next $35,000.............. 4 1/2%
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............... 1 1/2%
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.............. 81/2%
Next $35,000............... 6 %
Next $100,000.............. 23/4%
Excess..................... 1/2%
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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 may be deducted from each deposit.
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ANNUAL CONTRACT FEE: NONE
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ANNUAL EXPENSES
(as a percentage of average daily net assets)
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Management Fee:.......................................................................................... 0.30%
Mortality and Expense Risk Charge:...................................................................... 1.00%
Other Expenses:......................................................................................... None
----
Total Annual Expenses:........................................................................... 1.30%
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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
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<S> <C> <C> <C> <C>
$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
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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.
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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 taxe charges may
be applicable.
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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, 1999 appears in the Statement of
Additional Information.
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
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INCOME AND EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income $0.097 $0.98 $ .77 $.071 $.044 $.040 $ .046 $ .082 $ .074
$ .080
Expenses 0.456 0.328 .244 .163 .125 .089 .081 .064 .055
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.049
Net investment (loss) income (0.359) (0.230) (0.167) (.092) (.081) (.049) (.035) .018
.019 .031
CAPITAL CHANGES
Net realized and unrealized
gains (loss) on investments 13.132 10.447 6.701 3.217 3.880 .563 1.306 .654
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1.370 (.487)
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Net increase (decrease) in
accumulation unit value 12.773 10.217 6.534 3.125 3.799 .514 1.271 .672
1.389 (.456)
Accumulation unit value:
Beginning of year 31.040 20.823 14.289 11.164 7.365 6.851 5.580 4.908
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3.519 3.975
End of year $43.813 $31.040 $20.823 $14.289 $11.164 $7.365 $6.851 $5.580
====================================================================
$4.908 $3.519 Ratio of expenses to average
===============
accumulation fund balance 1.29% 1.32% 1.33% 1.31% 1.32% 1.31% 1.30% 1.30%
1.32% 1.32%
Ratio of net investment (loss)
income to average
accumulation fund balance (1.02%) (0.92%) (0.91%) (.74%) (.86%) (.72%) (.57%) .37%
0.48% .85%
Portfolio turnover rate 34.45% 53.78% 15.21% 32.94% 17.17% 30.62% 41.39% 43.48%
32.20% 47.43%
Number of accumulation units
outstanding at end of year
(000 omitted) 3,084 3,193 3,273 3,431 3,598 3,749 3,820 4,062
4,232 4,310
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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.
<PAGE>
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,which is owned by AEGON N.V. an international insurance group.
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").
<PAGE>
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. These fundamental policies are described in the
Statement of Additional Information.
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 TransamericaInvestment Management, LLC, 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.
The Adviser uses a "bottom up" approach to investing. It focuses on
identifying fundamental change in it's early stages and investing in premier
companies. The Adviser believes in long term investing and do not attempt to
time the market. The Fund is constructed one company at a time. Each company
passes through a rigorous research process and stands on it's own merits as a
premier company in the Adviser's opinion.
The Adviser buys securities of companies it believes have the defining
features of premier growth companies that are under-valued in the stock market.
Premier companies have many or all of these features. |X| Shareholder-oriented
management |X| Dominance in market share |X| Cost production advantages |X|
Leading brands |X| Self-financed growth |X| Attractive reinvestment
opportunities
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 Investment
Management, LLC, develops and implements and investment program subject to the
supervision of the Board.
THE INVESTMENT ADVISERS
Transamerica Investment Management, LLC, ("TIM" or "Adviser") is adviser to
the Fund. In addtion to the Fund, TIM also serves as adviser to registered
management investment companies Transamerica Investors, Inc., Transamerica
Variable Insurance Fund, Inc., and Transamerica Income Shares, Inc., and manages
other portfolios. TIM is controlled by Transamerica Investment Services, Inc.,
which is owned by Transamerica Corporation which is owned by AEGON, N.V.
Previous to January 1, 2000, Transamerica Occidental was Adviser to the Fund.
As Adviser, TIM is responsible for obtaining and evaluating pertinent
economic data relevant to the investment policy of the Fund, developing and
implementing an investment program for the Fund, and 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.
Transamerica Investment Services, Inc. ("TIS" or "Sub-Adviser") acts as
Sub-Adviser to the Fund and provides investment research reports and other
services at the request of the Adviser. TIS has been in existence since 1967 and
has provided investment services to the Fund and other Transamerica Life
Companies since 1981. The address for both TIM and TIS is 1150 South Olive
Street, Los Angeles, California 90015-2211.
<PAGE>
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.
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-------------------------------- ----------------------------- ------------------------------------
SALES AND ADMINISTRATIVE SALES AND ADMINISTRATIVE EXPENSES
TOTAL DEPOSITS UNDER THE EXPENSES AS A PERCENTAGE OF AS A PERCENTAGE
CONTRACT DEPOSIT OF NET DEPOSIT
-------------------------------- ----------------------------- ------------------------------------
-------------------------------- ----------------------------- ------------------------------------
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First $15,000 81/2% 9.28%
-------------------------------- ----------------------------- ------------------------------------
-------------------------------- ----------------------------- ------------------------------------
Next $35,000 6% 6.38%
-------------------------------- ----------------------------- ------------------------------------
-------------------------------- ----------------------------- ------------------------------------
Next $100,000 23/4% 2.83%
-------------------------------- ----------------------------- ------------------------------------
-------------------------------- ----------------------------- ------------------------------------
Excess 1/2% 0.5%
-------------------------------- ----------------------------- ------------------------------------
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The sales expense charge is retained by Transamerica Occidental as
compensation for the cost of selling the Contracts. Transamerica Occidental pays
the Underwriter and the Underwriter's registered representatives for the sale of
the Contracts. (See "Contract Values" for more information about the
Underwriter.) The distribution expenses may exceed amounts deducted from
Deposits as sales expenses. Transamerica Occidental will bear any such
additional expense from surplus, including profits, if any, from the mortality
and expense risk charges. Transamerica Occidental pays the sales expense charge
to the Underwriter as full commission.
The administrative expense charge will be retained by Transamerica
Occidental for its administrative service.
CHARGES ASSESSED AGAINST THE FUND
At the end of each Valuation Period, the Accumulation and Annuity Unit
values are reduced by a mortality and expense risk charge at an annual rate of
1.00% and an investment management charge at an annual rate of 0.30% of the
value of the aggregate net assets of the Fund. Amounts of such charges may be
withdrawn periodically from the Fund. The mortality risks assumed 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 Adviser TIM.
Transamerica Occidental may realize a profit from the mortality and expense risk
charge.
There are no other fees assessed against the Fund.
<PAGE>
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 a
premium taxe charges for taxes incurred 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, before June 5, 2000, to Transamerica Annuity Service Center at
401 North Tryon Street, Suite 700 Charlotte, North Carolina 28202. After June 5,
2000, you may request information regarding a Contract by writing to
Transamerica Annuity Service Center at P.O. Box 3183 Cedar Rapids, Iowa
52406-3183. The phone number is 877-717-8861.
ANNUITY PERIOD
Subject to limitations under federal law, Contract Owners may select an
annuity option, 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
an 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, and 403(b) of the internal
Revenue Code of 1986 as amended (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 70 1/2 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 70 1/2.
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 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.
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 for either a withdrawal from or the surrender of Accumulation
Account Value. Before June 5, 2000, mail such a request to 401 North Tryon
Street, Suite 700, Charlotte, North Carolina 28202. After June 5, 2000, mail
such a request to P.O. Box 3183 Cedar Rapids, Iowa 52406-3183 or, if overnight
mail, to 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499. The phone number is
877-717-8861. 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), or 408 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. 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.
<PAGE>
5. 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.
<PAGE>
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 the past 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 purpose 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, the Adviser or Sub-Adviser, or the Underwriter are
parties.
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
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-
</TABLE>
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, before June 5, 2000, the Annuity Service Center, at 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202. After June 5,
2000, the address is P.O. Box 3183, Cedar Rapids, Iowa 52406-3183 or, if by
overnight mail, 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499, or at
877-717-8861.
<PAGE>
(This page intentionally left blank)
<PAGE>
(LOGO)
(a prospectus)
CUSTODIAN--Boston Safe Deposit and Trust Company of California
- -------------------------------------------------------------------------------
AUDITORS--Ernst & Young LLP May 1, 2000
- -------------------------------------------------------------------------------
ISSUED BY
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015-2211
(213) 742-2111
(LOGO)
Transamerica Occidental
Life Insurance Company
TFM-1006 ED. 5-98
<PAGE>
1
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, before June 5, 2000, at 401 North
Tryon Street, Suite 700, Charlotte, North Carolina 28202. After June 5, 2000,
the address is P.O. Box 3183, Cedar Rapids, Iowa 52406-3183 or, if by overnight
mail, 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499, or at 877-717-8861.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS MAY 1, 2000 THE
DATE OF THE PROSPECTUS IS MAY 1, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Cross
Reference
to Prospectus
Page Page
<S> <C> <C>
General Information and History................................... -2- 8
Investment Objectives and Policies................................ -2- 9
Management........................................................ -3- 10
Investment Advisory and Other Services............................ -6- 10
Brokerage Allocations............................................. -6-
Underwriter....................................................... -7- 17
Annuity Payments.................................................. -7- 13
Federal Tax Matters............................................... -8- 17
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. Transamerica Corporation is owned by
AEGON N.V. an international insurance group.
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, 1999, the Company's share in the Fund was approximately 67.90% 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. Policies which are fundamental 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.
<TABLE>
<CAPTION>
MANAGEMENT
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>
Dr. James H. Garrity (61) Board of Directors President of the John Tracy Clinic and the Tracy
Family Hearing Center.
Jon C. Strauss (60) 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 (59)* 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 (59) 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).
Regina M. Fink (44) Assistant Secretary Counsel for Transamerica Occidental Life Insurance
Company and prior to 1994 Counsel and Vice
President for Colonial Management Associates, Inc.
Thomas M. Adams (65) Secretary Partner in the law firm of Lanning, Adams &
Peterson.
William T. Miller (36) Treasurer Chief Operating Officer, Transamerica Investment
Management, LLC since 1999. Chief Financial
Officer, Kayne Anderson Investment Management
1994 to 1999.
</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.
However, in some instances, occupation listed above is the current position and
prior positions with the same company or affiliate are not indicated.
Messrs. Garrity, Sodini and Strauss 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 $375 -0- $2,500
Dr. James. H. Garrity $750 0 $4,250
Richard N. Latzer(2) -0- -0- -0-
Gary U. Rolle(2) -0- -0- -0-
Peter J. Sodini $1,500 -0- $8,500
Jon C. Strauss $1,500 0 $8,500
</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 1999, 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 Transamerica Investment Management, LLC, and sub-advised by
Transamerica Investment Services, Inc., and of Transamerica Income Shares, Inc.,
a closed-end management company advised by TransamericaInvestment Management,
LLC. These registered investment companies comprise the "Fund Complex."
INVESTMENT ADVISORY AND OTHER SERVICES
Transamerica Investment Management, LLC (`TIM" or "Adviser") is the
investment adviser to the Fund. Prior to January 1, 2000, Transamerica
Occidental Life Insurance Company (the "Company") served as Adviser.
Previously the Company and now TIM provides investment management to
the Fund pursuant to an investment Advisory Agreement with the Fund. 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 $189,856 in 1997, $$246,542 in 1998, and
$330,503 in 1999. Transamerica Investment Services, Inc., serves as sub-adviser
to the Fund.
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
TIM has 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. TIM 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 1999,
commissions were fully negotiated and paid on a best execution basis. In 1997,
1998 and 1999 respectively, brokerage commissions were .03%, .04% and .07% of
average assets, and the aggregate dollar amounts were $16,312, $38,000 and
$72,314 respectively.
TIM furnishes investment advice to the Fund as well as other
institutional clients. Some of the Advisers' 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 TIM at
the same time. When two or more clients are engaged in the simultaneous sale or
purchase of securities, TIM will allocate the securities in question so as to be
equitable as to each client. TIM 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. TIM or TIS 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, a
subsidiary of AEGON N.V.
The past three years, the Underwriter received from the sales of the
Fund's Contracts total payments of $2,641 in 1997, $4,471 in 1998, and $1,087 in
1999.
ANNUITY PAYMENTS
AMOUNT OF FIRST ANNUITY PAYMENT
SINGLE AND ANNUAL DEPOSIT CONTRACTS:
At a Annuitant's selected Retirement Date, the Accumulation Account
Value based on the Accumulation Unit value established on the last Valuation
date in the second calendar month preceding the Retirement Date is applied to
the appropriate Annuity Conversion Rate under the Contract, according to the
Annuitant's, and any joint annuitant's, attained age at nearest birthday and the
selected form of Annuity, to determine the dollar amount of the first Variable
Annuity payment. The Annuity Conversion rates are based on the following
assumptions: (i) Investment earnings at 3.5% per annum, and (ii) Mortality - The
Annuity Table for 1949, ultimate two year age setback.
IMMEDIATE CONTRACT:
The Net Deposit applicable under the Contract is applied to the Annuity
Conversion Rate for this Contract by the Company according to the Annuitant's,
and any joint annuitant's, attained age at nearest birthday and selected form of
Annuity, to determine the dollar amount of the first Variable Annuity payment.
The Annuity Conversion Rates are based on the following assumptions: (i)
Investment earnings at 3.5% per annum, and (ii) Mortality - The Annuity Table
for 1949, one year age setback.
AMOUNT OF SUBSEQUENT ANNUITY PAYMENTS
The amount of a Variable Annuity payment after the first is determined
by multiplying the number of Annuity Units by the Annuity Unit value established
on the last Valuation Date in the second calendar month preceding the date such
payment is due.
The Annuity Conversion Rates reflect the assumed net investment
earnings rate of 3.5%. Each annuity payment will vary as the actual net
investment earnings rate varies from 3.5%. If the actual net investment earnings
rate were equal to the assumed rate, Annuity payments would be level. If the
actual Net Investment Rate were lower than the assumed rate, Annuity payments
would decrease.
NUMBER OF ANNUITY UNITS
The number of the Contract Owner's Annuity Units is determined at the
time the Variable Annuity is effected by dividing the dollar amount of the first
Variable Annuity payment by the Annuity Unit Value established on the last
Valuation Date in the second calendar month preceding the Retirement Date. The
number of Annuity Units, once determined, will remain fixed except as affected
by the normal operation of the form of Annuity, or by a late Deposit. Late
Deposit means a Deposit received by the Company after the Valuation Date in the
second calendar month preceding the Retirement Date.
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.
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, 1999, 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, 1999, 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, 1999, 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
Ernst & Young LLP
