As filed with the Securities and Exchange Commission on May 7, 1998
Registration Nos. 2-36250
811-2025
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 48 |X|
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 30 |X|
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SEPARATE ACCOUNT C
(Formerly Transamerica Occidental's Separate Account Fund C)
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(Name of Depositor)
1150 South Olive, Los Angeles, CA 90015-2211
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (213) 742-3065
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel and Sutherland, Asbill & Brennan, LLP
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004-2404
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the
Registration Statement.
Title of securities being registered:
Variable Annuity Contracts
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b)
|X| on May 1, 1998 pursuant to paragraph (b) |_| 60
days after filing pursuant to paragraph (a)(i) |_| on
_________________ pursuant to paragraph (a)(i)
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-4
<TABLE>
<CAPTION>
PART A
Item of Form N-4 Prospectus Caption
<S> <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
<PAGE>
10. Purchase and Contract Value
(a) Purchases.......................................... Description of the Contracts
(b) Valuation.......................................... Description of the Contracts
<PAGE>
(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
<PAGE>
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
<PAGE>
</TABLE>
SEPARATE ACCOUNT C
Individual Equity Investment Fund Contracts
For Non-Tax Qualified Individual Retirement Plans
1150 South Olive Street, Los Angeles, California 90015-2211 (213) 742-3065
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This Prospectus describes three types of variable annuity contracts
(the "Contracts") issued by Transamerica Occidental Life Insurance Company
("Transamerica" or the "Company"). The Contracts are called the Individual
Equity Investment Fund Contracts -- Annual Deposit, Single Deposit Deferred and
Single Deposit Immediate (the "Contracts"). These Contracts are designed for
non-tax-qualified investments only.
Deposits and Accumulation Account Value are allocated to Separate
Account C of Transamerica Occidental Life Insurance Company (the "Separate
Account"). The assets of the Separate Account will be invested solely in the
Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the Transamerica
Variable Insurance Fund, Inc. The Portfolio's investment objective is long-term
capital growth which its pursues by investing primarily in common stocks. The
Accumulation Account Value under the Contracts will vary with the investment
performance of the Portfolio in which the Separate Account is invested. There is
no assurance that the investment objective of the Portfolio will be met. The
Contract Owner bears the entire investment risk for amounts invested under the
Contracts.
This Prospectus sets forth basic information about the Contracts and
the Separate Account that a prospective investor should know before investing. A
"Statement of Additional Information" containing more detailed information about
the Contracts and the Separate Account is available free by writing to the
Transamerica Annuity Service Center at 401 North Tryon Street, Suite 700,
Charlotte, North Carolina 28202 or by calling 800-258-4260. The Statement of
Additional Information, which has the same date as this Prospectus , has been
filed with the Securities and Exchange Commission (the "Commission") and is
incorporated herein by reference. The table of contents for the Statement of
Additional Information is included at the end of this Prospectus.
This Prospectus must be accompanied by the current
prospectus for the Growth Portfolio of Transamerica
Variable Insurance Fund, Inc.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION 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, 1998
Please read this Prospectus carefully and keep it for
future reference.
An investment in the Contracts is not a deposit 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.
Investing in the Contracts involves certain investment risks, including possible
loss of principal.
<PAGE>
TABLE OF CONTENTS
(LOGO)
Terms Used in this Prospectus.......................... 3
Synopsis of this Prospectus............................ 5
Fee Table.............................................. 7
Condensed Financial Information........................ 9
Transamerica Occidental and the Separate Account....... 9
The Growth Portfolio................................... 10
Description of the Contracts........................... 12
Surrender of a Contract................................ 13
Death Benefits......................................... 14
Charges under the Contracts............................ 14
Annuity Period......................................... 15
Federal Tax Status..................................... 16
Preparing for Year 2000................................
Underwriter............................................ 19
Voting Rights.......................................... 19
Legal Proceedings...................................... 20
Table of Contents of the Statement of Additional Information.. 21
.........This Prospectus does not constitute an offer to sell, or a solicitation
of any offer to purchase, the Contracts offered hereby in any state or
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such state. 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 in connection with the offer described herein
and, if given or made, such information or representation must not be relied
upon.
<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 Separate
Account and used to measure
the value of a Contract
Owner's interest under a
Contract prior to the
Retirement Date under the
Contract.
Annuitant: The individual on
whose behalf a Contract is issued.
Generally, the Annuitant
will be the Contract Owner.
Annuity: A series of monthly payments provided under a Contract for the
Annuitant or his beneficiary. Annuity
payments will be due and
payable only on the first day of a
calendar month.
Annuity Conversion Rate: The rate
used in converting the
Accumulation Account Value
to an Annuity expressed as
the amount of the first
Annuity payment to which
the Participant or the
beneficiary is entitled for
each $1,000 of Accumulation
Account Value.
Annuity Unit: A unit used to determine
the amount of each Variable Annuity
payment after the first.
Code: The Internal Revenue Code
of 1986, as amended, and the rules
and regulations issued
thereunder.
Contract: Any one of the Individual
Equity Investment Fund Contracts
(Annual Deposit, Single
Deposit Deferred, or Single Deposit
Immediate) described in
this Prospectus.
Contract Owner: The party to the
Contract who is the owner of the
Contract.
Deposit: An amount paid to the
Company pursuant to a Contract. (With
respect to some Contracts
in which the term "Deposit" has
been replaced by the term "Purchase Payment," "Deposit" as
used herein shall also mean "Purchase Payment.")
Fund: The Transamerica Variable Insurance Fund, Inc., a
registered open-end management investment company in which
the Separate Account invests.
Net Deposit: That portion of a Deposit remaining after deduction of any
premium for Contract riders, charges for sales and
administrative expenses and for any applicable premium
taxes.
Plan of Reorganization: The plan pursuant to which the Separate
Account was
reorganized to its present form as a unit investment trust.
Portfolio:The Growth Portfolio of the Transamerica Variable Insurance
Fund, Inc. The Separate Account invests exclusively in the
Portfolio.
Retirement Date: The date on which the first Annuity payment is payable under
a Contract.
Separate Account: Separate Account C of Transamerica Occidental Life Insurance
Company. Separate Account C is not part of Transamerica's
general account.
Variable Annuity: An Annuity with payments which vary in dollar amount
throughout the payment period in accordance with the
investment experience of the Growth Portfolio of the Fund.
Valuation Date: Any day the New York Stock Exchange is open for trading.
Valuation usually occurs as of 4:00 p.m. ET each Valuation
Date.
Valuation Period: The period from the
close of business 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.
Written Request: An original signature is required on all Written Requests.
If a signature on record does not compare with that on the
Written Request, Transamerica reserves the right to request
a Bank Signature Guarantee before processing the request.
Written Requests and other communications are deemed to be
received by the Company on the date they are actually
received at the Company's Charlotte, North Carolina Office,
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.
<PAGE>
SYNOPSIS OF THIS PROSPECTUS
This Prospectus describes three types of individual variable annuity
contracts -- the Annual Deposit, Single Deposit Deferred and Single Deposit
Immediate. The Contracts are designed for non tax-qualified retirement programs.
Deposits made under the Contracts are allocated to the Separate Account which
invests solely in the Growth Portfolio of the Fund. The Growth Portfolio invests
principally in equity securities. (See "Description of the Contracts" on page
12.) The Contracts are no longer being offered for sale but additional Deposits
can be made on certain outstanding Contracts.
The Contracts. Three types of Contracts have been offered
through the Separate Account -- Annual
Deposit, Single Deposit Deferred, and Single Deposit Immediate.
The Annual Deposit Contract is a deferred variable annuity which
provides for payments to be made at least annually. The minimum payment is $10
and the aggregate minimum annual payment must be $120 in any Contract year.
Usually, a Contract was not issued for annual payments of less than $300.
Payments may be increased on a Contract anniversary, but annual payments may not
be increased to more than three times the first year's payments without the
consent of Transamerica.
The Single Deposit Deferred Contract provides a deferred variable
annuity. A minimum single payment of $1,000 must have been made when the
Contract is issued. Additional payments of at least $20 could have been made
anytime within the first five Contract years. Thereafter, Transamerica must give
its consent to accept further payments.
The Retirement Date for the Annual Deposit and Single Deposit Deferred
Contracts is the date the first annuity payment is made under the Contract. The
Retirement Date is specified in the application for the Annual Deposit and
Single Deposit Deferred Contracts. It may be changed by submitting a written
request to Transamerica at least 60 days before annuity payments begin.
The Single Deposit Immediate Contract provides an immediate variable
annuity. The minimum single payment accepted under the Contract is $2,500. The
Retirement Date specified by the Contract Owner may not be changed.
The Separate Account. Deposits made under the Contracts are allocated
to the Separate Account. The assets of the Separate Account are used to
purchase, at net asset value, shares of the Growth Portfolio. The Growth
Portfolio has a distinct investment objective and policies that are described in
the accompanying Prospectus for the Growth Portfolio. (See "The Growth
Portfolio" on page 10.)
The Accumulation Account Value, if any, and the amount of any annuity
payment will vary depending on the investment experience of the Growth Portfolio
and the amount of separate account and portfolio fees and expenses incurred.
(See "Charges Under the Contracts" on page 14.) The Contract Owner bears the
entire investment risk under the Contract. There is no guaranteed or minimum
Accumulation Account Value; therefore the proceeds of a surrender could be less
than the total amount of Deposits.
Surrenders and Partial Withdrawals. Annual Deposit and Single Deposit
Deferred Contracts may be surrendered prior to a selected Retirement Date for
the Accumulation Account Value. At any time before the earlier of the death of
the Annuitant or the Retirement Date, the Contract Owner may partially withdraw
Accumulation Account Value. Accumulation Account Value will be established at
the end of the Valuation Period in which the Written Request for surrender or
withdrawal is received. There is no surrender or withdrawal charge. A Contract
must be surrendered if a withdrawal reduces the Accumulation Account Value below
$10 for an Annual Deposit Contract or $20 for a Single Deposit Deferred
Contract. There are no surrender or withdrawal privileges for Single Immediate
Contracts.
Amounts withdrawn or surrendered may be taxable and subject to a
penalty tax imposed by Federal tax law.
Charges and Expenses. Transamerica deducts a sales charge and an
administrative charge from each Deposit at the time of payment. A maximum 6.5%
sales charge and 2.5% administrative charge are deducted from each Deposit.
Charges may be reduced depending on the total dollar value of Deposits paid
under the Contract.
(See "Fee Table" on page 7.)
Transamerica also deducts a daily charge (the "Mortality and Expense
Risk Charge") equal to a percentage of the value of the net assets in the
Separate Account for the mortality and expense risks it has assumed. With
certain exceptions (see "Fee Table" on page 7), the rates at which charges for
expenses are assessed may not be changed during the life of the Contract. The
Contracts permit the Company to deduct a Mortality and Expense Risk Charge from
the Separate Account at the end of each Valuation Period at a maximum annual
rate of 1.10% of the Accumulation Account Value. The amount of the Mortality and
Expense Risk Charges will be waived or reduced on Contracts outstanding as of
October 31, 1996 to the extent that the sum of Separate Account Annual Expenses
and Portfolio Annual Expenses exceeds 1.40% during any year. Currently the
Mortality and Expense Risk Charge is assessed at an annual rate of 0.55% of
Accumulation Account Value.
Some states require the payment of premium taxes. Generally, a charge
for premium taxes is made against the Accumulation Account Value when conversion
is made to provide annuity benefits. However, in certain states, a tax will be
deducted from each Deposit. Presently, premium taxes range from 0.0% to 3.5%.
(See "Premium Taxes" on page 15.)
Because the Separate Account purchases shares of the Growth Portfolio,
the net assets of the Separate Account will reflect the investment advisory fee
and certain expenses incurred by the Growth Portfolio. The investment adviser of
the Growth Portfolio is paid an advisory fee of 0.75% of the value of the
average daily net assets of the Growth Portfolio. Presently, certain fees and
expenses of the Portfolio are waived or reimbursed. (See the accompanying
prospectus of the Growth Portfolio for further details).
Death Benefit. The Contracts provide a death benefit payable if the
Annuitant dies before the selected Retirement Date. Transamerica will pay the
beneficiary the Accumulation Account Value as of the date Transamerica receives
due proof of the deceased's death and payment instructions. (See "Death
Benefits" on page 14.)
Annuity Payments. The Contracts provide for a series of monthly annuity
payments to begin on the Retirement Date. The Contract Owner may select from
three variable payment options. The amount of the annuity payments depends on
the payment option chosen, the age of the person named to receive the annuity
payments (the "Annuitant"), and the value of the Contract on the Retirement
Date. The annuity options include alternatives designed to provide payments for
life (for either a single or joint life), with or without a guaranteed minimum
number of payments. (See "Annuity Period" on page 15.) The minimum amount of the
first annuity payments must be $20. If the first monthly payment would be less
than $20, Transamerica may make a single payment equal to the total value of the
Contract Owner's account, the Accumulation Account Value.
Federal Tax Status. With respect to Contract Owners who are natural
persons, there should be no Federal income tax on increases in the Accumulation
Account Value until a distribution under the Contract occurs (e.g., a surrender
or annuity payment) or is deemed to occur (e.g., a pledge, loan or assignment of
a Contract). Generally, a portion of any distribution or deemed distribution
will be taxable as ordinary income. The taxable portion of certain distributions
will be subject to withholding unless the recipient elects otherwise. In
addition, a penalty tax may apply to certain distributions or deemed
distributions under the Contract. (See "Federal Tax Status," on page 16.) This
paragraph is applicable so long as the Contracts qualify as annuity contracts
for Federal income tax purposes. (See "FEDERAL TAX MATTERS--Tax Status of the
Contracts" in the Statement of Additional Information.)
<PAGE>
FEE TABLE
The purpose of this table and the examples that follow is to assist the
Contract Owner in understanding the various costs and expenses imposed directly
or indirectly under the Contracts. The standardized tables and examples reflect
expenses of the Separate Account as well as the Portfolio. They assume the
highest deductions possible under the Contracts whether or not such deductions
actually would be made from an individual Contract Owner's account. The
information set forth below should be considered together with the narrative
provided under the heading "Charges under the Contracts" on page 14 of this
Prospectus, and with the Portfolio's prospectus. In addition to the expenses
listed below, premium taxes may be applicable.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of each Deposit): 6.50%
Total Deposits
Under the Contract Sales Expense
---------------------------------------------------------------
First $15,000........... 6.50%
Next $35,000........... 4.50%
Next $100,000.......... 2.00%
Excess ............... 0.50%
Administrative Expense Imposed on Purchases (as a percentage of each
Deposit):
2.50%
Total Deposits
Under the Contract Administrative Expense
-------------------------------------------------------------------
First $15,000........... 2.50%
Next $35,000........... 1.50%
Next $100,000........... 0.75%
Excess ............... 0.00%
Maximum Total Contract Owner Transaction Expenses:1/
9.00%
Total Contract Owner
Total Deposits Transaction Expenses
Under the Contract as % of Total Deposits
-------------------------------------------------------------------
First $15,000........... 9.00%
Next $35,000........... 6.00%
Next $100,000........... 2.75%
Excess ............... 0.50%
Separate Account Annual Expenses:
(as a percentage of average daily separate account value )
Mortality and Expense Risk Charge................. 0.55%2/
Administrative Expense Charge..................... 0.00%
Other Expenses.................................... 0.00%
Total Separate Account Annual Expenses..... 0.55%2/
<PAGE>
Growth Portfolio Annual Expenses:3/
(as a percentage of Portfolio average daily net assets, after fee waivers and
expense reimbursements)
Management Fee................................. 0.75%
Other Expenses................................. 0.10%
-----
Total Portfolio Annual Expenses......... 0.85%
- ----------------
1/ This is equivalent to 9.89% of the Net Deposit. Premium taxes are
not shown. Charges for premium taxes, if any, are deducted when paid which may
be upon annuitization. In certain states, a premium tax charge will be deducted
from each Deposit.
2/ The Contracts permit the Company to deduct a Mortality and Expense
Risk Charge at a maximum annual rate of 1.10% of the Accumulation Account Value.
Under the terms of the Plan of Reorganization, however, Transamerica has agreed
to waive or reimburse the Mortality and Expense Risk Charge on Contracts
outstanding as of October 31, 1996 to the extent that the sum of Separate
Account Annual Expenses and Portfolio Annual Expenses exceeds 1.40% during any
year.
3/ During 1997 Transamerica reimbursed expenses for the Growth
Portfolio. Without such reimbursements the "other expenses" of the portfolio
would have been 0.23% and total portfolio annual expenses would have been 0.98%
for 1997. Transamerica plans to continue these expense reimbursements (or fee
waivers) throughout 1998.
EXAMPLES
A Contract Owner would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above:
Example #1: If the Contract is surrendered at the end of the applicable time
period:
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------
$103 $130 $160 $243
Example #2: If the Contract is not surrendered at the end of the periods shown:
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------
$103 $130 $160 $243
The 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" on
page 14 in this Prospectus.
The Contracts are designed for retirement planning. Surrenders prior to
the Annuity Period are not consistent with the long-term purposes of the
Contract and tax penalties may apply. Premium taxes may be applicable.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The condensed financial information for the Separate Account and the
Separate Account's predecessor, Transamerica Occidental's Separate Account Fund
C, is set forth below. This condensed financial information is derived from the
financial statements of the Separate Account and Separate Account Fund C that
were audited by Ernst & Young LLP, the independent auditors for the Separate
Account and Separate Account Fund C. The condensed financial information shown
is the same as it would have been if the Separate Account had operated as a unit
investment trust investing in the Portfolio for all the periods shown, with the
operation of the Portfolio having been as currently reported in the Portfolio's
prospectus and Statement of Additional Information.
The Accumulation Unit values and number of Accumulation Units
outstanding for the periods shown are as follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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Accumulation Unit value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of year 23.894 18.786 $12.291 $11.467 $9.384 $8.281 $5.885 $6.623 $4.959 $3.708
----------------------------------------------------------------------------------------
End of year 34.821 23.894 $18.786 $12.291 $11.467 $ 9.384 $ 8.281 $ 5.885 $ 6.623 $ 4.959
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Number of Accumulation Units
outstanding at end of year
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(000 omitted) 1,306 1,322 1,341 1,373 1,412 1,452 1,472 1,545 1,605 1,674
</TABLE>
<PAGE>
TRANSAMERICA OCCIDENTAL AND THE SEPARATE ACCOUNT
Transamerica Occidental Life Insurance Company
Transamerica Occidental Life Insurance Company ("Transamerica" or the
"Company") is a stock life insurance company incorporated under the laws of the
State of California on June 30, 1906. Its Home Office is located at 1150 South
Olive Street, Los Angeles, California, 90015-2211. It has been a wholly-owned
direct or indirect subsidiary of Transamerica Corporation, 600 Montgomery
Street, San Francisco, California 94111, since March 14, 1930. The Company
presently provides individual life insurance, especially interest-sensitive
products, variable and term life insurance, fixed and flexible premium annuity
products, and reinsurance.
Subsidiaries of the Company include Transamerica Assurance Company,
Transamerica Life Insurance and Annuity Company, Transamerica Life Insurance
Company of Canada and a New York company, Transamerica Life Insurance Company of
New York (formerly called, First Transamerica Life Insurance Company).
Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to Contract Owners, the ratings and other information
assigned to it by one or more independent rating organizations such as A.M. Best
Company, Standard & Poor's, Moody's, and Duff & Phelps. The purpose of the
ratings is to reflect the financial strength and/or claims-paying ability of
Transamerica and should not be considered as bearing on the investment
performance of assets held in the Separate Account. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, culminating in
the assignment of Best's Ratings. These ratings reflect their current opinion of
the relative financial strength and operating performance of an insurance
company in comparison to the norms of the life/health insurance industry. In
addition, the claims-paying ability of Transamerica as measured by Standard &
Poor's Insurance Ratings Services, Moody's, or Duff & Phelps may be referred to
in advertisements or sales literature or in reports to Contract Owners. These
ratings are opinions of an operating insurance company's financial capacity to
meet the obligations of its insurance and annuity policies in accordance with
their terms. Such ratings do not reflect the investment performance of the
Separate Account or the degree of risk associated with an investment in the
Separate Account.
The Separate Account
The Separate Account was established on February 26, 1969 by
Transamerica's Board of Directors. Prior to November 1, 1996, the Separate
Account was organized as an open-end diversified management investment company
with its own portfolio of securities. On November 1, 1996, the Separate Account
was re-organized to its present form as a unit investment trust. As part of the
reorganization, the assets of the managed separate account were transferred
intact to the Growth Portfolio of Transamerica Variable Insurance Fund, Inc. in
exchange for shares of the Growth Portfolio.
The Separate Account is registered with the Commission under the
Investment Company Act of 1940 (the "1940 Act") as a unit investment trust. It
meets the definition of a separate account under the federal securities laws.
However, the Commission does not supervise the management or the investment
practices or policies of the Separate Account.
The assets of the Separate Account are owned by Transamerica but they
are held separately from the other assets of Transamerica. 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 that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the Separate Account, whether or not
realized, are credited to or charged against the Separate Account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the Separate Account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica. Obligations under the Contracts are
obligations of Transamerica.
THE GROWTH PORTFOLIO
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc.
The Separate Account invests exclusively in the Growth Portfolio of the
Transamerica Variable Insurance Fund (the "Fund"). The Fund is an open-end,
diversified management investment company established as a Maryland Corporation
on June 23, 1995, as the successor to Transamerica Occidental's Separate Account
Fund C. The Fund currently consists of two investment portfolios, but only the
Growth Portfolio is available under the Contracts. (Additional Portfolios may be
created from time to time.) By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Growth
Portfolio. Likewise, an investor shares pro-rata in any losses of the Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's Board of Directors, Transamerica Occidental Life
Insurance Company (the "Company") serves as the Portfolio's investment adviser
and conducts the business and affairs of the Portfolio. The Company has engaged
an affiliate, Transamerica Investment Services, Inc. ("Investment Services") to
act as the Portfolio's sub-advisor to provide the day-to-day portfolio
management for the Portfolio.
The investment objective of the Growth Portfolio is to seek long-term
capital growth. Common stock (listed and unlisted) is the basic form of
investment. The Portfolio may also invest in debt securities and preferred stock
having a call on common stocks.
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The Fund currently offers shares of the Portfolio solely to the
Separate Account as a funding vehicle for the variable annuity contracts
supported by the Separate Account. The Fund does not offer the Portfolio's
shares directly to the general public. Shares of the Portfolio may, in the
future, be offered to other registered and unregistered separate accounts
supporting other variable annuity or variable life insurance contracts and to
qualified pension and retirement plans.
Meeting investment objectives depends on various factors,
including, but not limited to, how well the
portfolio manager anticipates changing economic and market conditions.
THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL ACHIEVE ITS STATED OBJECTIVES.
An investment in the Contracts is not a deposit or obligation 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. Investing in the Contracts involves certain investment
risks, including possible loss of principal.
Additional information concerning the investment objective and policies
of the Growth Portfolio, the investment advisory and administrative services and
charges can be found in the current prospectus for the Portfolio which
accompanies this Prospectus. The Portfolio's prospectus should be read carefully
before any decision is made concerning the allocation of Deposits to the
Separate Account.
Addition, Deletion, or Substitution
Transamerica cannot guarantee that the Portfolio will always be
available for its variable annuity products, but in the unlikely event that the
Portfolio is not available, Transamerica will do everything reasonably
practicable to secure the availability of a comparable fund. Transamerica
retains the right to make changes in the Separate Account and in its
investments.
Transamerica reserves the right to eliminate the shares of any
Portfolio held by the Separate Account and to substitute shares of another
Portfolio or of another investment company for the shares of any Portfolio, if
the shares of the Portfolio are no longer available for investment or if, in
Transamerica's judgment, investment in any Portfolio would be inappropriate in
view of the purposes of the Separate Account. To the extent required by the 1940
Act, a substitution of shares attributable to the Contract Owner's interest in
the Separate Account will not be made without prior notice to the Contract Owner
and the prior approval of the Commission. Nothing contained herein shall prevent
the Separate Account from purchasing other securities for other series or
classes of variable annuity policies, or from effecting an exchange between
series or classes of variable policies on the basis of requests made by Contract
Owners.
The Separate Account may be divided into sub-accounts and new
sub-accounts may be established when, in the sole discretion of Transamerica,
marketing, tax, investment or other conditions so warrant. Any new sub-accounts
will be made available to existing Contract Owners on a basis to be determined
by Transamerica. Each additional sub-account will purchase shares in a Portfolio
or in another mutual fund or investment vehicle. Transamerica may also eliminate
one or more sub-accounts if, in its sole discretion, marketing, tax, investment
or other conditions so warrant. In the event any sub-account is eliminated,
Transamerica will notify Contract Owners and request a re-allocation of the
amounts invested in the eliminated sub-account.
In the event of any substitution or change, Transamerica may make such
changes in the Contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the Contracts, the Separate Account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
DESCRIPTION OF THE CONTRACTS
The Contract Owner has all rights under the Contract during the
accumulation period. These include voting rights, selection of the annuitant,
surrendering any portion of the Contract values, electing retirement date and
annuity option and selection 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 value, if any, remaining in the Contract.
Annual Deposit Individual Equity Investment Fund Contract provides a
deferred Variable Annuity ("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.
Normally, Contracts will not be issued for annual Deposits of less than $300.
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 the Company. 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 Individual Equity Investment Fund Contract provides a
deferred Variable Annuity ("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, the Company must give its consent to further Deposits. The minimum
initial Deposit is $1,000. The Company reserves the right to reduce the minimum.
A Retirement Date is specified in the application for Annual Deposit
and Single Deferred Contracts, but may be changed by a Written Request to the
Company at its Home Office at least 60 days before an Annuity is to commence.
Single Deposit Individual Equity Fund Investment Contract also provides
an Immediate Variable Annuity ("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 this Contract is the last
Valuation Day of the second calendar month preceding the Retirement Date
specified in the Contract. The minimum Deposit is $2,500. The Company reserves
the right to reduce the minimum. The Retirement Date may not be changed.
Net Deposits
Net Deposits are immediately credited to the Contract Owner's
Accumulation Account in the Valuation Period in which they are received at the
Company's Home Office.
Net Deposits are used to purchase Accumulation Units. The number of
Accumulation Units purchased with a Net Deposit is determined on the Valuation
Date on which the Net Deposit is invested in the Separate Account by dividing
the Net Deposit by the Accumulation Unit Value at the end of 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 October 16, 1969, the
date the Separate Account commenced operations. 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 value of an Accumulation
Unit is expected to change from Valuation Period to Valuation Period, reflecting
the investment experience of the Portfolio as well as the deduction for charges.
The Investment Performance Factor is determined at the end of each
Valuation Period and is the ratio of A/B where:
"A" is the value of the Separate Account as of the end of such
Valuation Period immediately prior to making any Deposits into and any
withdrawals from the Separate Account.
"B" is the value of the Separate Account as of the end of the preceding
Valuation Period immediately after making any Deposits into and any
withdrawals from the Separate Account, including any charges for
expense and mortality risks assessed against the Separate Account on
that date, from the Separate Account.
SURRENDER OF A CONTRACT
Surrender and withdrawal privileges apply only to Annual Deposit and
Single Deposit Deferred Contracts prior to Retirement Date. There are no
surrender or withdrawal privilege for Single Deposit Immediate Contracts.
A Written Request by the Contract Owner must be received at the Home
Office for either a withdrawal or surrender of Accumulation Account Value.
Accumulation Units will be cancelled with the equivalent dollar amount withdrawn
or surrendered. The Accumulation Unit Value used to determine the number of
Accumulation Units cancelled shall be the value established at the end of the
Valuation Period in which the Written Request was received. The Accumulation
Account Value less any applicable premium tax charge will be paid within seven
days following receipt of the Written Request. However, the Company may postpone
such payment: (1) if the New York Stock Exchange is closed or trading on the
Exchange is restricted, as determined by the 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,
as described below. (See "Federal Tax Status" on page 16.)
A Contract must be surrendered through the Underwriter.
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, but only one repayment can be made in any twelve month
period. The Company must be given concurrent Written Request of repayment. The
sales charges will not be deducted from the Deposit repayment, but the
administrative charge will be assessed.
DEATH BENEFITS
Death Benefits--Before Retirement
(1) ANNUAL DEPOSIT AND SINGLE PREMIUM DEFERRED CONTRACTS:
In the event a Annuitant dies prior to the selected Retirement
Date, the Company will pay to the Annuitant's beneficiary the
Accumulation Account Value based on the Accumulation Unit
value determined on the Valuation Day coinciding with or next
following the later of (i) the date adequate proof of death is
received by the Company or (ii) the date the Company receives
notice of the method of payment selected by the beneficiary.
Subject to certain requirements imposed by Federal tax law,
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 the Company, and to compliance with
any applicable federal and state law.
(2) SINGLE PREMIUM IMMEDIATE CONTRACT:
In the event a Annuitant dies prior to the selected Retirement
Date, the Company will pay to the Annuitant's beneficiary the
Accumulation Account Value based on the Accumulation Unit
value determined on the Valuation Day coinciding with or next
following the date proof of death is received by the Company.
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.
CHARGES UNDER THE CONTRACTS
Charges Assessed Against The Deposits
Sales Charge. The Company makes a deduction from each Deposit for sales
expenses. No such charge will be assessed against Deposits made from insurance
or annuity policies issued by the Company which are transferred to the Separate
Account. The charge for sales expense ranges from 6.5% to 0.5% of each deposit.
(See "Fee Table" on page 7.)
The sales expense charge is retained by the Company as compensation for
the cost of selling the Contracts. The Company pays the Underwriter for the sale
of the Contracts. (See "Underwriter" on page 19 for more information about the
Underwriter.) The distribution expenses may exceed amounts deducted from
Deposits as sales expenses and will be paid from the Company's surplus,
including profits, if any, from the mortality and expense risk charges.
Administrative Charge. The Company also makes a deduction from each
Deposit for administrative expenses. The charge for the administrative expense
ranges from 2.5% to 0.0% of each deposit (See " Fee Table" on page 7.) The
administrative expense charge will be retained by the Company. This charge is
used to pay for all record keeping and administrative functions related to the
Contracts and each Contract Owner's account, including issuance of the Contract,
making annuity payments, legal and accounting fees and reports to Contract
Owners.
Charges Assessed Against the Separate Account
Mortality and Expense Risk Charge. The Contracts permit the Company to
deduct a Mortality and Expense Risk Charge from the Accumulation and Annuity
Unit Values at the end of each Valuation Period at a maximum annual rate of
1.10%. Amounts of such charges may be withdrawn periodically from the Separate
Account. Under the terms of the Plan of Reorganization, Transamerica has agreed
to waive or reimburse mortality and expense risk charges on Contracts
outstanding as of October 31, 1996, to the extent that the sum of Separate
Account Annual Expenses and Portfolio Annual Expenses exceeds 1.40% during any
year. Currently, the Mortality and Expense Risk Charge is assessed at an annual
rate of 0.55% of the Accumulation Account Value.
The Mortality and Expense Risk Charge compensates the Company for
bearing certain mortality and expense risks under the Contracts. The mortality
risk borne by Transamerica arises from its contractual obligation to make
annuity payments (determined in accordance with the annuity tables and other
provisions contained in the Contracts) regardless of how long all Annuitants or
any individual Annuitant may live. This undertaking assures that neither a
Contract Owner's own longevity, nor an improvement in general life expectancy,
will adversely affect the monthly annuity payments that a beneficiary will
receive under the Contract. The mortality risk assumed by Transamerica is the
risk that the persons on whose life annuity payments depend, as a group, will
live longer than Transamerica's actuarial tables predict. In this event,
Transamerica guarantees that annuity payments will not be affected by a change
in mortality experience that results in the payment of greater annuity income
than assumed under the annuity options in the Contract.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in issuing and administering the Contracts and
operating the Separate Account will be more than the charges assessed for such
expenses.
There are no other fees assessed against the Separate Account.
Portfolio Expenses
Because the Separate Account purchases shares of the Portfolio, the net
assets of the Separate Account will reflect the investment advisory fees and
other operating expenses incurred by the Portfolio. A complete description of
the fees, expenses, and deductions from the Growth Portfolio can be found in the
Portfolio's prospectus.
Premium Taxes
Transamerica may be required to pay premium or retaliatory taxes
currently ranging from 0% to 3.5% in connection with Purchase Payments or values
under the Contracts. Depending upon applicable state law, Transamerica may
deduct the premium taxes which are payable with respect to a particular Contract
from the Purchase Payments, 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 Purchase Payment, depending upon applicable state law.
ANNUITY PERIOD
A Contract Owner may select an Annuity option at any age, by Written
Request received by the Company at least 60 days prior to commencement of an
Annuity. The monthly Annuity benefit is determined by the Accumulation Account
Value, the age of the Annuitant, and any joint annuitant and the option
selected.
The Contracts have three standard 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 value will be determined on the Valuation Day
the Written Request is received in the Home Office.
Upon the Company'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.
The minimum amount of the first monthly payment is $20. If the first
monthly payment would be less than $20, the Company may make a single payment
equal to the total value of the Contract Owners' Accumulation Account.
For information regarding the calculation of annuity payments, see the
Annuity Payments section of the Statement of Additional Information.
FEDERAL TAX STATUS
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 the Company'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 the current interpretation by the
Internal Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
Tax Status of the Contract
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for Federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
<PAGE>
Taxation of Annuities
1. In General
Section 72 of the Internal Revenue Code ("Code") governs taxation of
annuities in general. The Company believes that a Contract Owner who is a
natural person generally is not taxed on increases in the value of a 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, the assignment, pledge, or
agreement to assign or pledge any portion of the Accumulation Account Value
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.
The Contract Owner of any annuity contract who is not a natural person
generally must include in income any increase in the excess of the Accumulation
Account Value over the "investment in the contract" (discussed below) during the
taxable year with respect to deposits made after February 28, 1986. There are
some exceptions to this rule and a Contract Owner that is not a natural person
may wish to discuss these with a competent tax adviser.
The following discussion generally applies only to a Contract owned by
a natural person.
2. Surrenders
In the case of a surrender before the Retirement Date, under Code
section 72(e), amounts received are generally first treated as taxable income to
the extent that the Accumulation Account Value immediately before the surrender
exceeds the "investment in the contract" at that time (this does not apply to
amounts allocable to investments made prior to August 14, 1982, nor the income
therefrom). Any additional amount withdrawn is not taxable. Generally, the
"investment in the contract" will be the total amount of Deposits made, less any
amount received under the Contract, to the extent that such amount received was
excluded from gross income.
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 Retirement Date. 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 there may be imposed a Federal penalty
tax equal to 10% of the amount treated as taxable income. In general, however,
there is no penalty tax on distributions: (1) made on or after the date on which
the Contract Owner attains age 59 1/2; (2) made as a result of death or
disability of the Contract Owner; (3) received in substantially equal periodic
payments as a life annuity or a joint and survivor annuity for the lives or life
expectancies of the taxpayer and the taxpayer's "designated beneficiary"; (4)
from a qualified plan (except as provided in Code section 72(t)); (5) allocable
to "investment in the contract" before August 14, 1982; (6) under a qualified
funding asset (as defined in Code section 130(d)); (7) under an immediate
annuity (as defined in Code section 72(u)(4)), or (8) from Contracts which are
purchased by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.
5. Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a Contract, the irrevocable designation of
an Annuitant or other beneficiary who is not also the Contract Owner, or the
exchange of a Contract may result in certain tax consequences to the Contract
Owner that are not discussed herein. A Contract 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. Multiple Contracts
All non-qualified deferred annuity contracts entered into after October
21, 1988 that are issued by the Company (or its affiliates) to the same Contract
Owner during any single calendar year are treated as one annuity contract for
purposes of determining the amount includible in gross income under section
72(e) of the Code. The Treasury Department has specific authority to issue
regulations to prevent the avoidance of section 72(e) through the serial
purchase of annuity contracts or otherwise. In addition, there may be other
situations (for example, the combination purchase of an immediate annuity and a
deferred annuity) in which the Internal Revenue Service or the Treasury may
conclude that it may be appropriate to aggregate two or more annuity contracts
purchased by the same Contract Owner.
7. Withholding
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. Individual recipients,
however, generally are provided the opportunity to elect not to have tax
withheld from distributions.
8. Death Benefits
Amounts may be distributed from a Contract because of the death of a
Participant or Owner. Generally, such amounts are includible in the income of
the recipient as follows: (i) if distributed in a lump sum, they are treated
like a surrender, or (ii) if distributed under an annuity option, they are
treated like an annuity payment.
9. Other Tax Consequences
As noted above, the foregoing discussion of the Federal income tax
consequences under the Contract is general in nature and 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 the Company's understanding of current Federal 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 Contract Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
10. Possible Changes in Taxation
Legislation has been proposed in 1998 that, if enacted, would
adversely modify the federal taxation of certain insurance and annuity
contracts. For example, one proposal would reduce the "investment 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 us 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.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 12/31/00
as the year 1900 rather than the year 2000, disruptions of business activities
may occur with the year 2000. In response, Transamerica established in 1997 a
"Y2K" committee to address this issue. With regard to the systems and software
which administer and affect the contracts, Transamerica has determined that is
own internal systems will be Year 2000 compliant. Additionally, Transamerica
requires any third party vendor which supplies software or administrative
services to Transamerica in connection with the administration of the contracts,
to certify that the software or services will be Year 2000 compliant. As of the
date of this prospectus, it is not anticipated that contract owners will
experience negative afffects on their investment, or on the services received in
connection with their contracts, as a result of Year 2000 issues. However,
especially when taking into account interaction with other systems, it is
difficult to predict with precision that there will be no distruption of
services in connection with the year 2000.
UNDERWRITER
Transamerica Securities Sales Corporation ("TSSC") is the principal
Underwriter for the Separate Account's Contracts. Its principal offices are
located at 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. TSSC may also serve as an
underwriter and distributor of other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Transamerica pays TSSC for acting as the principal underwriter
under a distribution agreement.
Prior to November 1, 1996, Transamerica Financial Resources, Inc.
("TFR") was the principal underwriter for the Contracts. TFR is a wholly-owned
subsidiary of Transamerica Insurance Company of California and is registered
with the Commission as a broker/dealer and is a member of the NASD.
VOTING RIGHTS
In accordance with its view of current applicable law, the Company will
vote Portfolio shares held in the Separate Account at regular and special
shareholder meetings of the Fund in accordance with instructions received from
persons having voting interests in the Separate Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
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 date of Contract Owners and will be computed in the
following manner:
(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.
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
Portfolio's shareholders 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 Company's records at least 20 days prior to the date
of the meeting.
Separate Account votes as to which no timely instructions are received
and shares held by the Company in the Separate Account as to which no Contract
Owner or Annuitant has a beneficial interest will be voted in proportion to the
voting instructions which are received with respect to all Contracts
participating in the Separate Account. Voting instructions to abstain on any
item to be voted upon will be applied to reduce the total number of votes
eligible to be cast on a matter.
Changes To Variable Annuity Contracts
The Company has the right to amend the Contracts to meet current
applicable federal and state laws 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, retirement date or Annuity
option prior to the Annuity commencement date.
Inquiries
Contract Owners may request information concerning their Variable
Annuity Contract by contacting a Company agent or by a Written Request mailed
directly to the Company.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account is a party; nor are there material legal proceedings involving the
Separate Account to which Transamerica or the Underwriter are parties.
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Page
GENERAL INFORMATION AND HISTORY.....................3
ANNUITY PAYMENTS....................................3
CALCULATION OF YIELDS AND TOTAL RETURNS.............4
FEDERAL TAX MATTERS.................................6
THE UNDERWRITER.....................................6
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS..............7
STATE REGULATION....................................7
LEGAL MATTERS.......................................7
INDEPENDENT AUDITORS................................8
RECORDS AND REPORTS.................................8
FINANCIAL STATEMENTS................................8
A "Statement of Additional Information" containing more detailed information
about the Contracts and the Separate Account is available free by writing
Transamerica Occidental Life Insurance Company at the Annuity Service Center,
401 N. Tryon Street, Suite 700, Charlotte, North Carolina, 28202 or by calling
800-258-4260.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
Separate Account C
of Transamerica Occidental Life Insurance Company
Individual Equity Investment Fund Contracts ("Contracts")
For Non-Tax Qualified Individual Retirement Plans
1150 South Olive Street, Los Angeles, California 90015-2211
This Statement of Additional Information expands upon subjects discussed in the
May 1, 1998, Prospectus for the Contracts offered by Transamerica Occidental
Life Insurance Company (the "Company") through Separate Account C. A copy of the
Prospectus may be obtained free of charge by writing to the Transamerica Annuity
Service Center at 401 North Tryon Street, Suite 700, Charlotte, North Carolina
28202 or by calling 800-258-4260. Terms used in the current Prospectus for the
Contracts are incorporated by reference into this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS
FOR THE CONTRACT AND THE PORTFOLIO.
Dated May 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION AND HISTORY...................................3
ANNUITY PAYMENTS..................................................3
CALCULATION OF YIELDS AND TOTAL RETURNS...........................4
FEDERAL TAX MATTERS...............................................6
THE UNDERWRITER...................................................6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS............................7
STATE REGULATION..................................................7
LEGAL MATTERS.....................................................7
INDEPENDENT AUDITORS..............................................8
RECORDS AND REPORTS...............................................8
FINANCIAL STATEMENTS..............................................8
<PAGE>
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.
ANNUITY PAYMENTS
Amount of First Annuity Payment
ANNUAL DEPOSIT AND DEFERRED CONTRACTS:
At the 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 three 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, two 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 October 16, 1969, 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 14 of the
Prospectus).
CALCULATION OF YIELDS AND TOTAL RETURNS
Separate Account Yield Calculations
Transamerica may from time to time disclose the current annualized
yield of the Separate Account for 30-day periods. The annualized yield of the
Separate Account refers to the income generated by the Separate Account over a
specified 30-day period. Because this yield is annualized, the yield generated
by the Separate Account during the 30-day period is assumed to be generated each
30-day period. The yield is computed by dividing the net investment income per
Accumulation Unit earned during the period by the price per unit on the last day
of the period, according to the following formula:
YIELD = 2[{a b+1}6 1]
cd
Where:
a = net investment income earned during the period by the
Portfolio attributable to the shares owned by the Separate
Account.
b = expenses for the Separate Account accrued for the period (net of
reimbursements). c = the average daily number of Accumulation Units
outstanding during the period. d = the maximum offering price per
Accumulation Unit on the last day of the period.
Net investment income will be determined in accordance with
rules established by the Commission. Accrued expenses will include all
recurring fees that are charged to all Policies. Because of the charges
and deductions imposed by the Separate Account, the yield for the
Separate Account will be lower than the yield for the corresponding
Portfolio. The yield on amounts held in the Separate Account normally
will fluctuate over time. Therefore, the disclosed yield for any given
period is not an indication or representation of future yields or rates
of return. The Separate Account's actual yield will be affected by the
types and quality of portfolio securities held by the Portfolio, and
its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average
annual total returns for the Separate Account for various periods of
time. Average annual total return quotations are computed by finding
the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P{1+T}n = ERV
<PAGE>
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the one,
five, or ten-year period at the end of the one, five
or ten-year period (or fractional portion thereof).
All recurring fees are recognized in the ending redeemable
value.
<PAGE>
FEDERAL TAX MATTERS
Tax Status of the Contract
Diversification Requirements: Section 817(h) of the Code generally
provides that in order for a variable contract which is based on a segregated
asset account to qualify as an annuity contract under the Code, the investments
made by such account must be "adequately diversified" in accordance with
Treasury regulations. The Treasury regulations issued under Section 817(h)
(Treas. Reg. ss. 1.817-5) apply a diversification requirement to the Separate
Account. The Separate Account, through the Portfolio, intends to comply with the
diversification requirements.
Distribution Requirements: In order to be treated as an annuity
contract for Federal income tax purposes, Section 72(s) of the Code requires any
nonqualified contract issued after January 18, 1985, to provide that (a) if any
Contract Owner dies on or after the retirement starting date but prior to the
time the entire interest in the Contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Contract Owner's death;
and (b) if any Contract Owner dies prior to the retirement starting date, the
entire interest in the Contract will be distributed within five years after the
date of the Contract Owner's death. These requirements will be considered
satisfied as to any portion of the Contract Owner's interest which is payable to
or for the benefit of a "designated beneficiary" and which is distributed over
the life of such "designated beneficiary" or over a period not extending beyond
the life expectancy of that Beneficiary, provided that such distributions begin
within one year of the Contract Owner's death. The Contract Owner's "designated
beneficiary" is the person designated by such Contract Owner as a beneficiary
and to whom ownership of the Contract passes by reason of death and must be a
natural person. However, if the Contract may be continued with the surviving
spouse as the new Contract Owner, the Contract may be continued with the
surviving spouse as the new Contract Owner (and annuitant if applicable). An
endorsement has been added to these Contracts to comply with these requirements.
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 Separate Account 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 Separate Account retained
as part of the reserves under the Contract. Based on this expectation, it is
anticipated that no charges will be made against the Separate Account for
Federal income taxes. If, in future years, any Federal income taxes are incurred
by the Company with respect to the Separate Account, then the Company may make a
charge to the Separate Account.
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 Separate
Account.
UNDERWRITER
Transamerica Securities Sales Corporation ("TSSC") is the principal
Underwriter for the Separate Account's Contracts. Its principal offices are
located at 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. TSSC may also serve as an
underwriter and distributor of other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). No underwriting commissions have been paid to TSSC.
Prior to November 1, 1996, Transamerica Financial Resources, Inc.
("TFR") was the principal underwriter for the Contracts. TFR is a wholly-owned
subsidiary of Transamerica Insurance Company of California and is registered
with the Commission as a broker/dealer and is a member of the NASD.
During the past three years, TFR received from the sales of the
Contracts total payments of $282 in 1995, $468 in 1996 and $825 in 1997.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to the assets of the Separate Account is held by Transamerica.
The assets of the Separate Account are kept separate and apart from
Transamerica's general account assets. Records are maintained of all purchases
and redemptions of Portfolio shares held by the Separate Account.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain Contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law and regulation, the Contract will be
modified accordingly.
LEGAL MATTERS
The organization of Transamerica, Transamerica's authority to issue
the Contracts, and the validity of
the form of the Contracts have been passed upon by James W. Dederer, Executive
Vice President, General Counsel
and Corporate Secretary of Transamerica, incorporated by reference herein.
INDEPENDENT AUDITORS
The financial statements of Transamerica Occidental Life Insurance
Company and the Separate Account included in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports appearing elsewhere herein, and are included in reliance
upon such reports given on their authority as experts in accounting and
auditing. Ernst & Young LLP's address is 515 South Flower Street, Los Angeles,
California 90071.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be
maintained by Transamerica. As presently required by the 1940 Act and
regulations promulgated thereunder pertaining to the Separate Account, reports
containing such information as may be required under the 1940 Act or by other
applicable law or regulation will be sent to the Contract Owner semi-annually at
the Contract Owner's last known address of record.
FINANCIAL STATEMENTS
This Statement of Additional Information contains the audited financial
statements of the Separate Account as of December 31, 1998.
The consolidated financial statements of Transamerica should be
considered only as bearing on the ability of Transamerica to meet its
obligations under the Contracts. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
<PAGE>
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the May 1, 1998,
Prospectus write to the Fund at the Transamerica Annuity Service Center, 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202, or by calling
800-258-4260.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
ADDITIONAL INVESTMENT POLICY INFORMATION 1
SPECIAL INVESTMENT METHODS AND RISKS 2
Restricted and Illiquid Securities 2
Borrowing 2
Other Investment Companies 2
Options on Securities and Securities Indices 3
Warrants and Rights 4
Repurchase Agreements 4
High-Yield ("Junk") Bond 5
Foreign Securities 5
INVESTMENT RESTRICTIONS 5
Fundamental Restrictions 5
Non-Fundamental Restrictions 7
Interpretive Rules 7
INVESTMENT ADVISER 8
Investment Advisory Agreement 8
Investment Sub-Advisory Agreement 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE 9
DETERMINATION OF NET ASSET VALUE 10
PERFORMANCE INFORMATION 11
FEDERAL TAX MATTERS 13
SHARES OF STOCK 14
CUSTODY OF ASSETS 15
DIRECTORS AND OFFICERS 15
Compensation 16
LEGAL PROCEEDINGS 17
OTHER INFORMATION 17
Legal Counsel 17
Other Information 17
Independent Auditors 18
Financial Statements 18
APPENDIX A 19
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio") and the Money Market
Portfolio. This Statement of Additional Information sets forth information about
the Growth Portfolio only. By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
<PAGE>
The Fund currently offers shares of the Growth Portfolio to insurance
companies as an underlying funding vehicle for variable annuity and variable
life insurance contracts (the "Contracts"). The Contracts are registered with
the Securities and Exchange Commission ("SEC"), and have separate prospectuses
and Statements of Additional Information.
The Fund may, in the future, offer its stock to qualified pension and
retirement plans. The Fund does not offer its stock directly to the general
public.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares were owned by Transamerica Life Insurance and Annuity
Company on behalf of Separate Account VA-6.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage. Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase options that are traded on United
States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price and that the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgment may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" means the lesser of: (a) 67% or more of the votes
attributable to shares of the Portfolio present at a meeting, if the holders of
more than 50% of such votes are present or represented by proxy; or (b) more
than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the Portfolio
may not purchase more than 10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than 25% of the
value of its total assets in securities issued by companies engaged in any one
industry. This limitation does not apply to investments in Government
Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets 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 real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell commodities or
commodities contracts.
9. Senior Securities The Portfolio may not issue senior securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities 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 salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio 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 Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns 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 Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain any short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
<PAGE>
INVESTMENT ADVISER
Transamerica is the investment adviser of the Fund and its Portfolio.
It will oversee the management of the assets of the Portfolio by Investment
Services. In turn, Investment Services is responsible for the day-to-day
management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of the Portfolio and paid to Transamerica periodically.
Transamerica or its affiliates pays the salaries and fees, if any, of all
officers and directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of Transamerica and of all personnel of Transamerica performing
services relating to research, statistical and investment activities and the
fees of the Sub-Adviser.
The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, registration fees and
expenses, and fees and expenses of directors unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed 0.10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The total dollar amounts paid by the Portfolio, and/or its predecessor
Separate Account Fund C, to Transamerica under the applicable investment
advisory contract for the last three fiscal years are as follows: Separate
Account Fund C paid $67,198 in 1995; Separate Account Fund C and the Portfolio
together paid $66,831 in 1996; and the Portfolio paid $313,749 in 1997.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and by the Contract Owners of Separate Account Fund C at a
Contract Owners meeting held on October 30, 1996. The investment advisory
agreement will remain in effect from year to year provided such continuance is
specifically approved as to the Portfolio at least annually by: (a) the Board of
Directors or the vote of a majority of the votes attributable to shares of the
Portfolio; and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Portfolio at any time by the Board of Directors or by vote of a
majority of the votes attributable to outstanding voting securities of the
applicable Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica.
Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services is located at 1150 South Olive Street, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. Investment Services will provide recommendations on the
management of Fund assets, provide investment research reports and information,
supervise and manage the investments of the Portfolio, and direct the purchase
and sale of Portfolio investments. Investment decisions regarding the
composition of the Portfolio and the nature and timing of changes in the
Portfolio are subject to the control of the Board of Directors of the Fund.
The sub-advisory agreement was approved for the Portfolio by the Board
of Directors, including a majority of the Directors who are not parties to the
sub-advisory agreement or "interested persons" (as such term is defined in the
1940 Act) of any party thereto (the "non-interested Directors"), on July 24,
1996, and by the Contract Owners of Separate Account Fund C at a Contract Owners
meeting held on October 30, 1996. The sub-advisory agreement will remain in
effect from year to year provided such continuance is specifically approved as
to the Portfolio at least annually by: (a) the Board of Directors or the vote of
a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The sub-advisory agreement
will terminate automatically if assigned (as defined in the 1940 Act). The
sub-advisory agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 30 days written
notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
activities, and some of such services obtained in connection with the execution
of transactions for the Portfolio may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of the Portfolio, and the services furnished by such brokers
may be used by Investment Services in providing investment sub-advisory services
for the Portfolio. The aggregate dollar amounts of the brokerage commissions
paid with respect to portfolio transactions of the Portfolio by Investment
Services as sub-adviser to Separate Account Fund C (the Portfolio's predecessor)
were $7,253 for fiscal year 1995, and $19,115 for the first ten months of 1996.
The aggregate dollar amount of brokerage commissions paid by the Portfolio after
the reorganization, during November and December 1996, was $5,550, so that the
total paid by Investment Services and the Portfolio during fiscal year 1996 was
$24,665. The total paid by the Portfolio during fiscal year 1997 was $16,312.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Portfolio's
predecessor) for 1995 was 30.84%. The portfolio turnover rate for 1996, when
combining the experience of Separate Account Fund C through October 31, 1996,
and the Portfolio's experience for November and December 1996 was 34.58%. The
Portfolio's portfolio turnover rate for 1997 was 20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments
("Equities") listed on any U.S. stock market or the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last sale price on that exchange
or NASDAQ on the valuation day; if no sale occurs, Equities
traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices; (b)
over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; (c)
debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors; (d) options and futures contracts
are valued at the last sale price on the market where any such
option contracts are principally traded; (e) over-the-counter
options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; (f) all
other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not
deemed by Investment Services to be representative of market
values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and (g) debt securities with a
remaining maturity of 60 days or less will be valued at their
amortized cost which approximates market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the price will be determined in good faith by or under procedures
established by the Board of Directors.
PERFORMANCE INFORMATION
The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C, as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, its investment performance for periods prior to the reorganization
reflect total mutual fund fees and expenses of 0.98% per year.
In computing its standardized total returns for periods prior to the
reorganization, the Portfolio assumes that the charges currently imposed by the
Portfolio were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data does not reflect
any sales or insurance charges, or any other separate account or contract level
charges, that were imposed under the annuity contracts issued through Separate
Account Fund C.
Any performance data quoted for the Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio does not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Portfolio recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 5000 Index; (k) the Salomon Brothers
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of the Portfolio varies based
on market conditions, portfolio expenses, portfolio investments and other
factors. The value of the Portfolio's shares fluctuates and an investor's shares
may be worth more or less than their original cost upon redemption. The Fund may
also, at its discretion, from time to time make a list of the Portfolio's
holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. The Portfolio must have, at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United States
Government securities, securities of other regulated investment companies, and
other securities which, in respect of any one issuer, do not exceed 5% of the
value of the Portfolio's total assets and that do not represent more than 10% of
the outstanding voting securities of the issuer. In addition, not more than 25%
of the value of the Portfolio's total assets may be invested in securities
(other than United States Government securities or the securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian") 225 Franklin Street, Boston,
Massachusetts 02110 holds the cash and portfolio securities of the Fund as
custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald E. Cantlay (76) Board of Directors Director, Managing General Partner of Cee
'n' Tee Company; Director of California
Trucking Association and Western Highway
Institute; Director of FPA Capital Fund
and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and
Director of Transamerica Investment
Services, Inc.; Senior Vice President and
Chief Investment Officer of Transamerica
Corporation. Director and Chief
Investment Officer of Transamerica
Occidental Life Insurance Company.
Jon C. Strauss (58) 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 (57)* Chairman, Board of Director,
Directors Executive Vice President and Chief
Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company.
Peter J. Sodini (57) 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).
Barbara A. Kelley (45) President President, Chief Operating Officer and
Director of Transamerica Financial
Resources, Inc. and President and Director
of Transamerica Securities Sales
Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica
Product, Inc. I, Transamerica Product,
Inc. II, Transamerica Product, Inc. IV,
and Transamerica Leasing Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of
the Institutional Marketing Services
Division of Transamerica Life Insurance
and Annuity Company and prior to 1994,
Vice President and National Sales Manager
of the Dreyfus Service Organization .
Sally S. Yamada (47) Assistant Secretary Vice President and Treasurer of
Transamerica
Occidental Life Insurance Company
and Treasurer of Transamerica Life
Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life
Insurance Company and prior to 1994
Counsel and Vice President for Colonial
Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams
& Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief Financial
Officer, Transamerica Investment Services,
Inc., since 1997; Independent Financial
Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940
Act.
** Except as otherwise noted, the mailing address of each Board member and
officer is 1150 South Olive, Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same or similar position with Transamerica Occidental's Separate Account Fund B.
The members of the Board of Directors are also members of the Board of Directors
of Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ended December 31, 1997, to all Directors of
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 Fund1/ Expenses2/
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini -$1500- -0- $4,750
Jon C. Strauss $500 -0- $500
</TABLE>
---------------------
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent auditors.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for the fiscal year ended December 31, 1997.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1A. Moody's Investors Service, Inc. Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
a medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or maybe
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements and their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Unrated:
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following:1. An application
for rating was not received or accepted.2. The issue or issuer belongs to a
group of securities or companies that are not rated as a matter of policy.3.
There is a lack of essential data pertaining to the issue or issuer.4.The issue
was privately placed, in which case the rating is not published in Moody's
publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.Note: Those
bonds in the Aa, A and Baa groups which Moody's believe possess the strongest
investment attributes are designated by the symbols Aa1, A1 and Baa1.B. Standard
& Poor's Corporations AAA: Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong. AA: Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. A: Bonds rated A have
a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. BBB: Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than in
higher rated categories. BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.Notes: Bonds which are
unrated expose the investor to risks with respect to capacity to pay interest or
repay principal which are similar to the risks of lower-rated speculative
obligations. Investment Services'
uses its judgment, analysis and experience to evaluate such bonds.
- --------
1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement of Additional
Information for the securities listed. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligations to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these securities on
the date of the Fund's fiscal year end.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the May 1, 1998,
Prospectus write to the Fund at the Transamerica Annuity Service Center, 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202, or by calling
800-258-4260.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
ADDITIONAL INVESTMENT POLICY INFORMATION 1
SPECIAL INVESTMENT METHODS AND RISKS 2
Restricted and Illiquid Securities 2
Borrowing 2
Other Investment Companies 2
Options on Securities and Securities Indices 3
Warrants and Rights 4
Repurchase Agreements 4
High-Yield ("Junk") Bond 5
Foreign Securities 5
INVESTMENT RESTRICTIONS 5
Fundamental Restrictions 5
Non-Fundamental Restrictions 7
Interpretive Rules 7
INVESTMENT ADVISER 8
Investment Advisory Agreement 8
Investment Sub-Advisory Agreement 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE 9
DETERMINATION OF NET ASSET VALUE 10
PERFORMANCE INFORMATION 11
FEDERAL TAX MATTERS 13
SHARES OF STOCK 14
CUSTODY OF ASSETS 15
DIRECTORS AND OFFICERS 15
Compensation 16
LEGAL PROCEEDINGS 17
OTHER INFORMATION 17
Legal Counsel 17
Other Information 17
Independent Auditors 18
Financial Statements 18
APPENDIX A 19
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio") and the Money Market
Portfolio. This Statement of Additional Information sets forth information about
the Growth Portfolio only. By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
<PAGE>
The Fund currently offers shares of the Growth Portfolio to insurance
companies as an underlying funding vehicle for variable annuity and variable
life insurance contracts (the "Contracts"). The Contracts are registered with
the Securities and Exchange Commission ("SEC"), and have separate prospectuses
and Statements of Additional Information.
The Fund may, in the future, offer its stock to qualified pension and
retirement plans. The Fund does not offer its stock directly to the general
public.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares were owned by Transamerica Life Insurance and Annuity
Company on behalf of Separate Account VA-6.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage. Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase options that are traded on United
States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price and that the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgment may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" means the lesser of: (a) 67% or more of the votes
attributable to shares of the Portfolio present at a meeting, if the holders of
more than 50% of such votes are present or represented by proxy; or (b) more
than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the Portfolio
may not purchase more than 10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than 25% of the
value of its total assets in securities issued by companies engaged in any one
industry. This limitation does not apply to investments in Government
Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets 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 real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell commodities or
commodities contracts.
9. Senior Securities The Portfolio may not issue senior securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities 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 salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio 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 Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns 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 Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain any short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
<PAGE>
INVESTMENT ADVISER
Transamerica is the investment adviser of the Fund and its Portfolio.
It will oversee the management of the assets of the Portfolio by Investment
Services. In turn, Investment Services is responsible for the day-to-day
management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of the Portfolio and paid to Transamerica periodically.
Transamerica or its affiliates pays the salaries and fees, if any, of all
officers and directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of Transamerica and of all personnel of Transamerica performing
services relating to research, statistical and investment activities and the
fees of the Sub-Adviser.
The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, registration fees and
expenses, and fees and expenses of directors unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed 0.10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The total dollar amounts paid by the Portfolio, and/or its predecessor
Separate Account Fund C, to Transamerica under the applicable investment
advisory contract for the last three fiscal years are as follows: Separate
Account Fund C paid $67,198 in 1995; Separate Account Fund C and the Portfolio
together paid $66,831 in 1996; and the Portfolio paid $313,749 in 1997.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and by the Contract Owners of Separate Account Fund C at a
Contract Owners meeting held on October 30, 1996. The investment advisory
agreement will remain in effect from year to year provided such continuance is
specifically approved as to the Portfolio at least annually by: (a) the Board of
Directors or the vote of a majority of the votes attributable to shares of the
Portfolio; and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Portfolio at any time by the Board of Directors or by vote of a
majority of the votes attributable to outstanding voting securities of the
applicable Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica.
Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services is located at 1150 South Olive Street, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. Investment Services will provide recommendations on the
management of Fund assets, provide investment research reports and information,
supervise and manage the investments of the Portfolio, and direct the purchase
and sale of Portfolio investments. Investment decisions regarding the
composition of the Portfolio and the nature and timing of changes in the
Portfolio are subject to the control of the Board of Directors of the Fund.
The sub-advisory agreement was approved for the Portfolio by the Board
of Directors, including a majority of the Directors who are not parties to the
sub-advisory agreement or "interested persons" (as such term is defined in the
1940 Act) of any party thereto (the "non-interested Directors"), on July 24,
1996, and by the Contract Owners of Separate Account Fund C at a Contract Owners
meeting held on October 30, 1996. The sub-advisory agreement will remain in
effect from year to year provided such continuance is specifically approved as
to the Portfolio at least annually by: (a) the Board of Directors or the vote of
a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The sub-advisory agreement
will terminate automatically if assigned (as defined in the 1940 Act). The
sub-advisory agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 30 days written
notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
activities, and some of such services obtained in connection with the execution
of transactions for the Portfolio may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of the Portfolio, and the services furnished by such brokers
may be used by Investment Services in providing investment sub-advisory services
for the Portfolio. The aggregate dollar amounts of the brokerage commissions
paid with respect to portfolio transactions of the Portfolio by Investment
Services as sub-adviser to Separate Account Fund C (the Portfolio's predecessor)
were $7,253 for fiscal year 1995, and $19,115 for the first ten months of 1996.
The aggregate dollar amount of brokerage commissions paid by the Portfolio after
the reorganization, during November and December 1996, was $5,550, so that the
total paid by Investment Services and the Portfolio during fiscal year 1996 was
$24,665. The total paid by the Portfolio during fiscal year 1997 was $16,312.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Portfolio's
predecessor) for 1995 was 30.84%. The portfolio turnover rate for 1996, when
combining the experience of Separate Account Fund C through October 31, 1996,
and the Portfolio's experience for November and December 1996 was 34.58%. The
Portfolio's portfolio turnover rate for 1997 was 20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments
("Equities") listed on any U.S. stock market or the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last sale price on that exchange
or NASDAQ on the valuation day; if no sale occurs, Equities
traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices; (b)
over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; (c)
debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors; (d) options and futures contracts
are valued at the last sale price on the market where any such
option contracts are principally traded; (e) over-the-counter
options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; (f) all
other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not
deemed by Investment Services to be representative of market
values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and (g) debt securities with a
remaining maturity of 60 days or less will be valued at their
amortized cost which approximates market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the price will be determined in good faith by or under procedures
established by the Board of Directors.
PERFORMANCE INFORMATION
The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C, as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, its investment performance for periods prior to the reorganization
reflect total mutual fund fees and expenses of 0.98% per year.
In computing its standardized total returns for periods prior to the
reorganization, the Portfolio assumes that the charges currently imposed by the
Portfolio were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data does not reflect
any sales or insurance charges, or any other separate account or contract level
charges, that were imposed under the annuity contracts issued through Separate
Account Fund C.
Any performance data quoted for the Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio does not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Portfolio recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 5000 Index; (k) the Salomon Brothers
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of the Portfolio varies based
on market conditions, portfolio expenses, portfolio investments and other
factors. The value of the Portfolio's shares fluctuates and an investor's shares
may be worth more or less than their original cost upon redemption. The Fund may
also, at its discretion, from time to time make a list of the Portfolio's
holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. The Portfolio must have, at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United States
Government securities, securities of other regulated investment companies, and
other securities which, in respect of any one issuer, do not exceed 5% of the
value of the Portfolio's total assets and that do not represent more than 10% of
the outstanding voting securities of the issuer. In addition, not more than 25%
of the value of the Portfolio's total assets may be invested in securities
(other than United States Government securities or the securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian") 225 Franklin Street, Boston,
Massachusetts 02110 holds the cash and portfolio securities of the Fund as
custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald E. Cantlay (76) Board of Directors Director, Managing General Partner of Cee
'n' Tee Company; Director of California
Trucking Association and Western Highway
Institute; Director of FPA Capital Fund
and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and
Director of Transamerica Investment
Services, Inc.; Senior Vice President and
Chief Investment Officer of Transamerica
Corporation. Director and Chief
Investment Officer of Transamerica
Occidental Life Insurance Company.
Jon C. Strauss (58) 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 (57)* Chairman, Board of Director,
Directors Executive Vice President and Chief
Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company.
Peter J. Sodini (57) 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).
Barbara A. Kelley (45) President President, Chief Operating Officer and
Director of Transamerica Financial
Resources, Inc. and President and Director
of Transamerica Securities Sales
Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica
Product, Inc. I, Transamerica Product,
Inc. II, Transamerica Product, Inc. IV,
and Transamerica Leasing Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of
the Institutional Marketing Services
Division of Transamerica Life Insurance
and Annuity Company and prior to 1994,
Vice President and National Sales Manager
of the Dreyfus Service Organization .
Sally S. Yamada (47) Assistant Secretary Vice President and Treasurer of
Transamerica
Occidental Life Insurance Company
and Treasurer of Transamerica Life
Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life
Insurance Company and prior to 1994
Counsel and Vice President for Colonial
Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams
& Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief Financial
Officer, Transamerica Investment Services,
Inc., since 1997; Independent Financial
Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940
Act.
** Except as otherwise noted, the mailing address of each Board member and
officer is 1150 South Olive, Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same or similar position with Transamerica Occidental's Separate Account Fund B.
The members of the Board of Directors are also members of the Board of Directors
of Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ended December 31, 1997, to all Directors of
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 Fund1/ Expenses2/
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini -$1500- -0- $4,750
Jon C. Strauss $500 -0- $500
</TABLE>
---------------------
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent auditors.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for the fiscal year ended December 31, 1997.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1A. Moody's Investors Service, Inc. Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
a medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or maybe
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements and their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Unrated:
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following:1. An application
for rating was not received or accepted.2. The issue or issuer belongs to a
group of securities or companies that are not rated as a matter of policy.3.
There is a lack of essential data pertaining to the issue or issuer.4.The issue
was privately placed, in which case the rating is not published in Moody's
publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.Note: Those
bonds in the Aa, A and Baa groups which Moody's believe possess the strongest
investment attributes are designated by the symbols Aa1, A1 and Baa1.B. Standard
& Poor's Corporations AAA: Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong. AA: Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. A: Bonds rated A have
a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. BBB: Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than in
higher rated categories. BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.Notes: Bonds which are
unrated expose the investor to risks with respect to capacity to pay interest or
repay principal which are similar to the risks of lower-rated speculative
obligations. Investment Services'
uses its judgment, analysis and experience to evaluate such bonds.
- --------
1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement of Additional
Information for the securities listed. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligations to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these securities on
the date of the Fund's fiscal year end.
<PAGE>
Audited Financial Statements
Transamerica Occidental's
Separate Account C
Year ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Transamerica Occidental's Separate Account C
Audited Financial Statements
Year ended December 31, 1997
Contents
Report of Independent Auditors...........1
Statement of Assets and Liabilities......2
Statement of Operations..................3
Statement of Changes in Net Assets.......4
Notes to Financial Statements............5
<PAGE>
2
Report of Independent Auditors
Unitholders of Transamerica Occidental's Separate Account C
Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
Transamerica Occidental's Separate Account C (comprised of shares of the Growth
Portfolio of Transamerica Variable Insurance Fund, Inc.) as of December 31,
1997, and the related statement of operations for the year then ended, and the
statement of changes in net assets for the year then ended and for the period
from November 1, 1996 through December 31, 1996. These financial statements are
the responsibility of Transamerica Occidental Separate Account C's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the fund manager. 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 C as of December 31, 1997, and the results of its operations
for the year then ended, and the changes in its net assets for the year then
ended
and for the period from November 1, 1996 through December 31, 1996 in conformity
with generally accepted accounting principles.
Charlotte, North Carolina
April 13, 1998
<PAGE>
Transamerica Occidental's Separate Account C
Statement of Assets and Liabilities
December 31, 1997
Assets:
Investment at fair value:
3,144,212.811 shares of the Growth Portfolio of Transamerica
Variable Insurance Fund, Inc., at $14.75 per share (cost
$19,010,135)
<TABLE>
<CAPTION>
<S> <C>
$46,377,139
Liabilities:
Due to Transamerica Life 11,717
--------------------
Net assets $ 46,365,422
====================
Net assets attributable to variable annuity contract holders-
1,305,735.516 units at $34.821219 per unit 45,467,302
Reserves for retired annuitants 898,120
====================
$ 46,365,422
====================
</TABLE>
See accompanying notes.
<PAGE>
Transamerica Occidental's Separate Account C
Statement of Operations
Year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Investment income $ 3,659,175
Mortality and expense risk charges 233,785
---------------------
Net investment income 3,425,390
Net realized and unrealized gains on investments:
Net realized gains on investment transactions 473,686
Net unrealized appreciation of investments 10,765,604
---------------------
Net gains on investments 11,239,290
=====================
Increase in net assets resulting from operations $ 14,664,680
=====================
</TABLE>
See accompanying notes.
<PAGE>
Transamerica Occidental's Separate Account C
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Period November 1,
1996 through
Year ended December December 31, 1996
31, 1997
--------------------- ---------------------
From operations:
<S> <C> <C>
Net investment income (loss) $ 3,425,390 $ (29,272)
Net realized gains on investment transactions 473,686 42,520
Net unrealized appreciation of investments 10,765,604 2,704,008
--------------------- ---------------------
Increase in net assets from operations 14,664,680 2,717,256
Changes from accumulated unit transactions (551,857) (31,735)
Initial transfer of funds from predecessor separate account
- 29,567,078
--------------------- ---------------------
Increase in net assets 14,112,823 32,252,599
Net assets at beginning of period 32,252,599 -
--------------------- ---------------------
Net assets at end of period $ 46,365,422 $ 32,252,599
===================== =====================
</TABLE>
See accompanying notes.
<PAGE>
Transamerica Occidental's Separate Account C
Notes to Financial Statements
December 31, 1997
1. Organization
Transamerica Occidental's Separate Account C ("Separate Account") was
established by Transamerica Occidental Life Insurance Company ("Transamerica
Life") as a separate account under the laws of the State of California.
Effective November 1, 1996, the Separate Account reorganized into a unit
investment trust. Prior to November 1, 1996, the Separate Account was organized
as an open-end diversified management investment company, Separate Account Fund
C (the "Predecessor Separate Account"). Effective November 1, 1996, all
investments held by the Predecessor Separate Account were transferred to the
Growth Portfolio (the "Portfolio") of Transamerica Variable Insurance Fund, Inc.
(the "Fund"). Thereafter, the Separate Account's only investment was in shares
of the Portfolio. The Fund is an open-end, diversified investment company
registered under the Investment Company Act of 1940. The Separate Account is
registered with the Securities and Exchange Commission under the Investment Act
of 1940 as a unit investment trust and is designed to provide annuity benefits
pursuant to annuity contracts issued by Transamerica Life.
2. Significant Accounting Policies
The accompanying financial statements of the Separate Account have been prepared
in accordance with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein. The
accounting principles followed and the methods of applying those principles are
presented below:
Investment Valuation--Investments in the Portfolio's shares are carried at fair
(net asset) value. Realized investment gains or losses on investments are
determined on a specific identification basis which approximates average cost.
Investment transactions are accounted for on the date the order to buy or sell
is executed (trade date).
<PAGE>
Transamerica Occidental's Separate Account C
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Investment Income--Both ordinary and capital gains dividends are recognized on
the ex-dividend date. All distributions received are reinvested in shares of the
Portfolio. No dividends had been declared or paid through December 31, 1997.
Federal Income Taxes--Operations of the Separate Account are part of, and will
be taxed with, those of Transamerica Life, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax law,
income from assets maintained in the Separate Account for the exclusive benefit
of participants is generally not subject to federal income tax.
Reserves for Retired Annuitants--Reserves for retired annuitants are computed
using the Annuity Table for 1949, ultimate, two year age setback and an assumed
investment earnings rate of 3 1/2%.
3. Transamerica Life Investment
As of December 31, 1997, Transamerica Life had deposited $1,000,000 (current
value of $35,533,484) in the Separate Account under an amendment to the
California Insurance Code which permits domestic life insurers to allocate
amounts to such accounts. Transamerica Life is entitled to withdraw its
proportionate share of the Separate Account, in whole or in part, at any time.
4. Expenses and Charges
The value of the Separate Account has been reduced by a charge of 0.55% on each
valuation date for mortality and expense risks. In addition, the value of the
Portfolio has been reduced by a charge of 0.85% on each valuation date for
management fees and other charges.
5. Remuneration
The Separate Account does not remunerate directors, advisory boards or officers
or such other persons who may from time to time perform services for the Fund.
<PAGE>
Transamerica Occidental's Separate Account C
Notes to Financial Statements (continued)
6. Accumulation Units and Investment Transactions
For the year ended December 31, 1997, $76,774 and 836.2595 units of the Separate
Account were sold and $628,631 and 19,133.5909 units of the Separate Account
were redeemed. During this period, no shares of the Portfolio were purchased and
53,456 shares of the Portfolio were sold for $757,013.
<PAGE>
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1997
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1997
Audited Consolidated Financial Statements
Report of Independent Auditors................... 1
Consolidated Balance Sheet....................... 2
Consolidated Statement of Income................. 3
Consolidated Statement of Shareholder's Equity... 4
Consolidated Statement of Cash Flows............. 5
Notes to Consolidated Financial Statements....... 6
<PAGE>
-26-
4367:Folder T
04/22/98 3:30 PM
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying consolidated balance sheet of Transamerica
Occidental Life Insurance Company and Subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
January 23, 1998
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
1997 1996
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 29,231,998 $ 26,980,676
Equity securities available for sale 791,221 471,734
Mortgage loans on real estate 706,939 716,669
Real estate 19,633 24,876
Policy loans 451,023 442,607
Other long-term investments 69,793 66,686
Short-term investments 324,672 135,726
--------------------- ---------------------
31,595,279 28,838,974
Cash 36,656 35,817
Accrued investment income 481,913 404,866
Accounts receivable 294,542 297,967
Reinsurance recoverable on paid and unpaid losses 920,847 829,653
Deferred policy acquisitions costs 2,102,588 2,138,203
Other assets 299,500 256,382
Separate account assets 5,494,703 3,527,950
--------------------- ---------------------
$ 41,226,028 $ 36,329,812
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 24,061,811 $ 22,718,955
Reserves for future policy benefits 5,468,611 5,275,149
Policy claims and other 557,822 502,331
--------------------- ---------------------
30,088,244 28,496,435
Income tax liabilities 814,088 388,852
Accounts payable and other liabilities 482,716 560,663
Separate account liabilities 5,494,703 3,527,950
--------------------- ---------------------
36,879,751 32,973,900
Shareholder's equity:
Common stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587 27,587
Additional paid-in capital 422,342 335,619
Retained earnings 2,738,151 2,467,406
Foreign currency translation adjustments (33,440) (24,472)
Net unrealized investment gains 1,191,637 549,772
--------------------- ---------------------
4,346,277 3,355,912
--------------------- ---------------------
$ 41,226,028 $ 36,329,812
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,777,371 $ 1,641,985 $ 1,663,576
Net investment income 2,165,565 2,077,232 1,972,759
Net realized investment gains 40,263 17,471 28,112
--------------- --------------- ---------------
TOTAL REVENUES 3,983,199 3,736,688 3,664,447
Benefits:
Benefits paid or provided 2,727,064 2,558,792 2,439,156
Increase in policy reserves and liabilities 59,246 57,968 236,205
--------------- --------------- ---------------
2,786,310 2,616,760 2,675,361
Expenses:
Amortization of deferred policy acquisition costs 265,264 235,180 182,123
Salaries and salary related expenses 165,768 158,699 145,681
Other expenses 284,220 224,084 200,339
--------------- --------------- ---------------
715,252 617,963 528,143
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,501,562 3,234,723 3,203,504
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 481,637 501,965 460,943
Provision for income taxes 149,581 164,685 149,647
--------------- --------------- ---------------
NET INCOME $ 332,056 $ 337,280 $ 311,296
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Net
Foreign Unrealized
Additional Currency Investment
Common Stock Paid-in Retained Translation Gains
Shares Amount Capital Earnings Adjustments (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 2,206,933 $ 27,587 $ 319,279 $ 1,921,232 $ (28,347) $ (321,460)
Net income 311,296
Capital contributions from 14,299
parent
Dividends declared (61,116)
Change in foreign currency
translation adjustments 4,729
Change in net unrealized
investment gains 1,260,392
Balance at December 31, 1995 2,206,933 27,587 333,578 2,171,412 (23,618) 938,932
Net income 337,280
Capital contributions from
parent 2,041
Dividends declared (41,286)
Change in foreign currency
translation adjustments (854)
Change in net unrealized
investment gains (389,160)
Balance at December 31, 1996 2,206,933 27,587 335,619 2,467,406 (24,472) 549,772
Net income 332,056
Capital transactions with
parent 86,723
Dividends declared (61,311)
Change in foreign currency
translation adjustments (8,968)
Change in net unrealized
investment gains 641,865
Balance at December 31, 1997 2,206,933 $ 27,587 $ 422,342 $ 2,738,151 $ (33,440) $ 1,191,637
============ ========== =========== ============= ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 332,056 $ 337,280 $ 311,296
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (91,194) (73,328) (466,669)
Accounts receivable (15,983) (159,309) (58,866)
Policy liabilities 1,102,246 949,108 1,273,723
Other assets, accounts payable and other
liabilities, and income taxes (89,954) (32,662) (252,362)
Policy acquisition costs deferred (467,730) (388,003) (381,806)
Amortization of deferred policy acquisition costs 256,303 268,770 191,313
Net realized gains on investment transactions (31,302) (51,061) (37,302)
Other (64,651) (15,758) (22,862)
--------------- --------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 929,791 835,037 556,465
INVESTMENT ACTIVITIES
Purchases of securities (9,825,763) (7,362,635) (5,667,539)
Purchases of other investments (127,437) (334,895) (330,503)
Sales of securities 8,193,409 5,064,780 3,587,367
Sales of other investments 129,671 175,001 155,084
Maturities of securities 559,361 506,941 341,485
Net change in short-term investments (188,946) 75,774 (67,337)
Other (53,478) (21,358) (35,384)
--------------- --------------- ---------------
NET CASH USED IN
INVESTING ACTIVITIES (1,313,183) (1,896,392) (2,016,827)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,851,644 6,260,653 5,151,428
Withdrawals from policyholder contract deposits (6,411,213) (5,173,419) (3,624,044)
Capital contributions from parent 3,800 - -
Dividends paid to parent (60,000) (40,000) (60,000)
--------------- --------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 384,231 1,047,234 1,467,384
--------------- --------------- ---------------
INCREASE (DECREASE) IN CASH 839 (14,121) 7,022
Cash at beginning of year 35,817 49,938 42,916
--------------- --------------- ---------------
CASH AT END OF YEAR $ 36,656 $ 35,817 $ 49,938
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"),
engage in providing life insurance, pension and annuity products, reinsurance,
structured settlements and investments,
which are distributed through a network of independent and company-affiliated
agents and independent brokers. The
Company's customers are primarily in the United States and Canada.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Reclassifications: Certain reclassifications of 1996 and 1995 amounts have
been made to conform to the 1997
- -----------------
presentation.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1997, the Financial Accounting Standards
Board issued a new standard on reporting comprehensive income, which establishes
standards for reporting and displaying comprehensive income and its components
in the financial statements. This standard is effective for interim and annual
periods beginning after December 15, 1997. Reclassification of financial
statements for all periods presented will be required upon adoption. Application
of this statement will not change recognition or measurement of net income and,
therefore, will not impact the Company's consolidated results of operations or
financial position.
In 1997, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for transfers of financial assets, servicing of financial
assets and extinguishment of liabilities. The standard requires that a transfer
of financial assets be accounted for as a sale only if certain specified
conditions for surrender of control over the transferred assets exist. There was
no material effect on the consolidated financial position or results of
operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans, which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TOLIC and its subsidiaries, all of which operate
primarily in the life insurance industry. TOLIC is a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which is a wholly owned
subsidiary of Transamerica Corporation. All significant intercompany balances
and transactions have been eliminated in consolidation.
Investments: Investments are reported on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes, as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC related to
non-traditional and investment type products are adjusted as if unrealized gains
or losses on securities available for sale were realized. Changes in such
adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Investment risks associated with fair value
changes are borne by the contract holders. Accordingly, investment income and
realized gains and losses attributable to Separate Accounts are not reported in
the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 3.0% to 9.7% in 1997 and 2.6% to 9.8% in 1996 and 2.8% to 10% in
1995.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and certain annuities with life
contingencies. The reserve for future policy benefits for traditional life
insurance products has been provided on a net-level premium method based upon
estimated investment yields, withdrawals, mortality, and other assumptions which
were appropriate at the time the policies were issued. Such estimates are based
upon past experience with a margin for adverse deviation. Interest assumptions
range from 2.25% in earlier years to 11.82%. Reserves for future policy benefits
are evaluated as if unrealized gains or losses on securities available for sale
were realized and adjusted for any resultant premium deficiencies. Changes in
such adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign Currency Translation: The effect of changes in exchange rates in
translating the foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1997, 1996 or 1995.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. The receivables and payables under certain modified
coinsurance arrangements are presented on a net basis to the extent that such
receivables and payables are with the same ceding company. Premiums ceded and
recoverable losses have been reported as a reduction of premium income and
benefits, respectively. The ceded amounts related to policy liabilities have
been reported as an asset.
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns filed by Transamerica Corporation, which
by the terms of a tax sharing agreement generally requires TOLIC to accrue and
settle income tax obligations in amounts that would result if TOLIC filed
separate tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturates consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities available for sale and equity
securities are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1997
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 273,949 $ 78,390 $ - $ 352,339
Obligations of states and political
subdivisions 219,391 16,765 31 236,125
Foreign governments 81,425 6,996 2 88,419
Corporate securities 18,596,027 1,438,385 57,729 19,976,683
Public utilities 4,017,154 340,580 811 4,356,923
Mortgage-backed securities 3,795,464 342,805 1,977 4,136,292
Redeemable preferred stocks 69,773 24,326 8,882 85,217
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 27,053,183 $ 2,248,247 $ 69,432 $ 29,231,998
================ ================ ================ ================
Equity securities $ 309,637 $ 488,322 $ 6,738 $ 791,221
================ ================ ================ ================
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 288,605 $ 25,118 $ 1,628 $ 312,095
Obligations of states and political
subdivisions 258,596 8,508 538 266,566
Foreign governments 110,283 4,479 520 114,242
Corporate securities 15,171,041 779,904 108,999 15,841,946
Public utilities 4,462,063 203,604 35,769 4,629,898
Mortgage-backed securities 5,548,067 252,094 56,293 5,743,868
Redeemable preferred stocks 66,856 10,281 5,076 72,061
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 25,905,511 $ 1,283,988 $ 208,823 $ 26,980,676
================ ================ ================ ================
Equity securities $ 199,494 $ 281,418 $ 9,178 $ 471,734
================ ================ ================ ================
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
The cost and fair value of fixed maturities available for sale at December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
<TABLE>
<CAPTION>
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1998 $ 494,969 $ 510,261
Due in 1999-2002 3,877,467 4,019,436
Due in 2003-2007 5,908,618 6,249,016
Due after 2007 12,906,892 14,231,776
---------------- ----------------
23,187,946 25,010,489
Mortgage-backed securities 3,795,464 4,136,292
Redeemable preferred stock 69,773 85,217
---------------- ----------------
$ 27,053,183 $ 29,231,998
================ ================
The components of the carrying value of real estate are as follows (in
thousands):
1997 1996
--------------- ----------
Investment real estate $ 18,806 $ 22,814
Properties held for sale 827 2,062
---------------- ----------------
$ 19,633 $ 24,876
================ ================
</TABLE>
As of December 31, 1997, the Company held a total investment in one issuer,
other than the United States Government or a Unites States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands):
Name of Issuer Carrying Value
Hill Street Funding $ 516,822
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $21.7 million at December 31, 1997.
<PAGE>
NOTE B--INVESTMENTS (Continued)
Net investment income by major investment category is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 2,096,543 $ 2,005,764 $ 1,904,519
Equity securities 5,339 5,458 3,418
Mortgage loans on real estate 62,877 58,165 40,702
Real estate (11,110) (7,435) 3,209
Policy loans 28,080 27,012 25,641
Other long-term investments 511 978 2,353
Short-term investments 12,770 10,616 13,286
---------------- ---------------- ----------------
2,195,010 2,100,558 1,993,128
Investment expenses (29,445) (23,326) (20,369)
----------------- ---------------- ----------------
$ 2,165,565 $ 2,077,232 $ 1,972,759
================ ================ ================
</TABLE>
Significant components of net realized investment gains are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
Net gains (losses) on disposition of investments in:
<S> <C> <C> <C>
Fixed maturities $ (21,484) $ 40,967 $ 52,889
Equity securities 59,834 15,750 5,637
Other (1,410) 3,424 2,327
---------------- ---------------- ----------------
36,940 60,141 60,853
Provision for impairment (5,638) (9,080) (23,551)
Accelerated amortization of DPAC 8,961 (33,590) (9,190)
---------------- ---------------- ----------------
$ 40,263 $ 17,471 $ 28,112
================ ================ ================
The components of net gains (losses) on disposition of investment in fixed maturities are as follows (in thousands):
1997 1996 1995
Gross gains $ 82,452 $ 74,817 $ 61,504
Gross losses (103,936) (33,850) (8,615)
---------------- ---------------- ----------------
$ (21,484) $ 40,967 $ 52,889
================= ================ ================
</TABLE>
Proceeds from disposition of investment in fixed maturities available for sale
were $7,896.5 million in 1997, $4,969.2 million in 1996 and $3,461.1 million in
1995.
<PAGE>
NOTE B--INVESTMENTS (Continued)
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------- -----------
<S> <C> <C>
Fixed maturities $ 64,168 $ 54,160
Mortgage loans on real estate 24,508 22,654
Real estate 5,854 9,146
Other long-term investments 5,900 11,025
---------------- ----------------
$ 100,430 $ 96,985
================ ================
</TABLE>
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------- ----------
Unrealized gains on investment in:
<S> <C> <C>
Fixed maturities $ 2,178,815 $ 1,075,165
Equity securities 481,584 272,240
---------------- ----------------
2,660,399 1,347,405
Fair value adjustments to:
DPAC (546,111) (306,602)
Reserves for future policy benefits (281,000) (195,000)
---------------- ----------------
(827,111) (501,602)
Related deferred taxes (641,651) (296,031)
---------------- ----------------
$ 1,191,637 $ 549,772
================ ================
</TABLE>
<PAGE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 2,138,203 $ 1,974,211 $ 2,480,474
Amounts deferred:
Commissions 352,300 290,512 298,698
Other 115,431 97,491 83,108
Amortization attributed to:
Net gain on disposition of investments 8,961 (33,590) (9,190)
Operating income (265,264) (235,180) (182,123)
Fair value adjustment (239,509) 48,969 (706,915)
Foreign currency translation adjustment (7,534) (4,210) 10,159
----------------- --------------- ----------------
Balance at end of year $ 2,102,588 $ 2,138,203 $ 1,974,211
================ =============== ================
</TABLE>
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------- -----------
<S> <C> <C>
Liabilities for investment-type products $ 19,297,966 $ 18,126,119
Liabilities for non-traditional life insurance
products 4,763,845 4,592,836
--------------- ---------------
$ 24,061,811 $ 22,718,955
=============== ===============
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $281 million as of December 31, 1997, $195 million as of
December 31, 1996 and $339 million as of December 31, 1995.
<PAGE>
NOTE E--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------- -----------
<S> <C> <C>
Current tax liabilities (receivables) $ 44,510 $ (13,752)
Deferred tax liabilities 769,578 402,604
---------------- ----------------
$ 814,088 $ 388,852
================ ================
</TABLE>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------- -----------
<S> <C> <C>
Deferred policy acquisition costs $ 783,624 $ 726,011
Unrealized investment gains 641,651 296,031
---------------- ----------------
Total deferred tax liabilities 1,425,275 1,022,042
Life insurance policy liabilities (613,874) (578,823)
Provision for impairment of investments (35,151) (33,945)
Other-net (6,672) (6,670)
----------------- -----------------
Total deferred tax assets (655,697) (619,438)
---------------- ----------------
$ 769,578 $ 402,604
================ ================
</TABLE>
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
Components of provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------
<S> <C> <C> <C>
Current tax expense $ 122,201 $ 99,692 $ 115,614
Deferred tax expense (benefit):
Domestic 14,731 55,261 21,784
Foreign 12,649 9,732 12,249
---------------- ---------------- ---------------
$ 149,581 $ 164,685 $ 149,647
================ ================ ===============
</TABLE>
<PAGE>
NOTE E--INCOME TAXES (Continued)
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- -----------
Income before income taxes:
<S> <C> <C> <C>
Income from U.S. operations $ 430,449 $ 474,160 $ 425,946
Income from foreign operations 51,189 27,805 34,997
--------------- --------------- ---------------
481,638 501,965 460,943
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 168,573 175,688 161,330
Income not subject to tax (3,284) (2,262) (685)
Low income housing credits (10,156) (8,175) (3,137)
Other, net (5,552) (566) (7,861)
--------------- --------------- ---------------
$ 149,581 $ 164,685 $ 149,647
=============== =============== ===============
</TABLE>
Low income housing credits are recognized over the productive life of acquired
assets. In 1995, the Company recognized a $4.4 million tax benefit related to
the favorable settlement of a prior year tax matter.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1997 was $138 million. At
December 31, 1997, $2,179 million was available for payment of dividends without
such tax consequences. No income taxes have been provided on the policyholders'
surplus account since the conditions that would cause such taxes are remote.
Income taxes of $58.5 million, $149.1 million and $153.3 million were paid
principally to the Company's parent in 1997, 1996 and 1995, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
NOTE F--REINSURANCE (Continued)
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1997
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 241,379,957 $ 207,533,094 $ 225,685,653 $ 259,532,516
==================== =================== =================== ===================
Premiums and other
considerations $ 1,854,918 $ 1,163,259 $ 1,085,712 $ 1,777,371
==================== =================== =================== ===================
Benefits paid or
provided $ 2,950,335 $ 696,009 $ 472,738 $ 2,727,064
==================== =================== =================== ===================
1996
Life insurance in force,
at end of year $ 220,162,932 $ 195,158,214 $ 201,560,322 $ 226,565,040
==================== =================== =================== ===================
Premiums and other
considerations $ 1,702,975 $ 1,033,201 $ 972,211 $ 1,641,985
==================== =================== =================== ===================
Benefits paid or
provided $ 2,922,967 $ 1,112,561 $ 748,386 $ 2,558,792
==================== =================== =================== ===================
1995
Life insurance in force,
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $ 264,153,296
==================== =================== =================== ===================
Premiums and other
considerations $ 1,857,439 $ 1,079,303 $ 885,440 $ 1,663,576
==================== =================== =================== ===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 701,488 $ 2,439,156
==================== =================== =================== ===================
</TABLE>
<PAGE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly traded stocks and
bonds.
The Company's total pension costs (benefits) recognized for all plans were
$(5.4) million in 1997, $(3.1) million in 1996 and $2.5 million in 1995, of
which $(6.1) million in 1997, $(3.7) million in 1996 and $2.0 million in 1995,
respectively, related to the plan sponsored by Transamerica Corporation. The
plans sponsored by the Company are not material to the consolidated financial
position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1997, 1996 and 1995.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include loans and advances, investments in a money market fund managed by an
affiliated company, rental of space, and other specialized services. At December
31, 1997, pension funds administered for these related companies aggregated
$1,467.4 million and the investment in an affiliated money market fund, included
in short-term investments, was $91.1 million.
During 1996, the Company transferred certain below investment grade bonds with
an aggregate book value of $424.9 million, including an aggregate interest
receivable of $9.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $438.9 million,
comprised of collateralized higher-rated bond obligations of $413.9 million
issued by the special purpose subsidiary and cash of $25 million. The excess of
fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies in exchange for assets with a fair value of $49.7
million, comprising mortgage loans of $35.1 million and cash of $14.6 million.
The excess of fair value of the consideration received over the book value of
the real estates transferred, net of related tax payable to the parent, is
included as a capital contribution.
<PAGE>
NOTE H--RELATED PARTY TRANSACTIONS (Continued)
During 1997, equity securities with a fair value of $177.2 million (cost of
$55.5 million) were received from Transamerica Corporation. $50 million was used
as a partial paydown on a $200 million note due from Transamerica Corporation.
The excess of fair value over cost less the amount applied to the note was
recorded as additional paid-in capital. The remaining balance on the note, which
is due in 2013 and bears interest at 7%, is $150 million.
In addition, the Company received a capital contribution of $15 million from
Transamerica Corporation.
NOTE I--REGULATORY MATTERS
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of TOLIC and each subsidiary's state of
incorporation. Such regulations include the risk-based capital requirement and
the restriction on the payment of dividends. Generally, dividends during any
year may not be paid, without prior regulatory approval, in excess of the
greater of 10% of the Company's statutory capital and surplus as of the
preceding year end or the Company's statutory net income from operations for the
preceding year. The insurance department of the domiciliary state recognizes
these amounts as determined in conformity with statutory accounting practices
prescribed or permitted by the insurance department, which vary in some respects
from generally accepted accounting principles. The Company's statutory net
income and statutory capital and surplus which are represented by TOLIC's net
income and capital and surplus are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 96,472 $ 112,296 $ 131,607
Statutory capital and surplus, at
end of year 1,556,228 1,249,045 1,115,691
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guarantee, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1997, commitments to maintain liquidity for
benefit payments on notional amounts of $3.3 billion were outstanding compared
to $1.9 billion at December 31, 1996.
<PAGE>
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1997 and 1996, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $16.5
million in 1997, $20.6 million in 1996 and $25.3 million in 1995. 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, 1997 (in thousands):
Year ending December 31:
1998 $ 15,115
1999 14,468
2000 12,208
2001 11,768
2002 6,874
Later years 55,597
--------------------
$ 116,030
====================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel entered into a settlement which was approved on
June 26, 1997. The settlement required prompt notification to affected
policyholders. Administrative and policy benefit costs associated with the
settlement of $31 million pre-tax have been accrued. Additional costs related to
the settlement are not expected to be material and will be incurred over a
period of years. Additional costs related to the settlement are not currently
determinable. In the opinion of the Company, any ultimate liability which might
result from other litigation would not have a materially adverse effect on the
combined financial position of the Company or the results of its operations.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
December 31
-----------------------------------------
1997 1996
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 29,231,998 $ 29,231,998 $ 26,980,676 $ 26,980,676
Equity securities available for sale 791,221 791,221 471,734 471,734
Mortgage loans on real estate 706,939 774,556 716,669 770,122
Policy loans 451,023 427,924 442,607 416,396
Short-term investments 324,672 324,672 135,726 135,726
Cash 36,656 36,656 35,817 35,817
Accrued investment income 481,913 481,913 404,866 404,866
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,779,951 6,261,707 6,962,501 6,400,632
Single premium immediate annuities 4,361,311 5,122,562 4,115,047 4,476,968
Guaranteed investment contracts 3,211,834 3,265,384 3,153,769 3,207,342
Other deposit contracts 4,944,870 4,992,906 3,894,802 3,913,046
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 8,189 - 43,916
Payable position - (5,247) - (5,485)
</TABLE>
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
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.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
The information on derivative instruments is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1997
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 419,715 6.81% $ 1,820
Floating rate interest 280,905 6.48% 3,000
Floating rate interest based on one index and
receives floating rate interest based on
another index 337,371 - (320)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest - - -
Floating rate interest 2,252,089 6.17% 4,507
Floating rate interest based on one index and
receives floating rate interest based on
another index 304,820 - (1,565)
Interest rate floor agreements 560,500 6.46% 25,254
Swaptions 8,326,030 4.50% 103,018
Others 29,117 - 15,314
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 270,035 6.73% $ 1,511
Floating rate interest 250,905 6.77% 5,877
Floating rate interest based on one index and
receives floating rate interest based on
another index 326,644 - (9,359)
Interest rate swap agreements designated as
----
hedges of financial liabilities, where TLC pays:
Fixed rate interest 60,000 4.39% 333
Floating rate interest 1,710,716 6.11% 37,655
Floating rate interest based on one index and
receives floating rate interest based on
another index 58,585 - 443
Interest rate floor agreements 560,500 6.46% 19,287
Swaptions 8,327,570 4.50% 54,198
Others 108,745 - 19,607
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Activities with respect to the notional amounts are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Beginning End
of Year Additions Maturities Terminations of Year
1997:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 847,584 $ 322,165 $ 91,858 $ 39,900 $ 1,037,991
Interest rate swap agreements
designated as hedges of
financial liabilities 1,829,301 2,297,133 1,554,525 15,000 2,556,909
Interest rate floor agreements 560,500 - - - 560,500
Swaptions 8,327,570 - - 1,540 8,326,030
Others 108,745 20,572 100,200 - 29,117
-------------- -------------- -------------- ------------ ----------------
$ 11,673,700 $ 2,639,870 $ 1,746,583 $ 56,440 $ 12,510,547
============== ============== ============== ============ ================
1996:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 440,173 $ 566,023 $ 143,554 $ 15,058 $ 847,584
Interest rate swap agreements
designated as hedges of
financial liabilities 1,146,678 1,887,348 1,103,525 101,200 1,829,301
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,267,140 7,170,000 109,570 - 8,327,570
Others 100,000 8,745 - - 108,745
-------------- -------------- -------------- ------------ ----------------
$ 3,764,491 $ 9,632,116 $ 1,606,649 $ 116,258 $11,673,700
============== ============== ============== ============ ===========
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 274,777 $ 246,790 $ 59,947 $ 21,447 $ 440,173
Interest rate swap agreements
designated as hedges of
financial liabilities 601,545 1,035,910 460,777 30,000 1,146,678
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 100,000 250,000 100,000 - 250,000
Swaptions 100,000 1,167,140 - - 1,267,140
Others 100,000 - - - 100,000
-------------- -------------- -------------- ------------ ----------------
$ 1,736,822 $ 2,699,840 $ 620,724 $ 51,447 $ 3,764,491
============== ============== ============== ============ ================
</TABLE>
<PAGE>
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, derivatives,
fixed maturities, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments and enters into derivative
transactions with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1997, the Company had no significant concentration of credit risk.
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
All required financial statements are included in Parts A and B of
this Registration Statement.
(b) Exhibits:
(1) (a) Resolutions of Board of Directors of Transamerica
Occidental Life
Insurance Company creating Transamerica Occidental's Separate Account Fund C. 1/
(b) Resolutions of Transamerica Occidental Life Insurance Company
approving the
conversion of the Registrant to a unit investment trust. 2/
(2) Not Applicable.
(3) (a) Form of Distribution Agreement between Transamerica
Securities Sales
Corporation and Transamerica Occidental Life Insurance Company on
behalf of
Registrant.7/
(b) Form of Sales Agreement among Transamerica Securities Sales
Corporation, Transamerica
Occidental Life Insurance Company on behalf of Registrant, and
Transamerica Financial
Resources, Inc.7/
(4) (a) Annual Deposit Individual Equity Investment Fund
Contract. 2/
(b) Single Deposit Individual Equity Investment Fund Contract to provide
a deferred
Variable Annuity.2/
(c) Single Deposit Individual Equity Investment Fund Contract to provide
an immediate
Variable Annuity.4/
(d) Endorsement to define the term "Deposit" in some
Contracts to mean "Purchase Payment".4/
(e) Endorsement to modify definition of "Valuation Period".4/
(f) Deposit Continuation on Total and Permanent Disability
Rider.4/ (g) Endorsement for State of Michigan to define
investment factors filed as part of this
Registration Statement.4/
(5) (a) Application for Individual Equity Investment Fund Contracts.4/
(b) Revised Application for Individual Equity Investment Fund
Contracts.4/
(c) Application for Request to Change Life Policy to Individual
Equity Investment Fund
Contract.4/
(6) (a) Restated Articles of Incorporation of Transamerica Occidental
Life Insurance Company.6/
(b) Restated By-Laws of Transamerica Occidental Life Insurance
Company.6/
(7) Not Applicable.
(8) Participation Agreement between Transamerica Occidental Life Insurance
Company and Transamerica
Variable Insurance Fund.3/
(9) Opinion and Consent of Counsel.7
(10) (a) Consent of Counsel.8/
(b) Consent of Independent Auditors.10/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations.
(14) Not Applicable.
(15) Powers of Attorney.9/10
Robert Abeles 2/9//10 Richard N. Latzer 7/9/10
Thomas J. Cusack 2/9/10 Karen MacDonald 5/9/10
Gary U. Rolle 7/9/10
Richard H. Finn 7/9/10 Paul E. Rutledge III 9/10
-
George A. Foegele 9/10
David E. Gooding 7/9/10
-
Edgar H. Grubb 7/9/10 T. Desmond Sugrue 9/10
- --
Bruce A. Turkstra 9/10
Frank C. Herringer 7/9/10 Nooruddin S. Veerjee 7/9/10
James W. Dederer 7/9/10 Robert A. Watson 5/9/10
----------------------------
1/ Incorporated by reference to the exhibits filed as part of the Registration
Statement on Form N-8B-1 of Transamerica Occidental's Separate Account Fund C,
File No. 2-3650.
2/ Incorporated by reference to the like-numbered exhibits to Post
Effective Amendment No. 43 to the
Registration Statement of Transamerica Occidental Life Insurance Company's
Separate Account C on Form N-4, File
No. 2-3650 (August 9, 1996).
3/ Incorporated by reference to the Exhibit 6 to Pre-Effective Amendment No. 1
to the Registration Statement of Transamerica Variable Insurance Fund, Inc. on
Form N-1A, File No. 33-99016 (September 12, 1996).
4/ Incorporated by reference to the exhibits filed as part of the Registration
Statement on Form N-1 of Transamerica Occidental's Separate Account Fund C.,
File No. 2-3650.
5/ Incorporated by reference to the like-numbered exhibits to Post
Effective Amendment No. 42 to the
Registration Statement of Transamerica Occidental's Separate Account Fund C
on Form N-3, File No. 2-36250
(April 6, 1996).
6/ Incorporated by reference to the like-numbered exhibits to the initial
Registration Statement on Form N-4 of Transamerica Occidental's VA-2L, File No.
33-49998 (July 24, 1992).
7/ Incorporated by reference to the like-numbered exhibits to Post-
Effective Amendment No. 44 to the
Registration Statement of Transamerica Occidental Separate Account C on Form
N-4, File No. 2-36250 (October 3,
1996).
8/ Incorporated by reference to the like-numbered exhibits to Post-
Effective Amendment No. 45 to the
Registration Statement of Transamerica Occidental Separate Account C on Form
N-4, File No. 2-36250 (November 8,
1996).
9/ Incorporated by reference to the like-numbered exhibits to
Post-Effective Amendment No. 46 to the Registration Statement of
Transamerica Occidental Separate Account C on Form N-4, File No. 2-36250
(April 28, 1998).
10/ Filed herewith.
<PAGE>
Items 25. Directors and Officers of the Depositor.
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.
List of Directors of Transamerica Occidental Life Insurance Company
Robert Abeles Frank C. Herringer*
Richard N. Latzer*
Thomas J. Cusack
James W. Dederer Karen MacDonald
Gary U. Rolle'
Richard H. Finn*
George A. Foegele*** Paul E. Rutledge III**
David E. Gooding Edgar H. Grubb*
T. Desmond Sugrue
Bruce A. Turkstra
Nooruddin S. Veerjee
Robert A. Watson
*600 Montgomery Street, San Francisco, California 94111
**401 N. Tryon Street, Charlotte, North Carolina 28202
***300 Consilium Place, Scarborough Ontario, Canada M1H3G2
List of Officers for Transamerica Occidental Life Insurance Company
<TABLE>
<CAPTION>
<S> <C>
Thomas J. Cusack President and Chief Executive Officer
Nooruddin S. Veerjee President - Insurance Products Division
Bruce A. Turkstra Executive Vice President and Chief Information Officer
George A. Foegele Senior Vice President
Paul E. Rutledge III President - Reinsurance Division
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer, CLU Executive Vice President, General Counsel and Corporate Secretary
David E. Gooding Executive Vice President and Chief Information Officer
Bruce Clark Senior Vice President and Chief Actuary
Meheriar Hasan Vice President
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Executive Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
Darrel K.S. Yuen President-Asian Operations
Richard N. Latzer Chief Investment Officer
Gary U. Rolle', CFA Chief Investment Officer
Stephen J. Ahearn Investment Officer
Glen E. Bickerstaff Investment Officer
Jim Bowman Vice President
John M. Casparian Investment Officer
Catherine Collinson Vice President
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Lennart H. Walin Investment Officer
Paul Wintermute Investment Officer
William D. Adams Vice President
Sandra Bailey-Whichard Vice President
Nicki Bair Senior Vice President
Dennis Barry Vice President
Laurie Bayless Vice President
Marsha Blackman Vice President
Nancy Blozis Vice President and Controller
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Senior Vice President and Actuary
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
Peter DeWolf Vice President
Randy Dobo Vice President and Actuary
Thomas P. Dolan, FLMI Vice President
John V. Dohmen Vice President
Harry Dunn, FSA Vice President and Chief Reinsurance Actuary
Gail DuBois Vice President and Associate Actuary
Ken Ellis Vice President
George Garcia Vice President and Chief Medicare Officer
David M. Goldstein Vice President and Associate General Counsel
Paul Hankwitz, MD Vice President and Chief Medical Director
Kevin Hobbs Vice President
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko Vice President
Phoebe Huang Vice President
William M. Hurst Vice President and Associate General Counsel
James M. Jackson Vice President and Deputy General Counsel
Allan H. Johnson, FSA Vice President and Actuary
Ken Kilbane Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Philip E. McHale, FLMI Vice President
Mark Madden Vice President
Maureen McCarthy Vice President
Vic Modugno Vice President and Associate Actuary
Jess Nadelman Vice President
Wayne Nakano, CPA Vice President
Paul Norris Vice President and Actuary
Michael Palace, ASA Vice President and Actuary
Jerry Paul Vice President
Stephen W. Pinkham Vice President
Kristy M. Pipes Senior Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Gary L. Seagraves Vice President
Joel D. Seigle Vice President
Sandra Smith Vice President
James O. Strand Vice President
Alice Su Vice President
Lee Tang Vice President
Bill Tate Vice President
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
John Vieren Vice President
Timothy Weis Vice President
William R. Wellnitz, FSA Senior Vice President and Actuary
Virginia M. Wilson Vice President and Controller
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Olisa Abaelu Second Vice President
Flora Bahaudin Second Vice President
Frank Beardsley Vice President
Benjamin Bock Vice President
Daniel J. Bohmfalk Second Vice President and Associate Actuary
Ken Bromberg Second Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Art Cohen Second Vice President
Lance Cockings, CPA Second Vice President
Ron Corlew Second Vice President
Dave Costanza Second Vice President
Gloria Durosko Second Vice President
Reid A. Evers Vice President and Associate General Counsel
David Fairhall Second Vice President and Associate Actuary
Selma Fox Second Vice President
Toni A. Forge Second Vice President
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
Sharon Haley Second Vice President
Brian Hoyt Second Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Andrew G. Kanelos Second Vice President
Ronald G. Keller Second Vice President
Joan Klubnik Second Vice President
Roger Korte Second Vice President
Lynette Lawson Second Vice President
Dean LeCesne Second Vice President
Liwen Lien Second Vice President
Marilyn McCullough Vice President
Richard MacKenzie Second Vice President
Danny Mahoney Second Vice President
Carl Marcero Second Vice President and Chief Reinsurance Underwriter
Claudia Maytum Second Vice President
Clay Moye Second Vice President
Daniel A. Norwick Second Vice President
John Oliver Second Vice President
Susan O'Brien Second Vice President
Stephanie Quincey Second Vice President
Paul Reisz Second Vice President
James R. Robinson Second Vice President
Ray Robinson Second Vice President
John J. Romer Vice President
Thomas M. Ronce Second Vice President and Assistant General Counsel
Laura Scully Second Vice President
Frederick Seto Second Vice President
Jack Shalley, MD Second Vice President and Medical Director
Steven R. Shepard Second Vice President and Assistant General Counsel
Frank Snyder Second Vice President
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Vice President
David Stone Second Vice President
Suzette Stover-Hoyt Second Vice President
John Tillotson Second Vice President
K. Y. To Second Vice President
Boning Tong Second Vice President and Associate Actuary
Janet Unruh Second Vice President and Assistant General Counsel
Colleen Vandermark Vice President
Marsha Wallace Second Vice President
Sheila Wickens, MD Second Vice President and Medical Director
Michael B. Wolfe Vice President
James Wolfenden Statement Officer
Kamran Haghighi Tax Officer
</TABLE>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
Registrant is a separate account of Transamerica Occidental Life
Insurance Company, is controlled by the Contract Owners, and is not controlled
by or under common control with any other person. The Depositor, Transamerica
Occidental Life Insurance Company, is wholly owned by Transamerica Insurance
Corporation of California (Transamerica-California). Transamerica-California may
be deemed to be controlled by its parent, Transamerica Corporation.
The following chart indicates the persons controlled by or under
common control with Transamerica.
<PAGE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation - DE
ARC Reinsurance Corporation - HI
Transamerica Management, Inc. - DE
Criterion Investment Management Company - TX
Inter-America Corporation - CA
Mortgage Corporation of America - CA
Pyramid Insurance Company, Ltd. - HI
Pacific Cable Ltd. - Bmda.
TC Cable, Inc. - DE
RTI Holdings, Inc. - DE
Transamerica Airlines, Inc. - DE
Transamerica Business Technologies Corporation - DE
Transamerica CBO I, Inc. - DE
Transamerica Corporation (Oregon) - OR
Transamerica Delaware, L.P. - DE
Transamerica Finance Corporation - DE
TA Leasing Holding Co., Inc. - DE
Trans Ocean Ltd. - DE
Trans Ocean Container Corp. - DE
SpaceWise Inc. - DE
TOD Liquidating Corp. - CA
TOL S.R.L. - Itl.
Trans Ocean Container Finance Corp. - DE
Trans Ocean Leasing Deutschland GmbH - Ger.
Trans Ocean Leasing PTY Limited - Aust.
Trans Ocean Management Corporation - CA
Trans Ocean Management S.A. - SWTZ
Trans Ocean Regional Corporate Holdings - CA
Trans Ocean Tank Services Corporation - DE
Transamerica Leasing Inc. - DE
Better Asset Management Company LLC - DE
Transamerica Leasing Holdings Inc. - DE
Greybox Logistics Services Inc. - DE
Greybox L.L.C. - DE
Transamerica Trailer Leasing S.N.C. - Fra.
Greybox Services Limited - U.K.
Intermodal Equipment, Inc. - DE
Transamerica Leasing N.V. - Belg.
Transamerica Leasing SRL - Itl.
Transamerica Distribution Services Inc. - DE
Transamerica Leasing Coordination Center - Belg.
Transamerica Leasing do Brasil Ltda. - Braz.
Transamerica Leasing GmbH - Ger.
Transamerica Leasing Limited - U.K.
ICS Terminals (UK) Limited - U.K.
Transamerica Leasing Pty. Ltd. - Aust.
Transamerica Leasing (Canada) Inc. - Can.
Transamerica Leasing (HK) Ltd. - H.K.
Transamerica Leasing (Proprietary) Limited - S.Afr.
Transamerica Tank Container Leasing Pty. Limited - Aust.
Transamerica Trailer Holdings I Inc. - DE
Transamerica Trailer Holdings II Inc. - DE
Transamerica Trailer Holdings III Inc. - DE
Transamerica Trailer Leasing AB - Swed.
Transamerica Trailer Leasing AG - SWTZ
Transamerica Trailer Leasing A/S - Denmk.
Transamerica Trailer Leasing GmbH - Ger.
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
Transamerica Commercial Finance Corporation, I - DE
BWAC Credit Corporation - DE
BWAC International Corporation - DE
BWAC Twelve, Inc. - DE
TIFCO Lending Corporation - IL
Transamerica Insurance Finance Corporation - MD
Transamerica Insurance Finance Company (Europe) - MD
Transamerica Insurance Finance Corporation, California - CA
Transamerica Insurance Finance Corporation, Canada - ON
Transamerica Business Credit Corporation - DE
Direct Capital Equity Investment, Inc. - DE
TA Air East, Corp. -
TA Air III, Corp. - DE
TA Air II, Corp. - DE
TA Air IV, Corp. - DE
TA Air I, Corp. - DE
TBC III, Inc. - DE
TBC II, Inc. - DE
TBC IV, Inc. -
TBC I, Inc. - DE
TBC Tax III, Inc. -
TBC Tax II, Inc. -
TBC Tax IV, Inc. -
TBC Tax IX, Inc. -
TBC Tax I, Inc. -
TBC Tax VIII, Inc. -
TBC Tax VII, Inc. -
TBC Tax VI, Inc. -
TBC Tax V, Inc. -
TBC Tax XII, Inc. -
TBC Tax XI, Inc. -
TBC V, Inc. -
The Plain Company - DE
Transamerica Distribution Finance Corporation - DE
Transamerica Accounts Holding Corporation - DE
Transamerica Commercial Finance Corporation - DE
Inventory Funding Trust - DE
Inventory Funding Company, LLC - DE
TCF Asset Management Corporation - CO
Transamerica Joint Ventures, Inc. - DE
Transamerica Inventory Finance Corporation - DE
BWAC Seventeen, Inc. - DE
Transamerica Commercial Finance Canada, Limited - ON
Transamerica Commercial Finance Corporation, Canada - Can.
BWAC Twenty-One, Inc. - DE
Transamerica Commercial Finance Limited - U.K.
WFC Polska Sp. Zo.o -
Transamerica Commercial Holdings Limited - U.K.
Transamerica Commercial Holdings, Inc. -
Transamerica Trailer Leasing Limited - NY
Transamerica Commercial Finance France S.A. - Fra.
Transamerica GmbH Inc. - DE
Transamerica Retail Financial Services Corporation - DE
Transamerica Consumer Finance Holding Company - DE
Metropolitan Mortgage Company - FL
Easy Yes Mortgage, Inc. - FL
Easy Yes Mortgage, Inc. - GA
First Florida Appraisal Services, Inc. - FL
First Georgia Appraisal Services, Inc. - GA
Freedom Tax Services, Inc. - FL
J.J. & W. Advertising, Inc. - FL
J.J. & W. Realty Corporation - FL
Liberty Mortgage Company of Ft. Myers, Inc. - FL
Metropolis Mortgage Company - FL
Perfect Mortgage Company - FL
Whirlpool Financial National Bank - DE
Transamerica Vendor Financial Services - DE
Transamerica Distribution Finance Corporation de Mexico -
Transamerica Corporate Services de Mexico -
Transamerica Federal Savings Bank -
Transamerica HomeFirst, Inc. - CA
Transamerica Home Loan - CA
Transamerica Lending Company - DE
Transamerica Financial Products, Inc. - CA
Transamerica Foundation - CA
Transamerica Insurance Corporation of California - CA
Arbor Life Insurance Company - AZ
Plaza Insurance Sales, Inc. - CA
Transamerica Advisors, Inc. - CA
Transamerica Annuity Service Corporation - NM
Transamerica Financial Resources, Inc. - DE
Financial Resources Insurance Agency of Texas - TX
TBK Insurance Agency of Ohio, Inc. - OH
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- AL
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - MA
Transamerica International Insurance Services, Inc. - DE
Home Loans and Finance Ltd. - U.K.
Transamerica Occidental Life Insurance Company - CA
NEF Investment Company - CA
Transamerica China Investments Holdings Limited - H.K.
Transamerica Life Insurance and Annuity Company - NC
Transamerica Assurance Company - CO
Transamerica Life Insurance Company of Canada - Can.
Transamerica Life Insurance Company of New York - NY
Transamerica South Park Resources, Inc. - DE
Transamerica Variable Insurance Fund, Inc. - MD
USA Administration Services, Inc. - KS
Transamerica Products, Inc. - CA
Transamerica Leasing Ventures, Inc. - CA
Transamerica Products II, Inc. - CA
Transamerica Products IV, Inc. - CA
Transamerica Products I, Inc. - CA
Transamerica Securities Sales Corporation - MD
Transamerica Service Company - DE
Transamerica Intellitech, Inc. - DE
Transamerica International Holdings, Inc. - DE
Transamerica Investment Services, Inc. - DE
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- - MD
Transamerica LP Holdings Corp. - DE
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - DE
Bankers Mortgage Company of California - CA
Pyramid Investment Corporation - DE
The Gilwell Company - CA
Transamerica Affordable Housing, Inc. - CA
Transamerica Minerals Company - CA
Transamerica Oakmont Corporation - CA
Ventana Inn, Inc. - CA
Transamerica Senior Properties, Inc. - DE
Transamerica Senior Living, Inc. - DE
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contractowners
As of December 31, 1997 there were 170 Contract Owners of
Registrant's Contracts.
Item 28. Indemnification
<PAGE>
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) we 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 pad 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 Expanses 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 I 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 h 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. Lee -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 shill 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 he 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 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 CAN, Lloyds, Gulf, Chubb, Travelers.
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.
Item 29. Principal Underwriter
(a) Transamerica Securities Sales Corporation, the principal
underwriter, is also the underwriter and distributor for shares of Transamerica
Investors, Inc. The Underwriter is wholly-owned by Transamerica Insurance
Corporation of California. Until November 1, 1996, Transamerica Financial
Resources, Inc. ("TFR") served as principal underwriter for the Contracts.
(b) The following table furnishes information with respect to each
director and officer of the principal Underwriter currently distributing
securities of the registrant:
Names and Principal Offices with
Business Address Principal Underwriter
Barbara Kelley Director & President
Regina Fink Director & Secretary
Nooruddin Veerjee Director
Dan Trivers Senior Vice President
Nicki Bair Vice President
Chris Shaw Second Vice President
Ben Tang Treasurer
*The Principal business address for each officer and director is 1150 South
Olive, Los Angeles, CA 90015.
TSSC received $825.00 from Separate Account C in 1997.
Item 30. Location of Accounts and Records
Physical possession of each account, book, or other document required
to be maintained is kept at the Company's offices at 1150 South Olive Street,
Los Angeles, California 90015-2211.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(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-4 promptly upon written or oral request.
(d) Transamerica Occidental Life Insurance Company hereby represents
that the fees and charges deducted under the Contracts, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to the
incurred, and the risks assumed by Transamerica Occidental Life Insurance
Company.
(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, Transamerica Occidental Life Insurance Company certifies that it
meets the requirements of Securities Act Rule 485(b) for the effectiveness of
this registration statement and that it has caused this Post-Effective Amendment
No. 48 to the Registration Statement to be signed on its behalf in the City of
Los Angeles, State of California, on the 7th day of May, 1998.
SEPARATE ACCOUNT C OF
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
(REGISTRANT)
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
(DEPOSITOR)
- ----------------------------------
David M. Goldstein
Vice President
As required by the Securities Act of 1933, this amendment to its
Registration Statement has been signed by the following persons or by their duly
appointed attorney-in-fact in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* Director and Chief May 7, 1998
Robert Abeles Financial Officer
______________________* President, Chairman, May 7 , 1998
Thomas J. Cusack Chief Executive Officer
and Director
1998______________________* Director May 7 , 1998
James W. Dederer
______________________* Director May 7 , 1998
Richard I. Finn
______________________* Director May 7, 1998
George A. Foegele
______________________* Director May 7, 1998
David E. Gooding
______________________* Director May 7, 1998
Edgar H. Grubb
______________________* Director May 7, 1998
Frank C. Herringer
______________________* Director May 7, 1998
Richard N. Latzer
______________________* Director May 7, 1998
Karen MacDonald
______________________* Director May 7, 1998
Gary U. Rolle'
______________________* Director May 7, 1998
Paul E. Rutledge III
______________________* Director May 7, 1998
Nooruddin S. Veerjee
______________________* Director May 7, 1998
T. Desmond Sugrue
______________________* Director May 7, 1998
Bruce A. Turkstra
______________________* Director May 7, 1998
Robert A. Watson
</TABLE>
- ---------------------
*By: David M. Goldstein On May 7, 1998 as Attorney-in-Fact pursuant to
powers of attorney previously filed and filed herewith,
and in his own capacity as Vice President.
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit
(10)(b) Consent of Independent Auditors.
(15) Power of Attorney
<PAGE>
Exhibit 10(b) Consent of Independent Auditors
We consent to the reference to our firm under the caption "Condensed Financial
Information" and Independent Auditors" in Post-Effective Amendment No. 47 under
the Securities Act of 1933 and Post-Effective Amendment No. 29 under the
Investment Company Act of 1940 to the Registration Statement (Form N-4 No.
2-36250) and related Prospectus and Statement of Additional Information of
Separate Account C of Transamerica Occidental Life Insurance Company and to the
use of our report dated January 23, 1998 with respect to the consolidated
financial statements of Transamerica Occidental Life Insurance Company and our
report dated April 13, 1998 with respect to the financial statements of Separate
Account C, both included in the Statement of Additional Information.
/s/Ernst & Young LLP
Los Angeles, California
April 28, 1998
<PAGE>
Exhibit 15 Powers of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Robert Abeles
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Thomas J. Cusack
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
James W. Dederer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Richard H. Finn
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
George A. Foegele
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
David E. Gooding
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Edgar H. Grubb
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Frank C. Herringer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Richard N. Latzer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), her true and lawful attorney-in-fact and agent, with full power of
substitution to each, for her and on her behalf and in her name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and her 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
20th day of March, 1998.
------------------------------
Karen MacDonald
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Mark McEachen
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Gary U. Rolle'
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Paul E. Rutledge III
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
T. Desmond Sugrue
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Bruce A. Turkstra
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Nooruddin Veerjee
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Robert A. Watson
