As filed with the Securities and Exchange Commission on
April 26, 2000
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. 48
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29
(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
<TABLE>
<CAPTION>
Name and Address of Agent for Service: Copy to:
<S> <C>
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
</TABLE>
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, 2000 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
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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. 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 23 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.
<PAGE>
TABLE
OF
CONTENTS
(LOGO)
<TABLE>
<CAPTION>
Page
Page
<S> <C> <C>
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
Investment Objectives and Underwriter............................... 17
Policies............................ 9 Surrender of a Contract..................... 17
Strategies............................... 9 Federal Tax Matters......................... 18
Risks.................................... 10 Introduction.............................. 18
Management of the Fund...................... 10 Qualified Contracts....................... 19
The Investment Advisers.................. 10 Tax Status of the Contract................ 21
Charges Under the Contracts................. 11 Taxation of Annuities..................... 21
Charges Assessed Against the Deposits.... 11 Legal Proceedings........................... 22
Charges Assessed Against the Fund........ 11 Table of Contents of the Statement of
Premium Taxes............................ 12 Additional Information.................... 23
Description of the Contracts................ 12
Voting Rights............................ 12
</TABLE>
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.
<PAGE>
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 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.
<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 10.) The
Contracts are no longer being offered, but additional deposits may be made to
outstanding Contracts.
A maximum 6 1/2% sales expense and 2% administration expense, plus
state premium taxes currently ranging from 0 to 3.5%, are deducted from each
deposit. This is equivalent to 9.28% of the net deposit after deducting sales
and administrative expenses but before deducting premium taxes. (See page 5.)
A mortality and expense risk charge is charged the Fund at an annual
rate of 1.00% of the value of the average daily net assets. The Fund also pays
the Adviser an investment management fee at an annual rate of 0.30% of the
Fund's average daily net assets. (See pages 6 and 10.)
Annual Deposit and Single Deposit Deferred Contracts may be surrendered
prior to the selected retirement date. The surrender value is determined when
the written request for surrender is received. See page 17. There is no
surrender charge. Withdrawals may be taken and may be taxable and a federal
penalty tax may be assessed upon withdrawals of amounts accumulated under the
Contract before age 59 1/2.
You may also choose to receive benefits in the form of an annuity. See
page 13.
<PAGE>
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.
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<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
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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</TABLE>
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.
<PAGE>
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
<TABLE>
<CAPTION>
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
------------------------------------------------------------------
<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
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.
</TABLE>
- -------------------
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.
<PAGE>
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.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
INCOME AND EXPENSE
<S> <C> <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 .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 1.370 (.487)
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 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
</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.
<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").
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.
CHARGES UNDER THE CONTRACTS
CHARGES ASSESSED AGAINST THE DEPOSITS
Transamerica Occidental makes a deduction from each deposit for sales
and administrative expenses. No such charges will be assessed against deposits
made from insurance or annuity policies issued by Transamerica Occidental which
are transferred to the Fund. The charge for sales expense ranges from 6 1/2% to
1/2%, and the charge for the administration expense is from 2% to none. (See
"Fee Table" on page 5.) The sales expense plus the administative expense are
equivalent to the following percentages of the net deposit after deduction of
these expenses.
<TABLE>
<CAPTION>
-------------------------------- ----------------------------- ------------------------------------
SALES AND ADMINISTRATIVE SALES AND ADMINISTRATIVE EXPENSES
TOTAL DEPOSITS UNDER THE EXPENSES AS A PERCENTAGE OF AS A PERCENTAGE
CONTRACT DEPOSIT OF NET DEPOSIT
-------------------------------- ----------------------------- ------------------------------------
-------------------------------- ----------------------------- ------------------------------------
<S> <C> <C> <C>
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%
-------------------------------- ----------------------------- ------------------------------------
</TABLE>
The sales expense charge is retained by Transamerica Occidental as
compensation for the cost of selling the Contracts. Transamerica Occidental pays
the Underwriter and the Underwriter's registered representatives for the sale of
the Contracts. (See "Contract Values" for more information about the
Underwriter.) The distribution expenses may exceed amounts deducted from
Deposits as sales expenses. Transamerica Occidental will bear any such
additional expense from surplus, including profits, if any, from the mortality
and expense risk charges. Transamerica Occidental pays the sales expense charge
to the Underwriter as full commission.
The administrative expense charge will be retained by Transamerica
Occidental for its administrative service.
CHARGES ASSESSED AGAINST THE FUND
At the end of each Valuation Period, the Accumulation and Annuity Unit
values are reduced by a mortality and expense risk charge at an annual rate of
1.00% and an investment management charge at an annual rate of 0.30% of the
value of the aggregate net assets of the Fund. Amounts of such charges may be
withdrawn periodically from the Fund. The mortality risks 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 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 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 in
Charlotte, North Carolina, or Cedar Rapids, Iowa, as appropriate, 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 Centerfor 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
mailing, 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.
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. 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.
<PAGE>
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, 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>
5
STATEMENT OF ADDITIONAL INFORMATION
FOR
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
Individual Equity Investment Fund Contracts
For Tax Deferred Individual Retirement Plans
Issued by Transamerica Occidental Life Insurance Company
1150 South Olive Street, Los Angeles, California 90015-2211
This Statement of Additional Information is not a Prospectus, but
should be read with the Prospectus for Transamerica Occidental's Separate
Account Fund B (the "Fund"). A copy of the Prospectus may be obtained by writing
to the Transamerica Annuity Service Center, 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- 18
Financial Statements.............................................. -9-
</TABLE>
GENERAL INFORMATION AND HISTORY
Transamerica Occidental Life Insurance Company (the "Company") was
formerly known as Occidental Life Insurance Company of California. The name
change occurred approximately on September 1, 1981.
The Company is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn wholly-owned by Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in life insurance, consumer lending, commercial
lending, leasing, and real estate services. 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.
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> <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."
<PAGE>
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.
<PAGE>
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
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
Accumulation
End of Quarter Unit Value
-------------- ------------
<S> <C>
December, 1989................. 3.975169
March, 1990.................... 3.879319
June, 1990..................... 4.124224
September, 1990................ 3.268967
December, 1990................. 3.518587
March, 1991.................... 4.337042
June, 1991..................... 4.288242
September, 1991................ 4.480883
December, 1991................. 4.908113
March, 1992.................... 4.895752
June, 1992..................... 4.798707
September, 1992................ 4.981578
December, 1992................. 5.580041
March, 1993.................... 5.893141
June, 1993..................... 6.139891
September, 1993................ 6.868266
December, 1993................. 6.851062
March, 1994.................... 6.629959
June, 1994..................... 6.325672
September, 1994................ 6.905430
December, 1994................. 7.364882
</TABLE>
<TABLE>
<CAPTION>
Accumulation
End of Quarter Unit Value
-------------- ------------
<S> <C>
March, 1995.................... 8.376121
June, 1995..................... 9.806528
September, 1995................ 11.275672
December, 1995................. 11.163517
March, 1996.................... 11.495829
June, 1996..................... 12.356950
September, 1996................ 13.007681
December, 1996................. 14.289273
March, 1997.................... 14.574090
June, 1997..................... 18.948025
September, 1997................ 22.762719
December, 1997................. 20.822981
March, 1998.................... 24.769837
June, 1998..................... 26.122076
September, 1998................ 24.532238
December, 1998................. 31.039623
March, 1999.................... 36.274720
June, 1999..................... 36.182643
September, 1999................ 33.766134
December, 1999................. 43.812753
</TABLE>
The table above covers the period from December, 1989, to December, 1999. 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, 1999
<TABLE>
<CAPTION>
Number
of Market
Shares Common Stocks Value(1)
- ------ ------------- --------
<C> <S> <C>
BROADCASTING (3.96%)
60,000 Clear Channel Communications, Inc.*.... $ 5,355,000
------------
BUSINESS SERVICES (4.20%)
115,000 First Data Corporation................. 5,670,880
------------
CHEMICALS (2.08%)
70,000 Minerals Technologies, Inc. ........... 2,804,340
------------
COMMERCIAL SERVICES (1.92%)
200,000 Sodexho Marriott Services, Inc......... 2,600,000
------------
COMMUNICATION SERVICES (3.50%)
110,000 Qwest Communications international, 4,730,000
Inc.*.................................
------------
COMPUTERS & BUSINESS EQUIPMENT (14.83%)
200,000 Dell Computer Corporation*............. 10,200,000
90,000 EMC Corporation*....................... 9,832,500
------------
20,032,500
------------
DRUGS & HEALTH CARE (2.19%)
45,000 Kervasion Inc.*........................ 275,625
40,000 Merck & Co., Inc....................... 2,682,480
------------
2,958,105
------------
ELECTRONICS (17.60%)
100,000 Applied Materials, Inc.*............... 12,668,700
135,000 Intel Corporation...................... 11,112,120
------------
23,780,820
------------
FINANCIAL SERVICES (5.68%)
200,000 Charles Schwab Corp.................... 7,675,000
------------
HOTELS & RESTAURANTS (2.69%)
90,000 McDonalds Corporation.................. 3,628,080
------------
</TABLE>
<TABLE>
<CAPTION>
Number
of Market
Shares Common Stocks Value(1)
- ------ ------------- --------
<C> <S> <C>
RETAIL (3.06%)
90,000 Gap Inc................................ $ 4,140,000
------------
RETAIL GROCERY(6.03%)
300,000 Kroger Company*........................ 5,662,500
70,000 Safeway, Inc.*......................... 2,489,340
------------
8,151,840
------------
SOFTWARE (8.56%)
125,000 IMS Health, Inc........................ 3,398,375
70,000 Microsoft Corporation*................. 8,172,500
------------
11,570,875
------------
TECHNOLOGY (5.09%)
36,000 Verisign, Inc. ........................ 6,873,732
------------
TELECOMMUNICATIONS (2.87%)
24,000 JDS Uniphase Corp* .................... 3,871,462
------------
TELECOMMUNICATION EQUIPMENT (13.10%)
60,000 QUALCOMM, Inc. ........................ 10,567,500
50,000 RF Micro Devises, Inc.* ............... 3,421,850
75,000 Vodaphone Airtouch PLC ADR............. 3,712,500
------------
17,701,850
------------
TRUCKING & FREIGHT FORWARDING (2.56%)
50,000 United Parcel Services, Inc. .......... 3,450,000
------------
134,994,484
TOTAL COMMON STOCK (99.92%)............
============
110,565
Cash, Cash Equivalents and Receivables
Less Liabilities (.08%)...............
------------
$135,105,049
NET ASSETS (100.00%)...................
============
</TABLE>
- ------------
(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, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in common stock -- at market value (cost
$58,323,745).............................................. $134,994,484
Cash and cash equivalents................................... 214,875
Dividend and interest receivable............................ 72,217
Miscellaneous receivables................................... 20,000
------------
TOTAL ASSETS........................................... 135,301,576
LIABILITIES:
Due to Transamerica Occidental's general account............ 196,527
------------
NET ASSETS.................................................. $135,105,049
============
Net assets attributed to variable annuity
contractholders -- 3,072,105 units at $43.812753 per
unit...................................................... $134,597,383
Reserve for retired annuitants.............................. 507,666
------------
$135,105,049
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Net investment loss......................................... $ (1,127,106) $ (750,527)
Net realized gain from security transactions................ 20,905,486 18,511,981
Net unrealized appreciation on investments.................. 20,097,581 15,435,710
------------ -----------
Net increase in net assets resulting from operations........ 39,875,961 33,197,164
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).............. 38,703 84,604
Payments to Contract Owners:
Annuity payments.......................................... (80,406) (71,998)
Terminations and withdrawals.............................. (3,892,204) (3,006,584)
Adjustment for mortality guarantees on retired annuitants... 32,477 37,352
------------ -----------
Total increase in net assets................................ 35,974,531 30,240,538
Balance at beginning of period.............................. 99,130,518 68,889,980
------------ -----------
Balance at end of period.................................... $135,105,049 $99,130,518
============ ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME
INCOME:
Dividends.............................................. $ 207,901
Interest............................................... 95,742
-----------
Total investment income.............................. 303,643
-----------
EXPENSES:
Mortality and expense risk charges..................... 1,100,246
Investment management services......................... 330,503
-----------
Total expenses....................................... 1,430,749
-----------
Net investment loss....................................... (1,127,106)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions.............. 20,905,486
Net change in unrealized appreciation on investments...... 20,097,581
-----------
Net realized and unrealized gain on investments........... 41,003,067
-----------
Net increase in net assets resulting from
operations.......................................... $39,875,961
===========
</TABLE>
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 $37,735,859 and $42,746,650, respectively, in 1999. The Fund had
gross unrealized gains of $81,235,847 and gross unrealized losses of $4,565,108
at December 31, 1999 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 benefit 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
<PAGE>
NOTE B -- TRANSAMERICA OCCIDENTAL LIFE INVESTMENT
As of December 31, 1999, Transamerica Occidental Life had deposited
$2,000,000 (current fund value of $93,647,873) 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
3 1/2%.
NOTE D -- REMUNERATION
No remuneration was paid during 1999 by Transamerica Occidental's Separate
Account Fund B to any member of the Board of Managers or officer of Fund B or
any affiliated person of such members or officers.
FINANCIAL HIGHLIGHTS
Selected data for an accumulation unit outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment income................................ $ 0.097 $ 0.098 $ 0.077 $ 0.071 $ 0.044
Expenses......................................... 0.456 0.328 0.244 0.163 0.125
------- ------- ------- ------- -------
Net investment loss.............................. (0.359) (0.230) (0.167) (0.092) (0.081)
Net realized and unrealized gain on investments.. 13.132 10.447 6.701 3.217 3.880
------- ------- ------- ------- -------
Net increase in accumulation unit value...... 12.773 10.217 6.534 3.125 3.799
Accumulation unit value:
Beginning of period............................ 31.040 20.823 14.289 11.164 7.365
------- ------- ------- ------- -------
End of period.................................. $43.813 $31.040 $20.823 $14.289 $11.164
======= ======= ======= ======= =======
Ratio of expenses to average accumulation fund
balance(a)..................................... 1.29% 1.32% 1.33% 1.31% 1.32%
Ratio of net investment loss to average
accumulation fund balance(a)................... (1.02)% (0.92)% (0.91)% (0.74)% (0.86)%
Portfolio turnover............................... 34.45% 53.78% 15.21% 32.94% 17.17%
Number of accumulation units outstanding at end
of period (000's omitted)...................... 3,084 3,193 3,273 3,431 3,598
</TABLE>
(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, 1999, 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements 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, 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 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, 1999, 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 accounting
principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
Charlotte, North Carolina
February 15, 2000
8
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
MANAGERS AND OFFICERS
GARY U. ROLLE, President,
Chairman of Board
DR. JAMES H. GARRITY, Manager
PETER J. SODINI, Manager
JON C. STRAUSS, Manager
WILLIAM T. MILLER, Treasurer,
Assistant Secretary
(LOGO)
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.
TRANSAMERICA
Pittsburgh, PA 15258
OCCIDENTAL'S
Tel. (800) 234-6356
SEPARATE
Transamerica Occidental
ACCOUNT FUND B
Life Insurance Company
Annuity Service Center
ANNUAL FINANCIAL
P.O. Box 31848
Charlotte, NC 28231-1848
REPORT
800 258-4260
(LOGO)
DECEMBER 31, 1999
This report cannot be used as sales literature.
TFM 1036 Ed. 2-98
<PAGE>
<PAGE>
Transamerica Occidental Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors..........................................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis........................................................................3
Statements of Operations - Statutory Basis..............................................................5
Statements of Changes in Capital and Surplus - Statutory Basis..........................................6
Statements of Cash Flow - Statutory Basis...............................................................7
Notes to Financial Statements - Statutory Basis.........................................................9
Statutory Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis.....................................................................................39
Supplementary Insurance Information - Statutory Basis..................................................40
Reinsurance - Statutory Basis..........................................................................42
</TABLE>
<PAGE>
2
Report Of Independent Auditors
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Occidental Life Insurance Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. Our audits also included the accompanying statutory-basis financial
statement schedules required by Article 7 of Regulation S-X. These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the California Department of Insurance, which practices differ from
accounting principles generally accepted in the United States. The variances
between such practices and accounting principles generally accepted in the
United States also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of Transamerica Occidental Life Insurance Company at
December 31, 1999 and 1998, or the results of its operations or its cash flows
for each of the three years in the period December 31, 1999.
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flow for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices prescribed or
permitted by the California Department of Insurance. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
March 31, 2000
<PAGE>
3
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
DECEMBER 31
1999 1998
--------------------------------------
ADMITTED ASSETS Cash and invested assets:
<S> <C> <C>
Bonds $ 12,820,804 $ 12,135,178
Preferred stocks - unaffiliated 77,231 40,941
Preferred stocks - subsidiaries 58,219 56,860
Common stocks - unaffiliated 1,270,039 773,490
Common stocks - subsidiaries 984,400 965,485
Mortgage loans on real estate 385,590 387,038
Real estate 101,195 102,748
Policy loans 409,534 410,628
Cash and short-term investments 132,454 513,557
Other investments 218,997 194,264
--------------------------------------
Total cash and invested assets 16,458,463 15,580,189
Federal income tax receivable 160,075 -
Accrued investment income 226,823 210,932
Deferred and uncollected premiums 227,722 (807,951)
Reinsurance receivable 249,225 1,201,639
Other admitted assets 245,696 255,744
Separate account assets 4,229,395 3,443,277
--------------------------------------
Total admitted assets $ 21,797,399 $ 19,883,830
======================================
<PAGE>
15
DECEMBER 31
1999 1998
--------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserves for future policy benefits $ 9,695,196 $ 9,428,282
Policy and contract claims payable 296,789 156,147
Supplementary contracts without life contingencies 208,349 215,548
Funding agreements 2,228,261 1,927,054
Other policy liabilities 114,442 115,361
Funds held under coinsurance 2,274,229 2,123,810
Asset valuation reserve 578,958 400,616
Interest maintenance reserve 58,721 61,514
Other liabilities 310,404 285,030
Separate account liabilities 4,068,126 3,326,306
--------------------------------------
Total liabilities 19,833,475 18,039,668
Capital and surplus:
Common Stock ($12.50 par value):
Authorized - 4,000,000 shares
Issued and outstanding - 2,206,933 shares 27,587 27,587
Contributed surplus 509,600 372,538
Unassigned surplus 1,426,737 1,444,037
--------------------------------------
Total capital and surplus 1,963,924 1,844,162
--------------------------------------
Total liabilities and capital and surplus $ 21,797,399 $ 19,883,830
======================================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------------------------
Revenues:
<S> <C> <C> <C>
Premiums and annuity considerations $ 1,368,016 $ 1,608,525 $ 1,715,745
Fund deposits 351,170 363,889 395,162
Considerations for supplementary contracts without life
contingencies 212,513 259,660 240,065
Net investment income 1,125,042 1,078,543 1,028,054
Commissions and expense allowances on reinsurance ceded
469,910 471,943 283,794
Other 550,544 900,281 228,649
-------------------------------------------------
4,077,195 4,682,841 3,891,469
Benefits and expenses:
Benefits paid or provided for:
Death benefits 392,276 595,585 432,019
Annuity benefits 582,542 570,424 754,609
Disability benefits 10,199 36,590 139,278
Surrender benefits and other fund withdrawals 694,766 616,224 429,449
Increase (decrease) in reserves 266,814 (447,419) (631,054)
Payments on supplementary contracts 231,717 243,383 235,594
Endowments 2,397 2,504 2,000
Other 112,059 102,093 96,546
-------------------------------------------------
2,292,770 1,719,384 1,458,441
Expenses:
Commissions and expense allowances 691,802 728,533 554,979
Reinsurance reserve transfer - 671,651 792,425
Other operating expenses 857,912 1,300,821 758,855
Net transfers to separate accounts 50,572 200,243 152,998
-------------------------------------------------
1,600,286 2,901,248 2,259,257
-------------------------------------------------
3,893,056 4,620,632 3,717,698
-------------------------------------------------
Gain from operations before dividends to policyholders,
federal income tax expense (benefit) and net realized
capital gains (losses) 184,139 62,209 173,771
Dividends to policyholders 9,294 8,206 9,453
-------------------------------------------------
Gain from operations before federal income tax expense
(benefit) and net realized capital gains (losses) 174,845 54,003 164,318
Federal income tax expense (benefit) 30,330 (70,408) 58,514
-------------------------------------------------
Gain from operations before net realized capital gains
(losses) 144,515 124,411 105,804
Net realized capital gains (losses) 17,515 76,071 (9,332)
-------------------------------------------------
Net income $ 162,030 $ 200,482 $ 96,472
=================================================
See accompanying notes.
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Capital and surplus at beginning of year $ 1,844,162 $ 1,556,228 $ 1,249,045
Net income 162,030 200,482 96,472
Increase in net unrealized capital gains 119,420 261,540 246,829
Increase in non-admitted assets and
related items (2,824) (45,392) (41,778)
(Decrease) increase in liability for reinsurance in
unauthorized companies (4,646) (3,137) 1,038
Increase in asset valuation reserve (178,342) (39,153) (66,577)
Increase in surplus in separate account statement
16,637 32,572 29,459
Contributed capital 137,062 3,800 127,194
Prior year adjustments (14,710) (21,276) (47,998)
Dividends paid to parent (79,000) (80,000) (61,311)
Change in benefit reserve valuation basis - - (7,782)
Increase (decrease) as a result of
reinsurance (35,865) (21,502) 31,637
------------------------------------------------------
Capital and surplus at end of year $ 1,963,924 $ 1,844,162 $ 1,556,228
======================================================
See accompanying notes.
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
OPERATING ACTIVITIES
Premiums and annuity considerations $ 319,552 $ 2,642,142 $ 1,612,975
Fund deposits 351,170 363,889 395,162
Other policy proceeds and considerations 212,546 259,627 240,280
Allowances and reserve adjustments received on
reinsurance ceded 1,861,584 93,368 249,623
Investment income received 1,088,846 1,068,856 996,628
Other income received 141,247 194,037 274,793
Life and accident and health claims paid (266,727) (661,006) (487,861)
Surrender benefits and other fund withdrawals paid
(695,777) (618,854) (442,793)
Annuity and other benefits paid (962,151) (948,840) (1,046,532)
Commissions, other expenses and taxes
paid (1,027,317) (950,827) (777,851)
Dividends paid to policyholders (9,136) (8,102) (10,101)
Federal income taxes received (paid) (146,945) 15,764 (12,411)
Reinsurance reserve transfers and other (618,898) (1,891,421) (1,552,528)
------------------------------------------------------
Net cash provided by (used in) operating activities
247,994 (441,367) (560,616)
INVESTING ACTIVITIES
Proceeds from investments sold, matured
or repaid:
Bonds 2,993,985 3,938,693 3,525,839
Stocks 220,666 488,559 138,284
Mortgage loans 11,248 37,335 34,216
Real estate 3,050 20,300 3,660
Other invested assets 200 3,984 8,580
Miscellaneous proceeds 407 (25,830) 7,140
------------------------------------------------------
Total investment proceeds 3,229,556 4,463,041 3,717,719
Taxes paid on capital gains - - (7,481)
------------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 3,229,556 4,463,041 3,710,238
<PAGE>
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Cost of investments acquired:
Bonds $ (3,656,035) $ (4,225,623) $ (4,103,637)
Stocks (611,404) (331,131) (311,708)
Mortgage loans (9,800) (121,139) (40,000)
Real estate (5,064) (7,030) (2,765)
Other invested assets (35,204) (36,752) (2,031)
Miscellaneous applications (93,194) - -
------------------------------------------------------
Total cost of investments acquired (4,410,701) (4,721,675) (4,460,141)
Net decrease (increase) in policy loans 1,094 (3,174) (7,996)
------------------------------------------------------
Net cost of investments acquired (4,409,607) (4,724,849) (4,468,137)
------------------------------------------------------
Net cash used in investing activities (1,180,051) (261,808) (757,899)
Financing and miscellaneous activities:
Other cash provided:
Capital and surplus paid-in 137,062 3,800 127,194
Other sources 562,978 1,485,965 1,558,615
------------------------------------------------------
Total other cash provided 700,040 1,489,765 1,685,809
Other cash provided (applied):
Dividends paid to shareholders (79,000) (80,000) (61,311)
Other applications, net (70,086) (347,482) (162,103)
------------------------------------------------------
Total other cash provided (applied) (149,086) (427,482) (223,414)
------------------------------------------------------
Net cash provided by financing and miscellaneous
activities 550,954 1,062,283 1,462,395
------------------------------------------------------
Net (decrease) increase in cash and short-term
investments (381,103) 359,108 143,880
Cash and short-term investments:
Beginning of year 513,557 154,449 10,569
------------------------------------------------------
End of year $ 132,454 $ 513,557 $ 154,449
======================================================
See accompanying notes.
</TABLE>
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
December 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transamerica Occidental Life Insurance Company (the Company) is domiciled in
California. The Company is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. The Company has three wholly owned insurance subsidiaries:
Transamerica Life Insurance and Annuity Company (TALIAC), Transamerica Life
Insurance Company of Canada and Transamerica Life Insurance Company of New York.
TALIAC has one wholly owned insurance subsidiary, Transamerica Assurance
Company. During 1999, Transamerica Corporation was merged with an indirect
wholly owned subsidiary of AEGON N.V., a holding company organized under the
laws of the Netherlands.
NATURE OF BUSINESS
The Company engages in providing life insurance, pension and annuity products,
reinsurance, structured settlements and investment products which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States
and are distributed in 50 states (reinsurance is the only product distributed in
New York).
BASIS OF PRESENTATION
Certain amounts reported in the accompanying financial statements are based on
management's best estimates and judgment, subject to the minimum requirements
imposed by regulatory authorities. Actual results could differ from those
estimates.
The accompanying financial statements have been prepared in conformity with
statutory accounting practices (SAP) prescribed or permitted by the California
Department of Insurance (the California Department), which vary in some respects
from accounting principles generally accepted in the United States (GAAP). The
more significant variances from GAAP are as follows:
The accounts and operations of the Company's subsidiaries are not
consolidated but are included in investments in common stocks at the
statutory net carrying value. Changes in the subsidiaries' net carrying
values are charged or credited directly to unassigned surplus.
<PAGE>
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Bonds, where permitted, are carried at amortized cost, rather than
segregating the portfolio into held-to-maturity (reported at amortized
cost), available-for-sale (reported at fair value) and trading (reported at
fair value) classifications.
The costs of acquiring new and renewal business, such as commissions and
underwriting and policy issue costs, are expensed when incurred rather than
deferred and amortized over the terms of the related policies.
Certain assets recognized under GAAP, principally agents' debit balances
and computer software, are "non-admitted" and excluded from the
accompanying financial statements under SAP and are charged directly to
unassigned surplus.
Reserves for future policy benefits generally are calculated based on
mortality and interest assumptions that are statutorily required rather
than using estimated expected experience or actual account balances. The
policy liabilities are reported net, rather than gross, of ceded amounts.
Revenues for interest-sensitive life policies and investment-type contracts
consist of the entire premium received and benefits represent the benefits
paid and the change in policy reserves. Under GAAP, premiums received in
excess of policy charges are not recognized as revenue and benefits
represent the excess of benefits paid over the policy account value and
interest credited to the account value.
An Interest Maintenance Reserve (IMR) is provided which defers certain
realized capital gains and losses attributable to changes in the general
level of interest rates. Such deferred gains or losses are amortized into
investment income over the remaining period to maturity based on groupings
of individual securities sold in five-year bands.
An Asset Valuation Reserve (AVR) is provided which reclassifies a portion
of surplus to liabilities. The AVR is calculated according to a specified
formula as prescribed by the National Association of Insurance
Commissioners (NAIC) and is intended to stabilize the Company's surplus
against possible fluctuations in the market values of bonds, equity
securities, mortgage loans, real estate, and other invested assets. Changes
in the required AVR balance are charged or credited directly to unassigned
surplus.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Deferred federal income taxes are not provided for differences between the
financial statement amounts and tax bases of assets and liabilities.
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
A liability for reinsurance balances has been provided for unsecured policy
reserves ceded to reinsurers unauthorized by license to assume such
business. Changes to those amounts are credited or charged directly to
unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible would be established through a charge to earnings.
Other significant accounting policies are as follows:
INVESTMENTS
Investments are shown on the following bases:
Bonds - where permitted, at amortized cost; all others are carried at
values prescribed by the Securities Valuation Office of the NAIC (SVO);
premiums and discounts are amortized using the interest method. For
loan-backed bonds, the interest method including anticipated prepayments at
the date of purchase is used. Prepayment assumptions for loan-backed bonds
are estimated using broker dealer survey values and are based on the
current interest rate and economic environment. The retrospective
adjustment method is used to value all securities, except for interest-only
securities which are valued using the prospective method.
Preferred stocks - where permitted at cost, all others are carried at fair
value based on NAIC values.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Common stocks - at fair value based on NAIC market values, except for
investments in subsidiaries which are at statutory net carrying values.
Mortgage loans on real estate - at the aggregate unpaid balances.
Real estate - at depreciated cost less encumbrances, except for properties
acquired in satisfaction of debt, which are carried at the lower of fair
value or cost, less encumbrances.
Policy loans - at the aggregate unpaid principal balances.
Other investments - primarily at the lower of cost or fair value.
Derivative instruments, included in other investments in the accompanying
balance sheet, are valued in accordance with the NAIC Accounting Practices
and Procedures manual and Purposes and Procedures manual of the SVO. All
derivative instruments are used for hedging purposes and valued on a basis
consistent with the hedged item.
The Company uses interest rate swaps, caps and floors, options and certain other
derivatives as part of its overall interest rate risk management strategy for
certain life insurance and annuity products. As the Company only uses
derivatives for hedging purposes, the Company values all derivative instruments
on a consistent basis as the hedged item. Upon termination, gains and losses on
those instruments are included in the carrying values of the underlying hedged
items and are amortized over the remaining lives of the hedged items as
adjustments to investment income or benefits from the hedged items. Any
unamortized gains or losses are recognized when the underlying hedged items are
sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Interest rate caps and floors are used to limit the effects of changing interest
rates on yields of variable rate or short-term assets or liabilities. The
initial cost of any such agreements is amortized to net investment income over
the life of the agreement. Periodic payments that are receivable as a result of
the agreements are accrued as an adjustment of interest income or benefits from
the hedged item.
Gains and losses on disposal of investments are recognized on the
specific-identification basis. Changes in the statutory fair values of stocks
and those bonds carried at values prescribed by the SVO, rather than amortized
cost, are reported as unrealized gains or losses directly in unassigned surplus
and, accordingly, have no effect on net income.
Short-term investments include investments with maturities of less than one year
at date of acquisition.
SEPARATE ACCOUNTS
The Company administers segregated asset accounts for pension and other clients.
The assets of the separate accounts are not subject to liabilities arising out
of any business the Company may conduct and are reported at fair value.
Investment risks associated with fair value changes are primarily borne by the
clients. The liabilities of the separate accounts represent reserves established
to meet withdrawal and future benefit payment provisions of the contracts.
POLICY RESERVES AND CONTRACT CLAIMS
Life, annuity, and accident and health benefit reserves are calculated based
upon published tables using such interest rate assumptions and valuation methods
that will provide, in the aggregate, reserves that meet the amounts required by
the California Department. The Company waives deduction of deferred fractional
premiums upon death of the insureds and returns any portion of the final premium
beyond the date of death. Additional reserves are established where the gross
premiums on any insurance in force are less than the net premiums according to
the standard valuation set by the California Department.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY RESERVES AND CONTRACT CLAIMS (CONTINUED)
Contract claim liabilities include provisions for reported claims and claims
incurred but not reported, net of reinsurance ceded.
PREMIUM REVENUES
Premiums from life insurance policies are recognized as revenue when due, and
premiums from annuity contracts are recognized when received. Accident and
health premiums are earned pro rata over the terms of the policies.
OTHER REVENUES
Other revenues consist primarily of profit sharing on reinsurance ceded and
reserve adjustments on ceded modified coinsurance transactions.
REINSURANCE
Coinsurance premiums, commissions, expense reimbursements, and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies and the terms of the reinsurance contracts.
Gains associated with reinsurance of inforce blocks of business are included in
surplus rather than gain from operations. Premiums ceded and recoverable losses
have been reported as a reduction of premium income and benefits, respectively.
PRIOR YEAR ADJUSTMENTS
Prior year adjustments charged directly to surplus in 1999 related primarily to
expenses incurred for sales practices litigation of $7 million (after tax) and a
suspense asset adjustment of $7 million (after tax).
Prior year adjustments in 1998 relate primarily to expenses incurred for sales
practices litigation of $8 million (after-tax) and a reserve valuation
adjustment of $13 million (after-tax) on single premium immediate annuities.
Prior year adjustments in 1997 relate primarily to expenses incurred for sales
practices litigation of $15 million (after-tax) and a reserve valuation
adjustment of $30 million (after-tax) on single premium immediate annuities.
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications of 1997 and 1998 amounts have been made to conform
with the 1999 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values for bonds are based on market values prescribed by the SVO (NAIC
market values) rather than on actual or estimated market values. For bonds
without available NAIC market values, amortized costs are used as estimated fair
values. As of December 31, 1999 and 1998, the fair value of investments in bonds
includes $5,366 million and $5,215 million, respectively, of bonds that were
valued at amortized cost.
Fair values for preferred and common stocks are based on NAIC market values,
except for investment in subsidiaries which are at statutory net carrying
values.
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.
Fair values for derivative instruments are estimated using values obtained from
independent pricing services.
The carrying amounts of cash and short-term investments and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts, included in
reserves for future policy benefits and other policy liabilities, are estimated
using discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued.
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
The carrying values and fair values of financial instruments are as follows (in
thousands):
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial assets:
<S> <C> <C> <C> <C>
Bonds $ 12,820,804 $ 12,681,458 $ 12,135,178 $ 12,834,818
Preferred stocks 135,450 93,071 97,801 100,909
Common stocks 2,254,439 2,254,439 1,738,975 1,738,975
Mortgage loans on real estate 385,590 363,650 387,038 409,714
Policy loans 409,534 396,956 410,628 388,076
Floors, caps and swaptions 56,964 60,129 57,311 149,447
Cash on hand and on deposit 132,454 132,454 513,557 513,557
Accrued investment income 226,823 226,823 210,932 210,932
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial liabilities (liabilities for investment-type contracts):
Single and flexible premium
deferred annuities $ 2,074,622 $ 1,881,238 $ 2,112,347 $ 1,927,980
Single premium immediate annuities
4,035,133 4,217,004 3,924,227 4,820,607
Other deposit contracts 2,219,143 2,222,305 1,917,574 1,915,954
Off-balance sheet assets (liabilities):
Exchange derivatives designated as hedges that are in a:
Receivable position - 30,253 - 88,062
Payable position - (96,206) - (17,025)
The Company enters into various interest-rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure.
</TABLE>
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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. Interest rate swap agreements are intended
primarily for asset and liability management. 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 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.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1999, there were no unfunded
interest rate swap agreements.
Interest rate floor 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. These agreements enable
the Company to transfer, modify, or reduce its interest rate risk and generally
require up front premium payments. The costs of interest rate floor agreements
are amortized over the contractual periods and resulting amortization expenses
are included in net investment income. The 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.
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1999
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
<S> <C> <C> <C>
Fixed rate interest $ 296,133 6.46% $ 28,092
Floating rate interest 1,516,308 5.95 (90,055)
Floating rate interest based on one index and
receives floating rate interest on another
index 4,525 6.05 20
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 710,981 6.40 (4,394)
Floating rate interest based on one index and
receives floating rate interest on another
index 237,500 6.13 (260)
Interest rate floor agreements 400,000 - 3,065
Swaptions 6,500,000 6.64 25,211
Call options 31,999 - 31,853
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1998
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
Fixed rate interest $ 44,950 5.95% $ 280
Fixed rate interest 212,488 5.01 (13,525)
Floating rate interest (1,495,000) 5.40 80,717
Floating rate interest based on one index and
receives floating rate interest on another
index 15,833 5.06 110
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 1,204,456 5.42 3,781
Floating rate interest based on one index and
receives floating rate interest on another
index 37,500 4.84 (339)
Interest rate floor agreements 400,000 - 21,705
Swaptions 6,500,000 5.19 101,754
Call options 30,710 - 25,988
</TABLE>
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of temporary cash investments, fixed maturities,
derivatives, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments with high credit quality financial
institutions. Concentration of credit risk with respect to investments in fixed
maturities and mortgage loans on real
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
estate is limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1999, the Company had no significant concentration of credit risk.
3. INVESTMENTS
<TABLE>
<CAPTION>
The carrying value and fair value of investments in debt securities are
summarized as follows (in thousands):
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
U.S. Treasury securities and
obligations of U.S. government
corporations
<S> <C> <C> <C> <C>
and agencies $ 189,325 $ 11,396 $ 1,968 $ 198,753
Obligations of states and political
subdivisions 106,484 3,673 1,482 108,675
Foreign governments 50,820 353 3,328 47,845
Corporate securities 9,345,228 103,079 230,148 9,218,159
Public utilities 1,718,582 20,020 38,842 1,699,760
Mortgage and other asset- backed
securities 1,410,365 - 2,099 1,408,266
-----------------------------------------------------------------------
$ 12,820,804 $ 138,521 $ 277,867 $ 12,681,458
=======================================================================
<PAGE>
3. INVESTMENTS (CONTINUED)
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1998
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 148,427 $ 57,226 $ - $ 205,653
Obligations of states and political
subdivisions 123,255 11,752 - 135,007
Foreign governments 39,940 2,115 1,486 40,569
Corporate securities 8,430,358 476,428 22,687 8,884,099
Public utilities 2,206,740 176,863 571 2,383,032
Mortgage and other asset- backed
securities 1,186,458 - - 1,186,458
-----------------------------------------------------------------------
$ 12,135,178 $ 724,384 $ 24,744 $ 12,834,818
=======================================================================
Included in bonds is a $150 million note due from Transamerica Corporation at
December 31, 1998.
The carrying value and fair value of bonds at December 31, 1999, by contractual
maturity, are as follows (in thousands):
CARRYING FAIR
VALUE VALUE
------------------------------------
Due in one year or less $ 137,778 $ 138,280
Due after one year through five years 2,021,208 2,019,633
Due after five years through ten years 2,769,210 2,708,056
Due after ten years 6,482,243 6,407,223
Mortgage and other asset-backed securities 1,410,365 1,408,266
------------------------------------
$ 12,820,804 $ 12,681,458
====================================
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
<PAGE>
3. INVESTMENTS (CONTINUED)
The costs and fair values of preferred stocks and common stocks (unaffiliated
companies) are as follows (in thousands):
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
Preferred stocks $ 77,231 $ 6,399 $ 41,182 $ 42,448
Common stocks 662,215 640,014 32,190 1,270,039
DECEMBER 31, 1998
Preferred stocks $ 40,941 $ 3,506 $ 18 $ 44,429
Common stocks 299,048 483,421 8,979 773,490
The components of investment in real estate are as follows (in thousands):
ACCUMULATED CARRYING
COST DEPRECIATION VALUE
------------------------------------------------------
DECEMBER 31, 1999
Properties occupied by the
Company $ 207,709 $ 111,331 $ 96,378
Other 7,450 2,633 4,817
------------------------------------------------------
$ 215,159 $ 113,964 $ 101,195
======================================================
DECEMBER 31, 1998
Properties occupied by the
Company $ 202,933 $ 105,330 $ 97,603
Other 8,514 3,369 5,145
------------------------------------------------------
$ 211,447 $ 108,699 $ 102,748
======================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
The maximum and minimum lending rates for mortgage loans during 1999 were 8.48%
and 7.13%, respectively. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of any purchase money or insured or
guaranteed mortgages, was 80%. Fire insurance is carried in every case at least
equal to the excess of the loan over the maximum loan which would be permitted
by law on the land without the buildings.
<TABLE>
<CAPTION>
Net investment income (expense) by major category of investments is summarized
as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Bonds $ 989,340 $ 950,923 $ 934,229
Preferred stocks 5,078 1,312 790
Common stocks 53,192 53,000 43,938
Mortgage loans on real estate 28,314 28,713 25,031
Real estate 28,008 27,288 29,447
Policy loans 27,086 24,780 26,061
Cash and short-term investments 10,526 10,939 4,094
Other investments 16,343 17,198 (533)
-----------------------------------------------------
1,157,887 1,114,153 1,063,057
Investment expense (32,845) (35,610) (35,003)
-----------------------------------------------------
$ 1,125,042 $ 1,078,543 $ 1,028,054
=====================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
The realized gains and losses and other information related to investments are
summarized as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Net gains (losses) on disposition of investments in:
<S> <C> <C> <C>
Bonds $ 2,993 $ 16,522 $ (27,875)
Preferred stocks (6,085) (2,405) (579)
Common stocks 41,011 164,984 9,792
Other (90,400) (7,021) (1,308)
-----------------------------------------------------
(52,481) 172,080 (19,970)
Related income (taxes) recovery 71,941 (84,425) (7,480)
Transfer to the IMR (1,945) (11,584) 18,118
-----------------------------------------------------
Net realized capital gains (losses) $ 17,515 $ 76,071 $ (9,332)
=====================================================
The other loss of $90.4 million in 1999 primarily results from the net pretax
loss incurred on an ineffective equity collar hedge (see Note 12).
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Proceeds from disposition of investment in bonds
$ 2,993,985 $ 3,938,693 $ 3,525,839
Gross gains on disposition of investment
in bonds 46,135 44,290 24,157
Gross losses on disposition of investment
in bonds (43,142) (27,768) (52,032)
Change in net unrealized gains (losses):
Bonds (5,756) (871) -
Preferred stocks 2,271 (2,741) 518
Common stocks 125,177 257,582 242,773
Real estate - - 3,727
Other (2,272) 7,570 (189)
------------------------------------------------------
$ 119,420 $ 261,540 $ 246,829
======================================================
</TABLE>
<PAGE>
3. INVESTMENTS (CONTINUED)
Change in net unrealized gains on common stocks in 1999, 1998 and 1997, includes
$(34) million, $156 million and $107 million, respectively, related to the
increase (decrease) in TALIAC's statutory capital and surplus for those years.
4. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies, including affiliated companies. Risks are reinsured with other
companies to permit the recovery of a portion of the direct losses. These
reinsured risks are treated as though, to the extent of the reinsurance, they
are risks for which the Company is not liable.
Policy liabilities and accruals are reported in the accompanying financial
statements net of reinsurance ceded. The Company remains liable to the extent
the reinsuring companies do not meet their obligations under these reinsurance
treaties.
<TABLE>
<CAPTION>
The following summarizes the effect of reinsurance transactions (in thousands):
CEDED/RETROCEDED TO ASSUMED FROM
-------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1999:
<S> <C> <C> <C> <C> <C> <C>
Premium revenue $ 1,409,419 $ 112,947 $ 1,965,697 $ 157,197 $ 1,880,044 $ 1,368,016
==============================================================================================
At December 31, 1999:
Life insurance in force $ 547,304,907 $ 4,881,384 $ 365,336,549 $ 17,212,668 $ 465,086 $194,764,728
==============================================================================================
Reserves for future policy
benefits $ 14,241,446 $ 4,124,327 $ 3,056,908 $ 233,126 $ 2,401,859 $ 9,695,196
Policy and contract claims
payable 127,030 40,341 137,047 1,824 345,323 296,789
----------------------------------------------------------------------------------------------
$ 14,368,476 $ 4,164,668 $ 3,193,955 $ 234,950 $ 2,747,182 $ 9,991,985
==============================================================================================
<PAGE>
4. REINSURANCE (CONTINUED)
CEDED/RETROCEDED TO ASSUMED FROM
--------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1998:
Premium revenue $ 1,401,733 $ 298,339 $ 2,193,006 $ 198,460 $ 2,499,677 $ 1,608,525
==============================================================================================
At December 31, 1998:
Life insurance in force $ 190,331,317 $ 950,789 $ 307,374,066 $ 25,093,946 $ 282,821,689 $ 189,922,097
==============================================================================================
Reserves for future policy
benefits $ 14,778,562 $ 4,978,700 $ 2,931,865 $ 136,208 $ 2,424,077 $ 9,428,282
Policy and contract claims
payable 121,330 45,187 316,533 11,018 385,519 156,147
----------------------------------------------------------------------------------------------
$ 14,899,892 $ 5,023,887 $ 3,248,398 $ 147,226 $ 2,809,596 $ 9,584,429
==============================================================================================
Year ended
December 31, 1997:
Premium reserve $ 1,434,511 $ 245,606 $ 1,296,529 $ 75,853 $ 1,747,516 $ 1,715,745
==============================================================================================
At December 31, 1997:
Life insurance in force $ 175,258,666 $ - $ 272,918,826 $ 26,199,512 $ 223,688,654 $ 152,228,006
==============================================================================================
Reserves for future policy
benefits $ 15,117,147 $ 5,457,334 $ 2,731,647 $ 15,306 $ 2,922,166 $ 9,865,638
Policy and contract claims
payable 94,040 42,804 197,351 20,854 357,125 231,864
----------------------------------------------------------------------------------------------
$ 15,211,187 $ 5,500,138 $ 2,928,998 $ 36,160 $ 3,279,291 $ 10,097,502
==============================================================================================
<PAGE>
4. REINSURANCE (CONTINUED)
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
-----------------------------------------------------------------------
Year ended December 31, 1999:
Benefits paid or provided $ 1,632,298 $ 1,499,809 $ 1,086,642 $ 1,219,131
=======================================================================
Year ended December 31, 1998:
Benefits paid or provided $ 1,576,300 $ 1,147,899 $ 1,020,085 $ 1,448,486
=======================================================================
Year ended December 31, 1997:
Benefits paid or provided $ 1,631,249 $ 955,287 $ 887,538 $ 1,563,500
=======================================================================
</TABLE>
5. INCOME TAXES
The Company's taxable income or loss is included in the consolidated return of
Transamerica Corporation for the period ended July 21, 1999. The method of
allocation between the companies for the period ended July 21, 1999, is subject
to written agreement approved by the Board of Directors. Tax payments are made
to, or refunds received from, Transamerica Corporation in amounts which would
result from filing separate tax returns with federal taxing authorities, except
that tax benefits attributable to operating losses and other carryovers are
recognized currently since utilization of these benefits is assured by
Transamerica Corporation. The provision does not purport to represent a
proportionate share of the consolidated tax.
For the period beginning July 22, 1999, the Company will join in a consolidated
tax return with certain life affiliates: TALIAC, Transamerica Assurance Company
and Transamerica Life Insurance Company of New York. The method of allocation
between the companies for the period beginning July 22, 1999, will be subject to
written agreement to be approved by the Board of Directors. It is anticipated
that this agreement will require that tax payments are made to, or refunds are
received from, TOLIC, in amounts which would results from filing separate tax
returns with federal taxing authorities.
<PAGE>
5. INCOME TAXES (CONTINUED)
Amounts due from Transamerica Corporation for federal income taxes are $160
million at December 31, 1999. Amounts due to Transamerica Corporation for
federal income taxes were $28.5 million at December 31, 1998, and are included
in accounts payable and other liabilities in the accompanying balance sheet.
Following is a reconciliation of federal income taxes computed at the statutory
rate with the income tax provision, excluding income taxes related to net
realized gains on investment transactions (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 61,196 $ 18,901 $ 57,511
Difference between statutory and tax reserves
(1,153) (3,463) 10,045
Deferred acquisition costs capitalized,
net of amortization 13,326 4,677 10,652
Reinsurance adjustments (14,442) (7,525) 12,900
Difference in statutory and tax bases
of investments (2,399) (10,990) (4,149)
Adjustment to prior year tax provision 24,640 (13,055) 4,689
Tax credits (16,000) (17,698) (11,127)
Nontaxable affiliate dividends (17,500) (17,500) (14,000)
Other (17,338) (23,755) (8,007)
------------------------------------------------------
Provision (benefit) for income taxes $ 30,330 $ (70,408) $ 58,514
======================================================
</TABLE>
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 would become subject to tax
when it exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1999, was $118 million.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $41.3
million. No income taxes have been provided on the policyholders' surplus
account since the conditions that would cause such taxes are remote.
<PAGE>
6. INVESTMENTS IN SUBSIDIARIES
The Company's investment in common stocks of its wholly owned subsidiaries with
carrying values, based on the statutory capital and surplus of the subsidiaries,
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING VALUE
COST
------------------------------------
At December 31, 1999:
<S> <C> <C>
TALIAC $ 238,418 $ 797,109
Other 206,041 187,291
------------------------------------
$ 444,459 $ 984,400
====================================
At December 31, 1998:
TALIAC $ 237,448 $ 830,829
Others 179,891 134,656
------------------------------------
$ 417,339 $ 965,485
====================================
</TABLE>
The Company received a $50 million dividend in 1999 and 1998 from its wholly
owned subsidiary, TALIAC.
The Company's investment in preferred stocks of subsidiaries is substantially
all represented by an investment in Transamerica Life Insurance Company of
Canada.
Certain financial information with respect to TALIAC, the Company's principal
subsidiary, is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------------------
<S> <C> <C>
Cash and investments $ 14,046,255 $ 13,582,175
Other assets 6,339,057 4,783,063
---------------------------------------
Total assets 20,385,312 18,365,238
Aggregate reserves 9,221,606 8,084,356
Other liabilities 10,366,597 9,450,053
---------------------------------------
Total liabilities 19,588,203 17,534,409
---------------------------------------
Total capital and surplus $ 797,109 $ 830,829
=======================================
</TABLE>
<PAGE>
7. DEFERRED AND UNCOLLECTED PREMIUMS
<TABLE>
<CAPTION>
Components of deferred and uncollected premiums are as follows:
GROSS LOADING NET
------------------------------------------------------
DECEMBER 31, 1999
Life and annuity:
<S> <C> <C> <C>
Ordinary first-year business $ 8,630 $ - $ 8,630
Ordinary renewal business 183,107 36,000 147,107
Group life direct business 2,095 - 2,095
------------------------------------------------------
193,832 36,000 157,832
Accident and health 69,890 - 69,890
------------------------------------------------------
$ 263,722 $ 36,000 $ 227,722
======================================================
DECEMBER 31, 1998
Life and annuity:
Ordinary first-year business $ (828,090) $ 14,537 $ (842,627)
Ordinary renewal business 9,900 8,929 971
Group life direct business 5,637 - 5,637
------------------------------------------------------
(812,553) 23,466 (836,019)
Accident and health 28,068 - 28,068
------------------------------------------------------
$ (784,485) $ 23,466 $ (807,951)
======================================================
</TABLE>
The gross deferred and uncollected premiums balance at December 31, 1999, of
$263,722,000 is composed of $431,756,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $168,034,000.
The gross deferred and uncollected premiums balance at December 31, 1998, of
$(784,485,000) is composed of $379,199,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $(1,163,684,000).
<PAGE>
8. ANNUITY RESERVES AND DEPOSIT LIABILITIES
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
----------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
----------------------------------------------------------------
Subject to discretionary withdrawal - with adjustment:
<S> <C> <C> <C>
With market value adjustment $ 9,134 -% $ 2,955,445 21%
At book value less surrender charge 435,717 3 565,977 4
At market value 7,385,279 53 2,319,944 16
----------------------------------------------------------------
7,830,130 56 5,841,366 41
Subject to discretionary withdrawal -
without adjustment 1,748,102 13 1,839,270 13
Not subject to discretionary withdrawal
provision 4,417,004 31 6,710,422 46
----------------- ------------------
---------------- ----------------
Total annuity reserves and deposit 13,995,236 100% 14,391,058 100%
liabilities
================ ================
Less reinsurance (5,820,180) (6,736,704)
-----------------
------------------
Net annuity reserves and deposit liabilities $ 8,175,056* $ 7,654,354*
================= ==================
</TABLE>
* Includes $3,364 million and $2,622 million of annuity reserves and deposit
liabilities reported in the separate account liability at December 31, 1999
and 1998, respectively. Funding agreement liabilities that are a part of the
separate account liabilities are excluded from the above amounts.
Included in other liabilities is $2,228 million and $1,927 million at December
31, 1999 and 1998, respectively, held pursuant to funding agreements. Funding
agreements are obligations that contain no mortality or morbidity risks.
<PAGE>
9. CAPITAL AND SURPLUS
The Company is subject to the requirements of the NAIC approved Risk Based
Capital (RBC) rules and at December 31, 1999 and 1998, the Company met the RBC
requirement.
The amount of dividends which can be paid by the Company without prior approval
of the California Department is subject to restrictions related to statutory
surplus and gains from operations. The Company could pay $184 million in
dividends in 2000 without prior approval.
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees are covered by noncontributory defined benefit plans
sponsored by the Company and the Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates in which the Company also participates.
Pension benefits are based on the employee's compensation during the highest
paid 60 consecutive months during the 120 months before retirement. The general
policy is to fund current service costs currently and prior service costs over
periods ranging from 10 to 30 years. Assets of those plans are invested
principally in publicly traded stocks and bonds.
The Company's total pension costs were $0.8 million, $0.6 million and $0 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. The Company accounts for the costs of such
benefit programs under the accrual method and amortizes its transition
obligation for retirees and fully eligible or vested employees over 20 years.
Postretirement benefit costs charged to income was $3 million for each of the
years ended December 31, 1999, 1998 and 1997.
11. ASSETS ON DEPOSIT
At December 31, 1999 and 1998, $4 million and $4 million of the Company's assets
were on deposit with public officials in compliance with regulatory
requirements.
<PAGE>
12. RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and its
affiliated companies in the normal course of operations. These transactions
include the assumption and cession of reinsurance and the performance of certain
administrative and support services for affiliated companies. Such
reimbursements are recorded as a reduction of operating expenses.
Transactions with Transamerica Corporation and its affiliates also include
transactions related to pension plans, investments in a money market fund
managed by an affiliated company, and rental of computer services. Pension funds
administered by a subsidiary for affiliated companies amounted to $1.8 billion,
$1.6 billion and $1.3 billion at December 31, 1999, 1998 and 1997, respectively.
The investment in an affiliated money market fund was not material.
The Company had amounts due from affiliates of $41 million as of December 31,
1999, and $16 million as of December 31, 1998.
In March 1999, the Company entered into an equity collar (which expired December
17, 1999), with an unrelated party to hedge the price fluctuations of their
unaffiliated equity securities portfolio. In addition, Transamerica Corporation
agreed to protect the Company from any ineffectiveness in the hedge that would
expose the Company to loss net of tax benefit. As a result of the
ineffectiveness of the collar with the unrelated party and the payment that the
Company was required to make upon settlement, Transamerica Corporation made a
payment of $172 million to the Company in December 1999.
<PAGE>
13. LEASES
Rental expense for equipment and properties occupied by the Company was $17
million in 1999, $14 million in 1998, and $19 million in 1997. 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, 1999 (in thousands):
Year ending December 31:
2000 $ 12,203
2001 9,998
2002 7,745
2003 6,728
2004 6,624
Later years 41,701
------------------
$ 84,999
==================
14. LITIGATION
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiff's counsel entered into a settlement which was approved on
June 26, 1997. The settlement required prompt notification to affected
policyholders. Administrative and policy benefit costs associated with the
settlement of $7 million, $8 million and $15 million after-tax have been
incurred in 1999, 1998 and 1997, respectively, and reflected in these statements
as prior period adjustments. Additional costs related to the settlement 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.
15. SEPARATE ACCOUNTS
Separate accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist primarily of fixed maturities
and equity securities and are carried at estimated fair value. The Company
provides a minimum guaranteed return to policyholders of certain separate
accounts. Certain other separate accounts do not have any minimum guarantees and
the investment risks associated with market value changes are borne entirely by
the policyholder.
<PAGE>
15. SEPARATE ACCOUNTS (CONTINUED)
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999, is as follows (in thousands):
<TABLE>
<CAPTION>
SEPARATE ACCOUNTS WITH GUARANTEES
-------------------------------------------------
NONINDEXED NONINDEXED
GUARANTEE GUARANTEE NONGUARANTEED
LESS THAN OR GREATER THAN SEPARATE
INDEXED EQUAL TO 4% 4% ACCOUNTS TOTAL
--------------- ---------------- ---------------- ----------------- ------------------
Premiums, deposits and other
<S> <C> <C> <C> <C> <C>
considerations $ - $ - $ - $ 254,076 $ 254,076
=============== ================ ================ ================= ==================
Reserves for separate accounts with assets at:
Fair value $ - $ - $ - $ 3,364,426 $ 3,364,426
Amortized cost - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total $ - $ - $ - $ 4,068,126 $ 4,068,126
=============== ================ ================ ================= ==================
Reserves for separate accounts by withdrawal characteristics:
Subject to discretionary withdrawal (with adjustment):
With market value
adjustment $ - $ - $ - $ - $ -
At book value less
current surrender
charge of 5% or more
- - - - -
At market value 3,364,426 3,364,426
At book value without
adjustment and with
current surrender
charges less than 5% - - - - -
--------------- ---------------- ---------------- ----------------- ------------------
Subtotal - - - 3,364,426 3,364,426
Not subject to
discretionary withdrawal - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total separate account $ - $ - $ - $ 4,068,126 $ 4,068,126
liabilities
=============== ================ ================ ================= ==================
</TABLE>
<PAGE>
15. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from the separate accounts is
presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Transfer as reported in the summary of operations of the separate accounts
statement:
<S> <C> <C> <C>
Transfers to separate accounts $ 255,210 $ 352,298 $ 454,749
Transfers from separate accounts 217,729 173,152 240,381
------------------------------------------------------
Net transfers to separate accounts 37,481 179,146 214,368
Reconciling adjustments:
Deposits (withdrawals) from separate
accounts 13,091 21,097 (61,370)
------------------------------------------------------
Transfers as reported in the statements of income
$ 50,572 $ 200,243 $ 152,998
======================================================
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS
The Company has the following direct premiums written through managing general
agents (in thousands):
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
National Benefit Resources No Specific and * $ 38
Aggregate
Excess of Loss
Insurance
R. E. Moulton Insurance Agency, Inc. No Specific and * 6,698
Aggregate
Excess of Loss
Insurance
<PAGE>
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS (CONTINUED)
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
Intermediary Insurance Services, Inc. No Specific and * 2,969
Aggregate
Excess of Loss
Insurance
Excess Reinsurance Underwriters No Specific and * 12,536
Agency, Inc. Aggregate
Excess of Loss
Insurance
Risk Assessment Strategies No Specific and * 576
Aggregate
Excess of Loss
Insurance
North American Insurance Management Yes Occupational * 1,453
Accident -
Excess of Loss
Insurance
Health Reinsurance Management Partnership No Provider Excess * 25,173
Self Funding Systems No Specific and * 119
Aggregate
Excess of Loss
Insurance
*Premium collection, underwriting and commission/claim payments authority
granted.
</TABLE>
<PAGE>
17. NAIC CODIFICATION
In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the state of California must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Department. The state
of California has stated affirmatively that it will adopt Codification effective
January 1, 2001. Management believes that the impact of Codification will not be
material to the Company's statutory-basis financial statements
18. YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
<PAGE>
Statutory Basis
Financial Statement Schedules
<PAGE>
39
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Summary of Investments - Other Than Investments in Related Parties - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE I
AMOUNT AT
WHICH SHOWN
MARKET IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------
FIXED MATURITIES
Bonds:
United States government and government
<S> <C> <C> <C>
agencies and authorities $ 189,325 $ 198,753 $ 189,325
States, municipalities and political
subdivisions 106,484 108,675 106,484
Foreign governments 50,820 47,845 50,820
Public utilities 1,718,582 1,699,760 1,718,582
All other corporate bonds 9,345,228 9,218,159 9,345,228
Mortgage and other asset-backed securities
1,410,365 1,408,266 1,410,365
Redeemable preferred stock 66,841 30,448 66,371
-----------------------------------------------------------
Total fixed maturities 12,887,645 12,711,906 12,887,175
EQUITY SECURITIES
Common stocks:
Affiliated entities 444,459 984,400 984,400
Banks, trust and insurance 36,481 38,892 38,892
Industrial, miscellaneous and all other 625,734 1,231,147 1,231,147
Nonredeemable preferred stock 69,079 62,623 69,079
-----------------------------------------------------------
Total equity securities 1,175,753 2,317,062 2,323,518
Mortgage loans on real estate 385,590 363,650 385,590
Real estate 101,195 50,000 101,195
Policy loans 409,534 396,956 409,534
Other long-term investments 218,997 155,562 218,997
Cash and short-term investments 132,454 132,454 132,454
-----------------------------------------------------------
Total investments $ 15,311,168 $ 16,127,590 $ 16,458,463
===========================================================
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual discounts.
<PAGE>
40
Transamerica Occidental Life Insurance Company
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE III
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Individual life $ 4,988,602 $ - $ 240,452
Individual health 42,065 28,046 33,481
Group life and health 31,586 2,616 32,963
Annuity 4,602,281 - (10,107)
-----------------------------------------------------------
9,664,534 30,662 296,789
Year ended December 31, 1998
Individual life 4,595,349 - 121,089
Individual health 26,439 41,669 (9,445)
Group life and health 12,953 3,675 47,840
Annuity 4,748,197 - (3,337)
-----------------------------------------------------------
9,382,938 45,344 156,147
Year ended December 31, 1997
Individual life 4,207,937 - 155,424
Individual health 27,254 31,297 2,606
Group life and health 16,964 2,124 51,052
Annuity 5,580,062 - 22,781
-----------------------------------------------------------
$ 9,832,217 $ 33,421 $ 231,863
===========================================================
</TABLE>
<PAGE>
41
<TABLE>
<CAPTION>
BENEFITS, CLAIMS
LOSSES AND
NET SETTLEMENT EXPENSES OTHER
PREMIUM INVESTMENT OPERATING PREMIUMS
REVENUE INCOME* EXPENSES* WRITTEN
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 891,749 $ 405,705 $ 909,143 $ 703,605 $ 1,178,607
(10,184) 2,770 (33,811) 35,665 80,328
158,775 10,967 134,414 124,689 65,217
327,676 705,600 1,283,024 736,327 85,267
- --------------------------------------------------------------------------------------------------
1,368,016 1,125,042 2,292,770 1,600,286 1,409,419
905,725 400,313 1,242,592 492,976 1,087,850
51,827 4,483 3,265 100,839 63,828
195,431 4,003 160,581 89,231 50,433
455,542 669,744 312,946 2,218,202 199,622
- --------------------------------------------------------------------------------------------------
1,608,525 1,078,543 1,719,384 2,901,248 1,401,733
761,853 370,027 933,474 383,255 1,042,734
23,988 6,216 19,252 49,460 56,861
236,688 5,074 200,224 123,772 111,314
693,216 646,737 305,491 1,702,770 223,602
- --------------------------------------------------------------------------------------------------
$ 1,715,745 $ 1,028,054 $ 1,458,441 $ 2,259,257 $ 1,434,511
==================================================================================================
</TABLE>
*Allocations of net investment income and other operating expenses are based on
a number of assumptions of estimates, and the results would change if
different methods were applied.
<PAGE>
42
<TABLE>
<CAPTION>
Transamerica Occidental Life Insurance Company
Reinsurance - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE IV
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1999
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 547,304,907 $ 370,217,933 $ 17,677,754 $ 194,764,728 9%
Premiums:
Individual life $ 1,178,607 $ 1,220,329 $ 933,471 $ 891,749 105%
Individual health 80,328 97,296 6,784 (10,184) -%
Group life and health 65,217 247,870 341,428 158,775 215%
Annuity 85,267 513,149 755,558 327,676 231%
-----------------------------------------------------------------------------------------
$ 1,409,419 $ 2,078,644 $ 2,037,241 $ 1,368,016 149%
=========================================================================================
Year ended December 31,
1998
Life insurance in force $ 190,331,317 $ 308,297,855 $ 307,915,635 $ 189,922,097 162%
Premiums:
Individual life $ 1,087,850 $ 958,929 $ 776,803 $ 905,725 86%
Individual health 63,828 134,991 122,991 51,827 237%
Group life and health 50,433 268,973 413,971 195,431 212%
Annuity 199,622 1,128,452 1,384,372 455,542 304%
-----------------------------------------------------------------------------------------
$ 1,401,733 $ 2,491,345 $ 2,698,137 $ 1,608,525 168%
=========================================================================================
Year ended December 31,
1997
Life insurance in force $ 175,258,666 $ 272,918,826 $ 249,888,166 $ 152,228,006 164%
Premiums:
Individual life $ 1,042,734 $ 967,543 $ 686,662 $ 761,853 90%
Individual health 56,861 47,651 14,778 23,988 61%
Group life and health 111,314 274,270 399,644 236,688 169%
Annuity 223,602 252,671 722,285 693,216 104%
-----------------------------------------------------------------------------------------
$ 1,434,511 $ 1,542,135 $ 1,823,369 $ 1,715,745 106%
=========================================================================================
</TABLE>
<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, 1999
Consolidated Statement of Income, Three years ended December 31, 1999
Consolidated Statement of Shareholder's Equity, Three years ended
December 31, 1999
Consolidated Statement of Cash Flows, Three years ended
December 31, 1999
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) Form of Investment Advisory Agreement between Transamerica Occidental Life
Insurance Company and Transamerica Occidental's Separate Account Fund B
dated July 21, 1999, and form of Investment Services Agreement between
Transamerica Occidental Life Insurance Company and Transamerica Investment
Services, Inc., dated July 21, 1999.*****
4(c) 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.
16(xxvi) 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).
****Exhibits 13 and 27 are incorporated by reference to the
like-numbered exhibits to Post Effective Amendment No. 46 to
this Registration Statement on Form N-3 (April 29, 1999).
*****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 his own account
during last two fiscal years or as
Position and director, officer, employee, partner or trustee
Name and Principal Position and Offices Offices with
Business Address with the Company Registrant
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Patrick S. Baird**** Director None Director of TOLIC since
1999. Director, Senior Vice President
and Chief Operating Officer of PFL
Life Insurance Company since 1996.
Executive Vice President and Chief
Operating Officer of AEGON USA since
1995. Chief Financial Officer of AEGON
USA from 1992 to 1995. President and
Chief Tax Officer of AEGON USA from
1984 to 1995.
Brenda K. Clancy**** Director None Director of TOLIC since 1999. Senior
Vice President, Corporate, of PFL Life
Insurance Company since 1991.
Treasurer and Chief Financial Officer
of PFL Life Insurance Company since
1996.
James W. Dederer Director, Executive None None
Vice President, General
Counsel and Corporate
Secretary
George A. Foegele Director and None ***President and CEO -
Senior Vice President Canadian Operations
Doulgs C. Kolsrud**** Director None Director of TOLIC since 1999. Senior
Vice President, Corporate, of PFL Life
Insurance Company since 1991.
Treasurer and Chief Financial Officer
of PFL Life Insurance Company since
1996.
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
Nooruddin S. Veerjee Director and President, None President of Transamerica
Insurance Products Division Life Insurance and
Annuity Company
Craig D. Vermie**** Director None Director of TOLIC since 1999.
Director, Vice President and General
Counsel, Corporate, of PFL Life
Insurance Company since 1990.
- --------------------
</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
**** 4333 Edgewood Road, NE, Cedar Rapids, Iowa 52499
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, a subsidiary of AEGON N.V.
The following chart indicates the persons controlled by or under common control
with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
(Common Parent Corporation)
Inter-America Corporation
Transamerica Corporation (Oregon)
Transamerica LP Holdings Corporation
Transamerica Finance Corporation
Transamerica HomeFirst, Inc. (Common)
Transamerica HomeFirst, Inc. (Preferred)
TREIC Enterprises, Inc.
Transamerica CBO I, Inc.
Transamerica International Holdings, Inc.
Transamerica Financial Products, Inc.
Pyramid Insurance Company Ltd. (Common)
Pyramid Insurance Company Ltd. (Preferred)
RTI Holdings, Inc. (dormant)
Transamerica Business Technologies Corporation
ARC Reinsurance Corporation
Transamerica Management, Inc.
Transamerica Intellitech, Inc.
Realist, Inc.
Transamerica Home Loan
Transamerica Lending Company
Transamerica Insurance Corporation of California
Arbor Life Insurance Company
Plaza Insurance Sales, Inc.
Transamerica International Insurance Services, Inc.
Transamerica Annuity Service Corporation
Transamerica Advisors, Inc.
Transamerica Securities Sales Corporation
Transamerica Products, Inc.
Transamerica Products I, Inc.
Transamerica Products II, Inc.
NEF Investment Company
Greenwich Potomac Holding Corporation
Transamerica Products IV, Inc.
Transamerica Service Company
Transamerica South Park Resources, Inc.
Transamerica Financial Resources Insurance Agency
Of Alabama, Inc.
Transamerica Financial Resources Insurance Agency
Of Massachusetts, Inc.
USA Administration Services, Inc.
Financial Resources Insurance Agency of Texas
Transamerica Financial Resources, Inc.
Gemini Investments, Inc.
Transamerica Senior Properties, Inc.
Transamerica Senior Living, Inc.
Transamerica Investment Services, Inc.
TA Leasing Holding Co., Inc.
Transamerica Leasing Inc.
Intermodal Equipment Inc.
Transamerica Distribution Services Inc.
Transamerica Transport Inc.
Transamerica Leasing Holdings Inc.
Transamerica Trailer Holdings I, Inc.
Transamerica Trailer Holdings II, Inc.
Transamerica Trailer Holdings III, Inc.
Trans Ocean Ltd.
Trans Ocean Container Finance Corp.
Trans Ocean Container Corp.
Trans Ocean Tank Services Corp.
SpaceWise, Inc.
Trans Ocean Regional Corporate Holdings
Trans Ocean Management Corp.
Greybox Logistics Services, Inc.
Transamerica Commercial Finance Corporation, I
Pacific Agency, Inc. (Indiana)
Transamerica Consumer Mortgage Receivables Corporation
Transamerica Mortgage Company
Transamerica Consumer Finance Holding Company
Metropolitan Mortgage Company
Easy Yes Mortgage, Inc. (Florida) (dormant)
Easy Yes Mortgage, Inc. (Georgia) (dormant)
First Florida Appraisal Services, Inc. (dormant)
First Georgia Appraisal Services, Inc. (dormant)
Freedom Tax Services, Inc. (dormant)
J.J. & W. Advertising, Inc. (dormant)
J.J. & W. Realty Services, Inc. (dormant)
Liberty Mortgage Company of Fort Myers, Inc. (dormant)
Metropolis Mortgage Company (dormant)
Perfect Mortgage Company (dormant)
TCF Asset Management Corporation
BWAC Twelve, Inc.
Transamerica Commercial Finance Corporation
BWAC International Corporation
BWAC Credit Corporation
BWAC Seventeen, Inc.
BWAC Twenty-One, Inc.
Transamerica GmbH, Inc.
Transamerica Insurance Finance Corporation Transamerica Insurance Finance
Corporation of California Transamerica Business Credit Corporation (Common)
Transamerica Business Credit Corporation (Preferred) Transamerica Insurance
Finance Company (Europe) Transamerica Inventory Finance Corporation Transamerica
Joint Ventures, Inc.
The Plain Company
Direct Capital Equity Investments, Inc. Transamerica Distribution Finance
Corporation Transamerica Retail Financial Services Corporation Transamerica
Vendor Financial Services Corporation TIFCO Lending Corporation TA Air I,
Corporation TA Air II, Corporation TA Air III, Corporation TA Air IV,
Corporation TBC I, Inc.
TBC II, Inc.
TBC III, Inc.
Transamerica Accounts Holding Corporation
TBC IV, Inc.
TBC V, Inc.
TA Air East, Corporation
TBC Tax I, Inc.
TBC Tax II, Inc.
TBC Tax III, Inc. TBC Tax IV, Inc. TBC Tax V, Inc. TBC Tax VI, Inc. TBC Tax VII,
Inc. TBC Tax VIII, Inc. TBC Tax IX, Inc.
Bay Capital Corporation
Gulf Capital Corporation
Coast Funding Corporation
Inventory Funding Trust (Delaware Trust, 1997 Form 8832)
Transamerica Bank N.A.
TBCC Funding Trust I (Delaware Trust, 1998 Form 8832) TBCC Funding Trust II
(Delaware Trust, 1998 Form 8832) TA Air V, Corporation TA Air VI, Corporation TA
Air VII, Corporation TA Air VIII, Corporation Transamerica Equipment Financial
Services Corporation
Transamerica Mezzanine Financing, Inc.
Transamerica Small Business Services, Inc.
Transamerica Distribution Finance - Overseas, Inc.
TA Marine I, Inc.
TA Marine II, Inc. TA Air IX, Corporation TA Air X, Corporation TBC VI, Inc.
Emergent Business Capital Holdings, Inc. TA Air XI Corporation Transamerica
Business Advisory Group, Inc. TA Air XII Corporation TA Air XIII Corporation TA
Air XIV Corporation TA Air XV Corporation Transamerica Realty Services, Inc.
Pyramid Investment Corporation The Gilwell Company Bankers Mortgage Company of
California Transamerica Minerals Company Transamerica Oakmont Corporation
Ventana Inn, Inc.
Transamerica Affordable Housing, Inc.
Transamerica Occidental Life Insurance Company
Transamerica Life Insurance & Annuity Company
Transamerica Assurance Company
Transamerica Life Insurance Company of New York
Transamerica Pacific Insurance Company, Ltd.
Transamerica International Re (Bermuda) Ltd.
Transamerica International Re (Bermuda) Ltd.
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
VERENGING AEGON - Netherlands Membership Association
AEGON N.V. - Netherlands corporation (51.16%)
Transamerica Corporation and subsidiaries (100%) (DE) AEGON Nederland N.V. -
Netherlands corporation (100%) AEGON NEVAK HOLDING B.V. - Netherlands
corporation (100%) GRONINGER FINANCIERINGEN B.V. - Netherlands corporation
(100%) AEGON INTERNATIONAL N.V. - Netherlands corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)(DE)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%) CORPA
Reinsurance Company (NY) (100%) AEGON Management
Company (IN) (100%) RCC North America Inc. (DE)
(100%)
AEGON USA, Inc. - holding co. (IA) (100%)
AEGON Funding Corp. (DE) (100%)
First AUSA Life Insurance Company - insurance
holding co. (MD) (100%) AUSA Life Insurance Company, Inc. -
insurance (NY) (82.33%) Life Investors Insurance Company of America
- insurance (IA) (100%)
Bankers United Life Assurance Company - insurance (IA) (100%)
Great American Insurance Agency, Inc. (IA) (100%)
Life Investors Alliance, LLC (DE) (100%)
PFL Life Insurance Company - insurance (IA) (100%) AEGON Financial
Services Group, Inc. (MN) (100%) AEGON Assignment Corporation of
Kentucky (KY) (100%) AEGON Assignment Corporation (IL) (100%)
Southwest Equity Life Insurance Company - insurance (AZ) (100%
Voting Common) Iowa Fidelity Life Insurance Company - insurance
(AZ) (100% Voting Common) Western Reserve Life Assurance Co. of
Ohio - insurance (OH) (100%) WRL Investment Management, Inc. -
investment adviser (FL) (100%) WRL Investment Services, Inc. -
transfer agent (FL)(100%) WRL Series Fund, Inc. - mutual fund (MD)
ISI Insurance Agency, Inc. and subsidiaries (CA) (100%) AEGON
Equity Group, Inc. (FL) (100%) Monumental General Casualty Company
- insurance (MD) (100%) United Financial Services, Inc. - general
agency (MD) (100%) Bankers Financial Life Insurance Company -
insurance (AZ) The Whitestone Corporation - insurance agency (MD)
(100%) Cadet Holding Corp. - holding company (IA) (100%) Monumental
General Life Insurance Company of Puerto Rico (PR) (51%)
AUSA Holding Company - holding company (MD)(100%)
Monumental General Insurance Group, Inc.-holding company(MD)(100%)
Monumental General Administrators, Inc. (MD) (100%)
Executive Management and Consultant Services, Inc. - consulting
services (MD)(100%)
Trip Mate Insurance Agency, Inc. (KS) (100%)
Monumental General Mass Marketing, Inc. - marketing (MD) (100%)
AUSA Financial Markets, Inc. - marketing (IA) (100%)
Endeavor Group (CA) (100%)
Endeavor Management Company (CA) (100%)
Universal Benefits Corporation - third party administrator (IA)
(100%) Investors Warranty of America, Inc. - provider of automobile
extended maintenance
contracts (IA) (100%)
Massachusetts Fidelity Trust Company - trust company (IA) (100%)
Money Services, Inc. - financial counseling for employees and
agents of affiliated companies (DE) (100%)
ORBA Insurance Services, Inc. (CA) (10.56%)
Zahorik Company, Inc. - broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
Long, Miller & Associates, L.L.C. (CA) (33-1/3%)
AEGON Asset Management Services, Inc. (DE) (100%)
InterSecurities, Inc. - broker-dealer (DE) (100%)
Associated Mariner Financial Group, Inc. - holding company
(MI) (100%)
Mariner Financial Services, Inc. - broker/dealer (MI)(100%)
Associated Mariner Agency of Hawaii, Inc. - insurance
agency (MI) (100%)
Associated Mariner Agency of New Mexico, Inc. (MI) (100%)
Idex Investor Services, Inc. - shareholder services (FL) (100%)
Idex Management, Inc. - investment adviser (DE) (100%)
IDEX Mutual Funds - mutual fund (MA)
Diversified Investment Advisors, Inc. - investment adviser (DE)
(100%)
Diversified Investors Securities Corporation - broker-dealer
(DE) (100%)
AEGON USA Securities, Inc. - broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - mutual fund (MD)
Creditor Resources, Inc. - credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - insurance
agency (Canada) (100%)
Weiner Agency, Inc. (MD) (100%)
AEGON USA Investment Management, Inc. - investment adviser
(IA) (100%)
AEGON USA Realty Advisors, Inc. - real estate investment services
(IA) (100%)
QSC Holding, Inc. (DE) (100%)
Landauer Realty Advisors, Inc. - real estate counseling
(IA) (100%)
Landauer Associates, Inc. - real estate counseling (DE) (100%)
Landauer Realty Associates, Inc. (TX) (100%)
Realty Information Systems, Inc. - information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - real estate investment trust
(IA) RCC Properties Limited Partnership (IA)
<PAGE>
ITEM 31. NUMBER OF HOLDERS OF SECURITIES
As of February 29, 2000 there were 262 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.
The Underwriter is wholly-owned by Transamerica Insurance Corporation of
California, a wholly-owned subsidiary of Transamerica Corporation, a subsidiary
of AEGON, N.V.
<TABLE>
<CAPTION>
(b) The following table furnishes information with respect to each
director and officer of the principal Underwriter currently distributing
securities of the registrant:
Position and Position and
Names and Principal Offices with Offices with
Business Address Principal Underwriter
------------------------------------------------------------------------------------------
Registrant
- ----------
<S> <C> <C>
Nooruddin S. Veerjee Director and Chairman President, Insurance Products
1150 South Olive Street Division and Director
Los Angeles, California
Sandy Brown Director, President and Vice President
1150 South Olive Street Chief Operating Officer
Los Angeles, California
Monica Suryapranata Treasurer 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
Los Angeles, California
Susan Vivino
1150 South Olive Street Assistant Secretary None
Los Angeles, California
</TABLE>
The Underwriter received in 1999, $$1,087 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 day of April, 2000.
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 , 2000 by the following
persons in the capacities:
SIGNATURE TITLE
_______________________*
William T. Miller Treasurer
_______________________*
Dr. James H. Garrity 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 26th
day of April, 2000.
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 26, 2000 by the following
persons or by their duly appointed attorney-in-fact in the capacities specified:
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURES TITLES DATE
______________________* Director and President - April 26, 2000
Nooruddin S. Veerjee Insurance Products Division
_________________* Director April 26, 2000
Patrick S. Baird
_________________* Director and Senior Vice President April 26, 2000
Brenda K. Clancy
______________________* Director, Executive Vice President April 26, 2000
James W. Dederer General Counsel and
Corporate Secretary
______________________* Director and April 26, 2000
Karen MacDonald and Acting Chief Financial Officer
______________________* Director April 26, 2000
George A. Foegele
______________________* Director and Senior Vice President April 26, 2000
Douglas C. Kolsrud
______________________* Director April 26, 2000
Richard N. Latzer
______________________* Director April 26, 2000
Gary U. Rolle'
______________________* Director April 26, 2000
Paul E. Rutledge III
______________________* Director, Vice President and Counsel April 26, 2000
Craig D. Vermie
___________________________ On April 26 , 2000 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.
</TABLE>
Exhibit 4(b) Advisory and Investment Services Agreements
INVESTMENT ADVISORY AGREEMENT
BETWEEN
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
AND
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<PAGE>
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT made this 21st day of July, 1999, between
Transamerica Occidental Life Insurance Company, a California corporation
(hereinafter called the "Company"), and Transamerica Occidental's Separate
Account Fund B, a separate account of the Company established by a resolution of
the Company's Board of Directors on June 26, 1968, pursuant to Section 10506 of
the California Insurance Code (hereinafter called the "Fund").
WHEREAS, the Fund has been organized for the purpose of providing a separate
account for the benefit of equity investment fund contracts and desires to avail
itself of the investment experience, assistance and facilities available to the
Company and to have the Company perform for it various management and clerical
services, and the Company is willing to furnish such advice, facilities and
services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. The Fund hereby employs the Company to manage the investment and
reinvestment of the assets of the Fund and to perform the other services
herein set forth, subject to the supervision of the Board of Managers of the
Fund (hereinafter called the "Board") for the period and on the terms herein
set forth. The Company hereby accepts such employment and agrees during such
period, at its own expense, to render the services and to assume the
obligations herein set forth for the compensation herein provided.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets of the Fund, the Company shall:
(a) obtain and evaluate pertinent economic, statistical and financial
data and other information relevant to the investment policy of the Fund,
affecting the economy generally, and individual companies or industries the
securities of which are included in the Fund's portfolio or are under
consideration for inclusion therein and make such data and information
reasonably available to the Board of Managers of the Fund at its request;
(b) develop and implement an investment program for the Fund, which
shall be subject to the overall review from time to time of the Board of
Managers;
(c) provide necessary personnel to assist the Board in managing the
affairs of the Fund, including clerical, bookkeeping, accounting and other
office personnel;
(d) provide for expenses (including all fees) incurred in connection
with the registration and qualification of the Fund and contracts issued by
the Fund under the Investment Company Act of 1940, the Securities Act of
1933 and state laws;
(e) provide for the charges and expenses of any custodian or
depository appointed for the safekeeping of the Fund's cash, securities or
other property;
(f) authorize and permit any of its directors, officers and employees,
who may be elected as directors or officers of the Fund, to serve in the
capacities in which they are elected;
(g) bear the expenses of calling and holding of meetings of Contract
Owners, the fees and expenses of members of the Board of Managers, and all
ordinary expenses incurred in the ordinary course of business.
3. Any investment program undertaken by the Company pursuant to this
Agreement and any other activities undertaken by the Company on behalf of
the Fund shall at all times be subject to any directives of the Board or any
duly constituted committee thereof acting pursuant to like authority.
4. For the services rendered hereunder, the Company shall receive an
amount for each valuation period of the Fund, equal to .30% per annum of the
value of the Fund as of the end of the period, such amount to be paid to the
Company weekly.
5. With respect to the Fund's portfolio securities, the Company shall
purchase such securities from or through and sell such securities to or
through such persons, brokers or dealers, as it may deem appropriate. Such
persons, brokers or dealers may include those affiliated with the Company.
6. The services of the Company to the Fund hereunder are not to be
deemed exclusive and the Company shall be free to render similar services to
others so long as its services hereunder are not impaired or interfered with
thereby.
7. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Company who may also be a director,
officer or employee of the Fund to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
other business or to render services of any kind to any other corporation,
firm, individual or association.
8. This Agreement shall be submitted for approval of the Contract
Owners and if then approved this Agreement:
(a) shall continue in effect only so long as its continuance is
specifically approved annually by the Board of Managers of the Fund as
required by the Investment Company Act of 1940 or by Contract Owners casting
a majority of the votes entitled to be cast by all of Contract Owners;
(b) may not be terminated by the Company without the prior approval of a
new investment advisory agreement by Contract Owners casting a majority of
the votes entitled to be cast by all Contract Owners and shall be subject to
termination without the payment of any penalty, on sixty days' written
notice, by the Board or by vote of Contract Owners casting a majority of the
votes entitled to be cast;
(c) shall not be amended without prior approval by Contract Owners
casting a majority of the votes entitled to be cast; and
(d) shall automatically terminate in the event of its assignment by
either party.
9. The Fund shall pay:
(a) brokers' commissions in connection with portfolio asset
transactions to which the Fund is a party;
(b) all taxes, including issuance and transfer taxes, which may become
payable to federal, state or other governmental entities, with respect to
the operation of the Fund; and
(c) all extraordinary expenses which may be incurred by or on behalf of
the Fund in connection with matters not in the ordinary course of business.
10. This Agreement is subject to the provisions of the Investment
Company Act of 1940, as amended, and the rules and regulations of the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized as of the day and
year first above written.
TRANSAMERICA OCCIDENTAL'S TRANSAMERICA OCCIDENTAL
SEPARATE ACCOUNT LIFE INSURANCE COMPANY
FUND B
By By
President President
By
Secretary
<PAGE>
INVESTMENT SERVICES AGREEMENT
REGARDING TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
THIS AGREEMENT is made between TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY, a California corporation, "Occidental", and TRANSAMERICA INVESTMENT
SERVICES, INC., a Delaware corporation, "the Services Company".
WHEREAS, Occidental pursuant to a separate written Investment Advisory
Agreement provides investment management and various other services to
Transamerica Occidental's Separate Account Fund B, the "Fund", which Fund is
registered as a management investment company under the Investment Company Act
of 1940; and
WHEREAS, the Services Company is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of providing
investment services to a number of clients, including other investment
companies; and
WHEREAS, the Services Company provides Occidental with investment advisement
and other services in connection with the management of Occidental's financial
resources under an Investment Advisement and Service Agreement between the two
parties; and
WHEREAS, Occidental desires to retain the Services Company to render certain
investment services pertaining to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Manager desires to perform such services in the manner and on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. INVESTMENT ADVICE AND OTHER SERVICES
(a) The Services Company shall, to the extent required in the conduct of the
investment activities of Occidental with respect to the Fund, place at the
disposal of Occidental its judgment and experience and provide Occidental advice
and recommendations with respect to the management of the assets of the Fund,
including but not limited to the purchase and sale of common stock, convertible
preferred stock, notes, bonds, debentures, short term investments and other
securities in which the Fund may invest. The Services Company shall also, from
time to time, furnish to or place at the disposal of Occidental such reports and
information relating to industries, businesses, corporations, or securities as
may be reasonably required by Occidental or as the Services Company may deem to
be helpful to Occidental in the administration of these investments.
(b) The Services Company agrees to use its best efforts in providing such
advice and recommendations and in the preparation of such reports and
information, and for this purpose the Services Company shall at all times
maintain a staff of officers and other trained personnel for the performance of
its obligations under this Agreement. The Services Company may employ other
persons to furnish to it statistical and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as it
may desire.
(c) The Fund and Occidental will from time to time furnish to the Services
Company detailed statements of the objectives and investments of the Fund and
will provide to the Services Company such information relating to the
investments of the Fund as may be available to the Fund or Occidental.
(d) The Services Company shall take, on behalf of Occidental and the Fund,
all actions which it deems necessary to implement the investment policies with
respect to stocks, bonds and money market instruments as determined by the Board
of Managers of the Fund, the Board of Directors of Occidental, or any committee
thereof, and in particular within the limits of those guidelines will determine
those securities to be bought or sold and will place all orders for the purchase
or sale of such securities for the Fund's account. To that end the Services
Company is authorized as the agent of Occidental and of the Fund to give
instructions as to deliveries of securities and other documents and as to
payments of cash for the account of the Fund in connection with the placing of
such orders. Selection of the brokers or dealers with which transactions are
executed and negotiation of commission rates will be made by the Services
Company.
Securities orders will be placed with brokers or dealers selected for their
ability to give prompt execution at prices and commissions rates (if any)
favorable to the Fund, and, in some instances, for their ability to provide
statistical, investment research and other services. As part of the process of
brokerage allocation, the Services Company is authorized to pay commissions
which may exceed what another broker might have charged. To the extent that
preference is given in the allocation of portfolio business to those brokers and
dealers which provide statistical, investment research, pricing quotations, or
other services, the Fund will bear any cost of obtaining such services, and the
Services Company and other clients advised by the Services Company, including
Occidental, may benefit from those services. Under the provisions of Section
28(e) of the Securities Exchange Act of 1934, the Services Company may determine
in good faith that the amount of a commission paid was reasonable in relation to
the value of the "brokerage and research services" provided by the executing
broker or dealer viewed in terms of the particular transaction or the Services
Company's overall responsibilities with respect to accounts as to which it is
exercising investment discretion.
2. ALLOCATION OF CHARGES AND EXPENSES
(a) The Services Company shall furnish at its own expense executive,
supervisory and other personnel and services, office space, equipment, utilities
and telephone services in connection with supplying the investment advice,
statistical and research services contemplated by this Agreement.
(b) It is understood that either the Fund or Occidental will pay, pursuant
to the separate Agreement between them, for all other expenses in connection
with operation of the Fund, including, without limitation, maintenance of
accounting and securities records, governmental fees, interest charges, taxes,
fees and expenses of independent auditors, legal fees, brokerage and other
expenses connected with the execution of security transactions, and custodian
and transfer agent fees. Should the Services Company advance or pay any of these
or similar expenses, it will be reimbursed by the appropriate party.
3. COMPENSATION
Occidental agrees to pay to the Services Company, as full compensation for
all services rendered hereunder, a fee at an annual rate of 0.15% (15/100ths of
one percent), or such other amount as the parties mutually agree in writing from
time to time, of the value of the Fund, as calculated by Occidental on each
Valuation Date of the Fund, which fee is to be paid by Occidental to the
Services Company quarterly, or more frequently should Occidental elect to do so.
Occidental and the Services Company may mutually choose to calculate an
estimated quarterly fee, with any applicable fee adjustment being made after the
end of the applicable quarter. Fee calculation and payment is solely a matter
between Occidental and the Services Company; the Fund has no obligation to pay
or take other acts in connection therewith.
Compensation under this Agreement will only be paid as specified in Section
5 of this Agreement.
4. NON-EXCLUSIVE AGREEMENT
This Agreement is non-exclusive as to Occidental, the Fund and the Services
Company. Occidental or the Fund may, in its discretion, purchase or obtain
information, reports and other services from other sources, including other
affiliates of Transamerica Corporation and outside consultants. The Services
Company may engage in any other business and may provide similar services to
other clients, so long as its services under this Agreement are not impaired;
and the Services Company may purchase or obtain information, reports and other
services from outside sources, including other affiliates of Transamerica
Corporation and outside consultants. The Services Company assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith, and shall not be responsible for any action of the
Board of Managers of the Fund, the Board of Directors of Occidental, or any
committee thereof, in following or declining to follow any advice or
recommendation of the Services Company. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Services Company,
whether or not he is also a director, officer or employee of Occidental or the
Fund, to engage in any other business or to devote his time and attention in
part to the management or other aspects of any other business, whether of a
similar or dissimilar nature.
5. EFFECTIVE DATE
This Agreement shall become effective on , 1999 as to the services and other
obligations in this Agreement, provided, however, that the fee specified in
Section 3 will accrue but will not be paid unless and until initial approval of
and continuance of this Agreement shall have been approved by a vote of a
majority of the outstanding voting securities of the Fund (which matter is
expected to be considered at the Special Meeting of Contract Owners scheduled to
be held in June, 1999) or by a vote of the Board of Managers of the Fund, and by
a majority of the Managers who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act of 1940) of any party to this
Agreement, and provided further that said fee will in no event be paid prior to
, 1999. In the event the Fund does not approve this Agreement and its
continuance as specified above, the Services Company will if so requested
continue to provide on a temporary basis the services contemplated by this
Agreement for a reasonable period until the Fund and Occidental make other
arrangements.
6. CONTINUANCE AND TERMINATION
This Agreement shall continue in effect from year to year after the initial
approval and continuance as specified in Section 5, provided it is approved
annually 1) by vote of a majority of the outstanding voting securities of the
Fund or by vote of the Board of Managers of the Fund, and 2) by a majority of
the Managers of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act of 1940) of any party to this
Agreement; provided, however, that (a) Occidental, either on its own motion or
at the direction of the Fund upon a majority vote of the Board of Managers of
the Fund or by the vote of a majority of the outstanding voting securities of
the Fund, may, at any time and without the payment of any penalty, terminate
this Agreement upon sixty days' written notice to the Services Company; (b) this
Agreement shall immediately terminate in the event of its assignment (within the
meaning of the Investment Company Act of 1940) unless such automatic termination
shall be prevented by an exemptive order of the Securities and Exchange
Commission; and (c) the Services Company may terminate this Agreement without
payment of penalty on sixty days' written notice to Occidental and the Fund. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed postpaid, to the other party at the principal office of such party.
Any amendment to this Agreement may be made at any time by mutual written
consent of the parties.
7. APPLICABLE LAW
This Agreement shall be construed in accordance with the laws of the State
of California and the applicable provisions of the Investment Company Act of
1940.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
in Los Angeles, California on this 21st day of July, 1999.
TRANSAMERICA OCCIDENTAL
ATTEST: LIFE INSURANCE COMPANY
- --------------------------------------------------- By
--
Title: Title:
ATTEST: TRANSAMERICA INVESTMENT
SERVICES, INC.
- --------------------------------------------------- By
--
Title: Title:
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Per Accumulation
Unit income and Capital Changes" in the Prospectus and "Investment Advisory and
Other Services" in the Statement of Additional Information in Post-Effective
Amendment No. 48 under the Securities Act of 1933 and the Post-Effective
Amendment No. 29 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 reports Dated February 15, 2000 and March 31, 2000 with respect to
the statutory-basis financial statements of Transamerica Occidental Life
Insurance Company and the financial statement of Transamerica Occidental's
Separate Account Fund B, respectively, both included in the Statement of
Additional Information.
Los Angeles, California
April 24, 2000
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental's Separate Account
Fund B, (the "Fund"), hereby constitutes and appoints James W. Dederer, Reid A.
Evers, Regina M. Fink, David M. Goldstein, Richard N. Latzer, and William T.
Miller 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 (the "1933 Act") or the Investment Company Act of 1940
(the "1940 Act"): 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 connections 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
_____ day of April, 2000.
Gary U. Rolle'
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental's Separate Account
Fund B, (the "Fund"), hereby constitutes and appoints James W. Dederer, Reid A.
Evers, Regina M. Fink, David M. Goldstein, Richard N. Latzer, and William T.
Miller 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 (the "1933 Act") or the Investment Company Act of 1940
(the "1940 Act"): 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 connections 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
_____ day of April, 2000.
Dr. James H. Garrity
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental's Separate Account
Fund B, (the "Fund"), hereby constitutes and appoints James W. Dederer, Reid A.
Evers, Regina M. Fink, David M. Goldstein, Richard N. Latzer, and William T.
Miller 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 (the "1933 Act") or the Investment Company Act of 1940
(the "1940 Act"): 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 connections 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
_____ day of April, 2000.
Peter S. Sodini
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental's Separate Account
Fund B, (the "Fund"), hereby constitutes and appoints James W. Dederer, Reid A.
Evers, Regina M. Fink, David M. Goldstein, Richard N. Latzer, and William T.
Miller 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 (the "1933 Act") or the Investment Company Act of 1940
(the "1940 Act"): 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 connections 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
_____ day of April, 2000.
Jon C. Strauss
<PAGE>
POWER OF
POWER OF ATTORNEY
The undersigned Director of Transamerica Occidental's Separate Account
Fund B, (the "Fund"), hereby constitutes and appoints James W. Dederer, Reid A.
Evers, Regina M. Fink, David M. Goldstein, Richard N. Latzer, and William T.
Miller 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 (the "1933 Act") or the Investment Company Act of 1940
(the "1940 Act"): 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 connections 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
_____ day of April, 2000.
William T. Miller
<PAGE>
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 134994
<INVESTMENTS-AT-VALUE> 58324
<RECEIVABLES> 72
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 215
<TOTAL-ASSETS> 135302
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 197
<TOTAL-LIABILITIES> 197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2395
<SHARES-COMMON-PRIOR> 2980
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 135105
<DIVIDEND-INCOME> 208
<INTEREST-INCOME> 96
<OTHER-INCOME> 0
<EXPENSES-NET> 1431
<NET-INVESTMENT-INCOME> (1127)
<REALIZED-GAINS-CURRENT> 20905
<APPREC-INCREASE-CURRENT> 20098
<NET-CHANGE-FROM-OPS> 39876
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 617
<NUMBER-OF-SHARES-REDEEMED> 969
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 35975
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1100
<AVERAGE-NET-ASSETS> 111016
<PER-SHARE-NAV-BEGIN> 31.04
<PER-SHARE-NII> (.36)
<PER-SHARE-GAIN-APPREC> 13.13
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 43.81
<EXPENSE-RATIO> 1.29
</TABLE>
