As filed with the Securities and Exchange Commission on September 12, 1996
File No. 33-99016
File No. 811-9126
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 1 |X|
Post-Effective Amendment No. |_|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 1 |X|
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
(Exact Name of Registrant)
1150 South Olive Los Angeles, CA 90015-2211
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-213-742-2111
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel Sutherland, Asbill & Brennan
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 the effective date of the registration statement.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the registrant
hereby elects to register an indefinite amount of securities being offered. The
filing fee of $500 was paid with the initial filing.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
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TRANSAMERICA VARIABLE INSURANCE FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495
<TABLE>
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N-1A
Item No. Caption
- -------- -------
PART A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
1. Cover Page ........................................... Cover Page
2. Synopsis ........................................... Not Applicable
3. Condensed Financial Information.............................. Condensed Financial Information
4. General Description of Registrant............................ Introduction; Investment Objectives
and Policies; Investment Methods
and Risks
5. Management of the Fund....................................... Management
5A. Management's Discussion of Performance....................... Not Applicable
6. Capital Stock and Other Securities........................... Other Information
7. Purchase of Securities Being Offered......................... Offering, Purchase and Redemption
of Shares
8. Redemption or Repurchase..................................... Offering, Purchase and Redemption
of Shares
9. Pending Legal Proceedings.................................... Not Applicable
PART B INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page ........................................... Cover Page
11. Table of Contents............................................ Table of Contents
12. General Information and History.............................. Introduction; Shares of Stock
13. Investment Objectives and Policies........................... Additional Investment Policy
Information; Special Investment
Methods and Risks; Investment
Restrictions
14. Management of the Registrant................................. Investment Adviser
15. Control Persons and Principal
Holders of Securities...................................... Shares of Stock
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CROSS REFERENCE SHEET -- continued
16. Investment Advisory and
Other Services............................................. Investment Adviser
17. Brokerage Allocation and Other
Practices ........................................... Portfolio Transactions, Portfolio
Turnover and Brokerage
18. Capital Stock and Other Securities........................... Shares of Stock
19. Purchase, Redemption and Pricing
of Securities Being Offered................................ Determination of Net Asset Value
20. Tax Status ........................................... Not Applicable
21. Underwriters ........................................... Not Applicable
22. Calculation of Performance Data.............................. Performance Information
23. Financial Statements......................................... Other Information
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PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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GROWTH PORTFOLIO
OF THE
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 SOUTH OLIVE STREET, LOS ANGELES, CALIFORNIA 90015, (213) 742-2111
PROSPECTUS OCTOBER 9, 1996
===============
The Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
management investment company. The Growth Portfolio seeks 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.
Shares of the Fund are offered only to separate accounts of insurance
companies to fund the benefits of variable annuity contracts and variable life
insurance policies (collectively "variable insurance contracts") and certain
qualified retirement plans. Each variable insurance contract involves fees and
expenses not described in this Prospectus. See the accompanying variable
insurance contract prospectus for information regarding contract fees and
expenses and any restrictions on purchases or allocations.
This Prospectus contains information about the Fund and the Portfolio
that a prospective purchaser of a variable insurance contract should know before
allocating purchase payments or premiums to the Portfolio. It should be read in
conjunction with the Prospectus for the variable insurance contract and should
be retained for future reference. A Statement of Additional Information
containing more detailed information about the Fund is available free by writing
to the Fund at [1150 SOUTH OLIVE STREET, LOS ANGELES, CALIFORNIA 90015,] or by
calling (800) _______. The Statement of Additional Information, which has the
same date as this Prospectus, as it may be supplemented from time to time, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
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.
THIS PROSPECTUS SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS FOR THE
VARIABLE INSURANCE CONTRACT.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are fund shares federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in fund shares involves certain investment risks,
including possible loss of principal.
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TABLE OF CONTENTS
Page
INTRODUCTION........................................................
CONDENSED FINANCIAL INFORMATION.....................................
INVESTMENT OBJECTIVE AND POLICIES...................................
INVESTMENT METHODS AND RISKS........................................
Small Capitalization Companies.............................
High-Yield ("Junk") Bonds..................................
Repurchase Agreements......................................
State Insurance Regulation.................................
PORTFOLIO TURNOVER..................................................
MANAGEMENT..........................................................
Directors and Officers.....................................
Investment Adviser.........................................
Investment Sub-Adviser.....................................
PERFORMANCE INFORMATION.............................................
DETERMINATION OF NET ASSET VALUE....................................
OFFERING, PURCHASE AND REDEMPTION OF SHARES.........................
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS...................
TAXES ...........................................................
OTHER INFORMATION...................................................
Reports....................................................
Voting and Other Rights....................................
Custody of Assets..........................................
Accounting and Administrative Services.....................
Summary of Bond Ratings....................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........
ii
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TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Transamerica Variable Insurance Fund, Inc. (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 one investment portfolio, the Growth
Portfolio. (Additional Portfolios may be created from time to time.) By
investing in the Fund, 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 Growth Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's Board of Directors, Transamerica Occidental Life
Insurance Company ("Transamerica" or the "Investment Adviser") 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-advisor to provide the day-to-day portfolio
management for the Portfolio.
The Fund currently offers its shares solely to Separate Account C of
Transamerica Occidental Life Insurance Company as a funding vehicle for the
variable annuity contracts supported by Separate Account C. The Fund does not
offer its shares directly to the general public. A separate prospectus, which
accompanies this Prospectus, describes Separate Account C and the variable
annuity contracts it supports. The Fund may, in the future, offer its shares to
other insurance company separate accounts supporting other variable annuity or
variable life insurance contracts and to qualified pension and retirement plans.
CONDENSED FINANCIAL INFORMATION
AS OF THE DATE OF THIS PROSPECTUS, THE FUND HAD NOT
YET COMMENCED OPERATIONS, HAD NO ASSETS OR LIABILITIES, HAD INCURRED NO EXPENSES
AND HAD RECEIVED NO INCOME. ACCORDINGLY, NO CONDENSED FINANCIAL INFORMATION IS
INCLUDED FOR THE FUND IN THIS PROSPECTUS.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Growth Portfolio are
described below. THERE CAN BE NO ASSURANCE THAT THE GROWTH PORTFOLIO WILL
ACHIEVE ITS INVESTMENT OBJECTIVE. Investors should not consider any one
Portfolio alone to be a complete investment program.
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As with any security, a risk of loss, including possible loss of principal, is
inherent in an investment in the shares of the Portfolio.
The different types of securities, investments, and investment
techniques used by the Portfolio involve risks of varying degrees. These risks
are described in greater detail, under "Investment Methods and Risks" and in the
Statement of Additional Information. The Portfolio is subject to certain
investment restrictions that are described under the caption "Investment
Restrictions" in the Statement of Additional Information.
The investment objective of the Portfolio as well as the investment
policies that are not fundamental may be changed by the Fund's Board of
Directors without shareholder approval. Certain of the investment restrictions
of the Portfolio are fundamental, however, and may not be changed without the
approval of a majority of the votes attributable to the outstanding shares of
the Portfolio. See "Investment Restrictions" in the Statement of Additional
Information.
The Growth Portfolio's investment objective is 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 debt securities and preferred stocks (both having a
call on common stocks by means of a conversion privilege or attached warrants)
and 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.
The Portfolio may invest up to 10% of the Portfolio's assets in debt
securities having a call on common stocks that are rated below investment grade.
Those securities are rated Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if
unrated, deemed to be of comparable quality by Investment Services.
If a security that was originally rated "investment grade" is
downgraded by a ratings service, it may or may not be sold. This depends on
Investment Services' assessment of the issuer's prospects. However, Investment
Services will not purchase below-investment-grade securities if that purchase
would increase their representation in the Portfolio to more than 10%.
The Portfolio may invest up to 10% of its net assets in the securities
of foreign issuers that are in the form of American Depository Receipts
("ADRs"). ADRs are registered stocks of foreign companies that are typically
issued by an American bank or trust company
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evidencing ownership of the underlying securities. ADRs are designed for use
on the U.S. stock exchanges.
WITH RESPECT TO 75% OF TOTAL ASSETS, THE PORTFOLIO MAY NOT PURCHASE
more than 10% of the voting securities of any one issuer . The Portfolio may not
invest in companies for the purposes of exercising control or management.
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.
INVESTMENT METHODS AND RISKS
The Growth Portfolio is subject to the risk of changing economic
conditions, as well as the risk inherent in the ability of Investment Services
to make changes in the portfolio composition of the Portfolio in anticipation of
changes in economic, business, and financial conditions.
In addition, the different types of securities, investments, and
investment techniques used by the Portfolio involve risks of varying degrees.
For example, with respect to equity securities, there can be no assurance of
capital appreciation and there is a substantial risk of decline in value. With
respect to debt securities, there exists the risk that the issuer of a security
may not be able to meet its obligations on interest or principal payments at the
time required by the investment. Certain risks associated with the types of
investments in which the Portfolio may invest are discussed below. For more
information on investment methods and risks, see "Special Investment Methods and
Risks" in the Statement of Additional Information.
SMALL CAPITALIZATION COMPANIES
The Growth Portfolio may invest in securities of smaller, lesser-known
companies. Such investments involve greater risks than the investments of
larger, more mature, better known issuers, including an increased possibility
of portfolio price volatility. Historically,
3
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small capitalization stocks and stocks of recently organized companies have been
more volatile in price than the larger capitalization stocks included in the S&P
500. Among the reasons for the greater price volatility of these small company
stocks are the less certain growth prospects of smaller firms, the lower degree
of liquidity in the markets for such stocks and the greater sensitivity of small
companies to changing economic conditions. For example, these companies are
associated with higher investment risk than that normally associated with
larger, more mature, better known firms due to the greater business risks of
small size and limited product lines, markets, distribution channels and
financial and managerial resources.
The values of small company stocks may fluctuate independently of
larger company stock prices. Small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should therefore expect that to the extent the Portfolio
invests in stock of small capitalization companies, the net asset value of the
Portfolio's shares may be more volatile than, and may fluctuate independently
of, broad stock market indices such as the S&P 500. Furthermore, the securities
of companies with small stock market capitalizations may trade less frequently
and in limited volume.
HIGH-YIELD ("JUNK") BONDS
High-yield bonds (commonly called "junk" bonds) are lower-rated bonds
that involve higher current income but are predominantly speculative because
they present a higher degree of credit risk than higher-rated bonds. Credit risk
is the risk that the issuer of the bonds will not be able to make interest or
principal payments on time. The prices of junk bonds tend to be more reflective
of prevailing economic and industry conditions, the issuer's unique financial
situation, and the bond's coupon than to small changes in the market level of
interest rates. During an economic downturn or a period of rising interest
rates, highly leveraged companies may experience difficulties in making
principal and interest payments, meeting projected business goals, and obtaining
additional financing. See "Summary of Bond Ratings" on page ___ and the
Statement of Additional Information for a description of bond rating categories.
REPURCHASE AGREEMENTS
The Growth Portfolio may enter into repurchase agreements with Federal
Reserve System member banks or U.S. securities dealers. A repurchase agreement
occurs when the Portfolio purchases an interest-bearing debt obligation and the
seller agrees to repurchase the debt obligation on a specified date in the
future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Portfolio's money is invested in the security.
Since the security constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a collateralized loan. The Portfolio's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller is unable to make a timely repurchase, the Portfolio's
expected proceeds could be delayed, or the Portfolio could suffer a loss in
principal or current interest, or incur costs in liquidating the
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collateral. In evaluating whether to enter into a repurchase agreement,
Investment Services will carefully consider the creditworthiness of the seller
pursuant to procedures established by the Fund's Board of Directors.
The Growth Portfolio will not invest in repurchase agreements maturing
in more than seven days if that would constitute more than 10% of the
Portfolio's net assets when taking into account the remaining days to maturity
of the Portfolio's existing repurchase agreements.
STATE INSURANCE REGULATION
The Portfolio is intended to be a funding vehicle for variable annuity
contracts and variable life policies to be offered by insurance companies and
will seek to be offered in as many jurisdictions as possible. Certain states
have regulations or guidelines concerning concentration of investments and other
investment techniques. If such regulations and guidelines are applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its portfolio with the flexibility provided herein. It
is the Portfolio's intention that it operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
PORTFOLIO TURNOVER
The Growth Portfolio will not consider portfolio turnover to be a
limiting factor in making investment decisions. Changes will be made in the
Portfolio if such changes are considered advisable to better achieve the
Portfolio's investment objective. The portfolio turnover rate is calculated by
dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of the portfolio securities, excluding
debt securities having a maturity at the date of purchase of one year or less.
Investment Services anticipates that the annual turnover rate for the Growth
Portfolio will generally not exceed 75%.
High rates of portfolio turnover involve correspondingly greater
expenses which must be borne by the Portfolio and its shareholders, including
higher brokerage commissions, dealer mark-ups and other transaction costs on the
sale of securities and reinvestment of other securities. High rate of turnover
may result in the acceleration of taxable gains and may under certain
circumstances make it more difficult for a Portfolio to qualify as a regulated
investment company under the Internal Revenue Code. See "Federal Tax Matters" in
the Statement of Additional Information.
5
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MANAGEMENT
DIRECTORS AND OFFICERS
The Fund's Board of Directors is responsible for deciding matters of
general policy and reviewing the actions of the Adviser and Investment Services,
the custodian, the accounting and administrative services providers and other
providers of services to the Portfolio. The officers of the Fund supervise its
daily business operations. The Statement of Additional Information contains
information as to the identity of, and other information about, the directors
and officers of the Fund.
INVESTMENT ADVISER
Transamerica Occidental Life Insurance Company ("Transamerica"), 1150
South Olive Street, Los Angeles, California 90015, is the investment adviser of
the Portfolio. Transamerica is a stock life insurance company incorporated in
the state of California on June 30, 1906. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. Transamerica acted as
investment adviser to Transamerica Occidental's Separate Account Fund C
("Separate Account Fund C"), the Fund's predecessor, and currently acts as
investment adviser to Transamerica Occidental's Separate Account Fund B.
The Fund has entered into an Investment Advisory Agreement with
Transamerica under which the Transamerica assumes overall responsibility,
subject to the supervision of the Fund's 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.
For its services to the Portfolio, Transamerica receives an ANNUAL
advisory fee of 0.75% of the average daily net assets of the Growth Portfolio.
The fee is deducted daily from the assets of the Portfolio. This fee may be
higher than the average advisory fee paid to the investment advisers of other
growth portfolios. Transamerica may waive some or all of its fee from time to
time at its discretion.
INVESTMENT SUB-ADVISER
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Portfolio. Investment Services has been
in existence since 1967 and has provided investment services to investment
companies and the Transamerica Life Companies
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since 1980. 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 Portfolio 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 Services is also responsible for the selection of brokers
and dealers to execute transactions for the Fund. Some of these brokers or
dealers may be affiliated persons of Transamerica and Investment Services.
Although it is the policy of Investment Services to seek the best price and
execution for each transaction, Investment Services may give consideration to
brokers and dealers who provide Investment Services with statistical information
and other services in addition to transaction services. Additional information
about the selection of brokers and dealers is provided in the Statement of
Additional Information.
The transactions and performance of the Growth Portfolio are reviewed
continuously by the senior officers of Investment Services. The portfolio
manager for the Growth Portfolio is Jeffrey S. Van Harte, C.F.A., Vice President
and Senior Fund Manager at Investment Services. Mr. Van Harte is a member of
the San Francisco Society of Financial Analysts and received a B.A. from
California State University at Fullerton from 1980. Mr. Van Harte has
been managing the portfolio of the Fund's predecessor, Separate Account Fund C,
since 1984.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return
figures for the Portfolio in advertisements and communications to shareholders
or sales literature.
Average annual total return is determined by computing the annual
percentage change in value of $1,000 invested for specified periods ending with
the most recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The average annual total return calculation
assumes a complete redemption of the investment at the end of the relevant
period.
The Fund also may from time to time disseminate year-by-year total
return, cumulative total return and yield information for the Portfolio in
advertisements, communications to shareholders or sales literature. These may be
provided for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a specified
period are each derived by calculating the percentage rate required to make a
$1,000 investment in the Portfolio (assuming all distributions are reinvested)
at the beginning of such period equal to the actual total value of such
investment at the end of such period.
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In addition, the Fund may from time to time publish performance of the
Portfolio relative to certain performance rankings and indices.
The Fund is the intended 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 IS BEING SUBMITTED FOR CONTRACT OWNER APPROVAL AT A MEETING OF
CONTRACT OWNERS SCHEDULED FOR OCTOBER 30, 1996. IF THE REORGANIZATION IS
APPROVED, the assets of Separate Account Fund C WILL BE transferred intact to
the Growth Portfolio in exchange for shares of the Growth Portfolio. As the
successor to Separate Account Fund C, the Growth Portfolio WILL TREAT the
historical performance data of Separate Account Fund C as its own for periods
prior to the reorganization. The performance data for the Growth Portfolio prior
to the reorganization will assume that the charges currently imposed by the Fund
were in effect during that period. In addition, such performance data will not
reflect any sales or insurance charges that were imposed under the annuity
contracts issued through Separate Account Fund C.
Since the Fund is not available directly to the public, its performance
data will not be advertised unless accompanied by comparable data for the
applicable variable annuity or variable life insurance policy. The Fund's
performance data does not reflect separate account or contract level charges.
The investment results of the Portfolio will fluctuate over time and
any presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the
Portfolio's performance may be in any future period. In addition to information
provided in shareholder reports, the Fund may, in its discretion, from time to
time make a list of the Portfolio's holdings available to investors upon
request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is normally determined
once daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open, except as noted below. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year, except for certain holidays. The
net asset value of the Portfolio's shares will not be calculated on the Friday
following Thanksgiving, the Friday following Christmas if Christmas falls on a
Thursday and the Monday before Christmas if Christmas falls on a Tuesday. The
net asset value of the Portfolio is determined by dividing the value of the
Portfolio's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the
Portfolio outstanding.
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The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. The short-term debt securities
having remaining maturities of sixty days or less held by the Growth Portfolio
(if any) are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Fund's Board of Directors. See "Determination of Net Asset
Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to its PARTICIPATION agreement with the Fund AND TRANSAMERICA,
Transamerica Securities Sales Corporation ("TSSC") WILL ACT without remuneration
as the Fund's distributor in the distribution of the shares of each Portfolio.
TSSC is a wholly-owned subsidiary of Transamerica Insurance Corporation of
California, which is a wholly-owned subsidiary of the Transamerica Corporation.
TSSC has no obligation to sell any stated number of shares. TSSC is located at
1150 South Olive Street, Los Angeles, California 90015.
Shares of the Portfolio are sold in a continuous offering and WILL BE
authorized to be offered to Separate Account C to support its variable annuity
contracts (the "Contracts"). Net purchase payments under the Contracts WILL BE
placed in Separate Account C and the assets of the Separate Account C WILL BE
invested in the shares of the Growth Portfolio. Separate Account C WILL PURCHASE
and REDEEM shares of the Portfolio at net asset value without sales or
redemption charges.
For each day on which the Portfolio's net asset value is calculated,
Separate Account C WILL TRANSMIT to the Fund any orders to purchase or redeem
shares of the Portfolio based on the purchase payments, redemption (surrender)
requests, and transfer requests from Contract owners, annuitants and
beneficiaries that have been processed on that day. SHARES of the Portfolio WILL
BE PURCHASED AND REDEEMED at the Portfolio's net asset value per share
calculated as of that same day although such purchases and redemptions may be
executed the next morning.
In the future, the Fund may offer shares of the Portfolio (including
new Portfolios that might be added to the Fund) to other separate accounts of
various insurance companies, whether or not affiliated with Transamerica, to
support variable annuity contracts or variable life insurance contracts.
Likewise, the Fund may also, in the future, offer shares of the Portfolio
directly to qualified pension and retirement plans.
In the event that shares of the Portfolio are offered to a separate
account supporting variable life insurance or to qualified pension and
retirement plans, a potential for certain conflicts may exist between the
interests of variable annuity contract owners, variable life
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insurance contract owners and plan participants. The Fund currently does not
foresee any disadvantage to owners of the Contracts arising from the fact that
shares of the Portfolio might be held by such entities. However, in such an
event, the Fund's Board of Directors will monitor the Portfolio in order to
identify any material irreconcilable conflicts of interest which may possibly
arise, and to determine what action, if any, should be taken in response to such
conflicts.
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Growth Portfolio will distribute substantially all of its net
investment income in the form of dividends to its shareholders. The Growth
Portfolio will declare its dividends and capital gain distributions at least
annually. It is anticipated that all dividends and distributions will be
reinvested in additional Portfolio shares at net asset value.
TAXES
The Fund believes that the Portfolio will qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Portfolio intends to distribute substantially all
of its net income and net capital gains to its shareholders. As a result, under
the provisions of subchapter M, there should be little or no income or gains
taxable to the Portfolio. In addition, the Portfolio intends to comply with
certain other distribution rules specified in the Code so that it will not incur
a 4% nondeductible federal excise tax that otherwise would apply. See "Federal
Tax Matters" in the Statement of Additional Information.
The shareholders of the Portfolio WILL currently BE limited to Separate
Account C and the Fund. For more information regarding the tax implications for
the purchaser of a Contract who allocates investments to the Portfolio, please
refer to the prospectus for Separate Account C.
OTHER INFORMATION
REPORTS
Annual Reports containing audited financial statements of the Fund and
Semi-Annual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Fund at the telephone number or
address set forth on the cover page of this Prospectus.
10
<PAGE>
VOTING AND OTHER RIGHTS
Each share outstanding is entitled to one vote on all matters submitted
to a vote of shareholders (of the Portfolio or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolio and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of the Portfolio), when issued, is nonassessable and
has no preemptive or conversion rights. The shares have noncumulative voting
rights.
As a Maryland corporation, the Fund is not required to hold regular
annual shareholder meetings. The Fund is, however, required to hold shareholder
meetings for the following purposes: (i) approving certain agreements as
required by the 1940 Act; (ii) changing fundamental investment objectives,
policies and restrictions of the Portfolio; and (iii) filling vacancies on the
Board of Directors in the event that less than a majority of the members of the
Board of Directors were elected by shareholders. Directors may also be removed
by shareholders by a vote of two-thirds of the outstanding votes attributable to
shares at a meeting called at the request of holders of 10% or more of such
votes. The Fund has the obligation to assist in shareholder communications.
AFTER THE REORGANIZATION, Transamerica WILL OWN more than 25% of the
outstanding shares of the Portfolio which may result in it being deemed a
controlling person of the Portfolio, as that term is defined in the 1940 Act.
CUSTODY OF ASSETS AND ADMINISTRATIVE SERVICES
Pursuant to a custody agreement with the Fund, STATE STREET BANK AND
TRUST COMPANY ("STATE STREET"), 225 FRANKLIN STREET, BOSTON, MASSACHUSETTS
02110, WILL HOLD all securities and cash assets of the Fund, PROVIDE
recordkeeping AND CERTAIN ACCOUNTING services and SERVE as the custodian of the
Fund's assets. The custodian WILL BE authorized to deposit securities in
securities depositories and
to use the services of sub-custodians.
SUMMARY OF BOND RATINGS
11
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Following is a summary of the grade indicators used by two of the most
prominent, independent rating agencies (Moody's Investors Service, Inc. and
Standard & Poor's Corporation) to rate the quality of bonds. The first four
categories are generally considered investment quality bonds. Those below that
level are of lower quality, commonly referred to as "junk bonds."
INVESTMENT GRADE MOODY'S ............ STANDARD & POOR'S
---------------- ------- -----------------
Highest quality Aaa AAA
High quality Aa AA
Upper medium A .......... A
Medium, speculative features Baa BBB
LOWER QUALITY
Moderately speculative Ba BB
Speculative B B
Very speculative Caa CCC
Very high risk Ca CC
Highest risk, may not be
paying interest C ............. C
In arrears or default D D
For more information on bond ratings, including gradations within each
category of quality, see the Statement of Additional Information.
12
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
Page
INTRODUCTION...........................................................
ADDITIONAL INVESTMENT POLICY INFORMATION...............................
SPECIAL INVESTMENT METHODS AND RISKS...................................
Convertible Securities........................................
Restricted and Illiquid Securities............................
Borrowing.....................................................
Other Investment Companies....................................
Options on Securities and Securities Indices..................
Warrants and Rights...........................................
Repurchase Agreements.........................................
High-Yield ("Junk") Bonds.....................................
Foreign Securities............................................
INVESTMENT RESTRICTIONS................................................
Fundamental Restrictions......................................
Non-fundamental Restrictions..................................
Interpretive Rules............................................
INVESTMENT ADVISER.....................................................
Investment Advisory Agreement.................................
Investment Sub-Advisory Agreement.............................
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE...............
DETERMINATION OF NET ASSET VALUE.......................................
PERFORMANCE INFORMATION................................................
FEDERAL TAX MATTERS....................................................
SHARES OF STOCK........................................................
CUSTODY OF ASSETS......................................................
DIRECTORS AND OFFICERS.................................................
Compensation..................................................
LEGAL PROCEEDINGS......................................................
OTHER INFORMATION......................................................
Legal Counsel.................................................
Other Information.............................................
Financial Statements..........................................
APPENDIX A.............................................................
13
<PAGE>
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
GROWTH PORTFOLIO
OF THE
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
OCTOBER 9, 1996
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 Prospectus with the
same date as this Statement of Additional Information write to the Fund at
__________________or call 1-(___)-___-____.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...................................................
ADDITIONAL INVESTMENT POLICY INFORMATION.......................
SPECIAL INVESTMENT METHODS AND RISKS...........................
Convertible Securities.........................................
Restricted and Illiquid Securities....................
Borrowing......................................................
Other Investment Companies.....................................
Options on Securities and Securities Indices..........
Warrants and Rights...................................
Repurchase Agreements..........................................
High-Yield ("Junk") Bond.......................................
Foreign Securities.............................................
INVESTMENT RESTRICTIONS........................................
Fundamental Restrictions..............................
Non-Fundamental Restrictions..........................
Interpretive Rules....................................
INVESTMENT ADVISER.............................................
Investment Advisory Agreement.........................
Investment Sub-Advisory Agreement..............................
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE.......
DETERMINATION OF NET ASSET VALUE...............................
PERFORMANCE INFORMATION........................................
FEDERAL TAX MATTERS.....................................................
SHARES OF STOCK................................................
CUSTODY OF ASSETS..............................................
DIRECTORS AND OFFICERS.........................................
Compensation...................................................
LEGAL PROCEEDINGS.......................................................
OTHER INFORMATION..............................................
Legal Counsel.........................................
Other Information.....................................
Financial Statements..................................
APPENDIX A.....................................................
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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 is the INTENDED 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, IS BEING SUBMITTED FOR THE APPROVAL OF THE CONTRACT
OWNERS OF SEPARATE ACCOUNT FUND C AT A CONTRACT OWNERS MEETING SCHEDULED FOR
OCTOBER 30, 1996. ONCE THE REORGANIZATION IS APPROVED, THE assets of Separate
Account Fund C WILL BE 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.
The Fund currently consists of one investment portfolio, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio"). By investing in the
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.
The Fund currently offers shares of the Growth Portfolio to Separate
Account C of Transamerica Occidental Life Insurance Company ("Separate Account
C") as the underlying funding vehicle for the variable annuity contracts (the
"Contracts") supported by Separate Account C. The Fund does not offer its stock
directly to the general public. Separate Account C, like the Fund, is registered
as an investment company with the Securities and Exchange Commission ("SEC"),
and a separate prospectus, which accompanies the prospectus for the Fund (the
"Prospectus"), describes that separate account and the Contracts it supports.
The prospectus for Separate Account C and the Contracts also has a statement of
additional information.
The Fund may, in the future, offer its stock to other separate accounts
of other insurance companies supporting other variable annuity contracts or
variable life insurance polices and to qualified pension and retirement plans.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
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<PAGE>
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.
SPECIAL INVESTMENT METHODS AND RISKS
CONVERTIBLE SECURITIES
The Growth Portfolio may invest in convertible securities. THE
PORTFOLIO CURRENTLY DOES NOT INTEND TO INVEST MORE THAN 5% OF ITS NET ASSETS IN
CONVERTIBLE SECURITIES. Convertible securities may include corporate notes or
preferred stock but are ordinarily a long-term debt obligation of the issuer
convertible at a stated exchange rate into common stock of the issuer.
Convertible securities have general characteristics similar to both fixed-income
and equity securities. As with all debt securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. In addition, because of the
conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock, and
therefore, will react to variations in the general market for equity securities.
As the market price of the underlying common stock declines, the convertible
security tends to trade increasingly on a yield basis, and thus may not
depreciate to the same extent as the underlying common stock.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Like all fixed-income securities, there is no assurance of current
income as the issuer might default in its obligations. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, rank senior to common stocks
in an issuer's capital structure and are consequently of higher quality and
entail less risk of declines in market value than the issuer's common stock.
However, the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed-income security.
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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
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<PAGE>
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 the 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
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<PAGE>
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 the 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 both 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, 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
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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
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<PAGE>
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, judgement 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
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<PAGE>
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" of share 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.
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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 amy 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
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<PAGE>
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.
INVESTMENT ADVISER
Transamerica Occidental Life Insurance Company ("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 in 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 each of the Portfolio and paid to Transamerica
periodically. TRANSAMERICA 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; THE EXPENSES OF
PRINTING AND DISTRIBUTING ANY PROSPECTUSES, REPORTS OR SALES LITERATURES
PREPARED FOR ITS USE OR THE USE OF THE FUND IN CONNECTION WITH THE SALE OF FUND
SHARES; THE COST OF ANY ADVERTISING; 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, PRINTING COSTS OF REPORTS TO
SHAREHOLDERS, REGISTRATION FEES AND EXPENSES, AND FEES AND EXPENSES OF DIRECTORS
UNAFFILIATED WITH TRANSAMERICA.
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<PAGE>
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 .10% of the Portfolio's estimated average
daily net assets on an annualized basis .
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 WILL BE SUBMITTED FOR THE APPROVAL OF the Contract Owners
of Separate Account Fund C AT A CONTRACT OWNERS MEETING SCHEDULED FOR 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. The agreement is also terminable by
Transamerica on 90 days' written notice to the Fund.
INVESTMENT 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 and the Transamerica Life Companies since 1980. 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
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<PAGE>
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 investment 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 investment 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 WILL BE SUBMITTED FOR THE APPROVAL OF the
Contract Owners of Separate Account Fund C AT A CONTRACT OWNERS MEETING
SCHEDULED FOR OCTOBER 30, 1996. The investment 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 investment
sub-advisory agreement will terminate automatically if assigned (as defined in
the 1940 Act). The investment 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 60 days' written notice to Investment Services. The agreement
is also terminable by Transamerica or Investment Services on 90 days' written
notice to the Fund.
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
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<PAGE>
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 investment 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. In
1993, 1994, AND 1995 respectively, the brokerage commissions paid by Investment
Services as sub-adviser to Separate Account Fund C (the Fund's predecessor) were
.07% , .02%, AND .01% of THE average assets, and the aggregate dollar amounts
were $10,058, $3,500, AND $1,960, respectively.
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 Fund's predecessor)
for 1994 and 1995 were 30.84% and 18.11%, respectively.
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,
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<PAGE>
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 their 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. 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 is 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 rate of exchange will be determined in good faith by or under
procedures established by the Board of Directors.
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<PAGE>
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 Fund is the successor to Transamerica Occidental's Separate Account
Fund C ("Separate Account Fund C"). Separate Account Fund C HAS 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, IS BEING SUBMITTED FOR THE APPROVAL
OF CONTRACT OWNERS OF SEPARATE ACCOUNT FUND C AT A CONTRACT OWNERS MEETING
SCHEDULED FOR OCTOBER 30, 1996. ONCE THE REORGANIZATION IS APPROVED, the assets
of Separate Account Fund C WILL BE 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 WILL TREAT the historical performance data of Separate Account Fund C
as its own for periods prior to the reorganization.
In computing its standardized total returns for periods prior to the
reorganization, the Fund will assume that the charges currently imposed by the
Fund were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data will not reflect
any sales or insurance charges that were imposed under the annuity contracts
issued through Separate Account Fund C.
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<PAGE>
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. Performance data for the Portfolio will 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 4500 Index; (k) the Salomon Brothers'
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds,
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<PAGE>
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 will be based on historical results and will not be
intended to indicate future performance. The total return of the Portfolio will
vary based on market conditions, portfolio expenses, portfolio investments and
other factors. The value of the Portfolio's shares will fluctuate 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.
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<PAGE>
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 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
- 20 -
<PAGE>
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.
- 21 -
<PAGE>
The shares of the Portfolio, when issued, will be fully paid and non-assessable
and have no preemptive or conversion rights.
As the DESIGNATED successor to Separate Account Fund C, the Fund WILL
RECEIVE the assets of Separate Account Fund C. In exchange, the Fund WILL
PROVIDE 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 custody agreement with the Fund, STATE STREET BANK AND TRUST
COMPANY ("STATE STREET") WILL HOLD 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
Fund, or Participant's Trust Fund book entry systems.
DIRECTORS AND OFFICERS
- 22 -
<PAGE>
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> <C>
Donald E. Cantlay (74) 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 (59)* Board of Directors President, Chief Executive Officer and Director of
====
Transamerica Investment Services, Inc.; DIRECTOR,
==========
Senior Vice President and Chief Investment Officer of
Transamerica Corporation.
DeWayne W. Moore (82) Board of Directors Retired Senior Vice President, Chief Financial Officer
====
and Director of Guy F. Atkinson Company of
California; Director of FPA Capital Fund and FPA
New Income Fund.
Gary U. Rolle (54)* Chairman, Board of Director, Transamerica INVESTORS, INC.;
==== ===============
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 (55) Board of Directors Associate, Freeman Spogli & Co. (a private Investor);
====
President and Chief Executive Officer, Purity
Supreme, Inc. (a supermarket). President and Chief
Executive Officer, Quality Foods International
(supermarkets); Director Pamida Holdings Corp. (a
retail merchandiser) and Buttrey Food and Drug Co.
(a supermarket).
Barbara A. Kelley (42) 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 (35) VICE PRESIDENT BROKER/DEALER CHANNEL OF TRANSAMERICA LIFE
================== ============== ==========================================
INSURANCE AND ANNUITY COMPANY AND PRIOR TO 1994
===============================================
VICE PRESIDENT AND NATIONAL SALES MANAGER OF THE
================================================
DREYFUS SERVICE ORGANIZATION
============================
<PAGE>
Sally S. Yamada (45) Treasurer and Vice President and Treasurer of Transamerica
====
Assistant Secretary Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Thomas M. Adams (60) Secretary Partner in the law firm of Lanning & Adams.
====
</TABLE>
* These members of the Board are or may be interested persons as
defined by Section 2(a) (19) of the 1940 Act.
** The mailing address of each Board member and officers is 1150
SOUTH OLIVE, Los Angeles, California 90015.
*** THE MAILING ADDRESS OF THIS BAORD MEMBER IS 101 NORTH TRYON
STREET, SUITE 1070, CHARLOTTE NORTH CAROLINA 28246.
The principal occupations listed above apply for the last five years.
In some instances, 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 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 expected to be paid during
the current fiscal year to all directors of the Fund by Transamerica pursuant to
its investment advisory agreement with the Fund.
<TABLE>
<CAPTION>
Name of Person Aggregate Total Pension or Compensation
Compensation Retirement Benefits From
From Fund Accrued As Part of Registrant
Fund Expenses and Fund
Complex Paid
to Directors
<S> <C> <C> <C>
Donald E. Cantlay $1,000 -0- $6,000
Richard N. Latzer -0- -0- -0-
- 24 -
<PAGE>
Gary U. Rolle -0- -0- -0-
Peter J. Sodini $1,000 -0- $6,250
- --------------------------------
</TABLE>
* None of the members of the Board of Directors currently receives any pension
or retirement benefits from Transamerica due to services rendered to the Fund
and thus will not receive any benefits upon retirement from the Fund.
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, 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.
- 25 -
<PAGE>
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.
FINANCIAL STATEMENTS
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONTAIN AUDITED OR
UNAUDITED FINANCIAL STATEMENTS FOR THE PORTFOLIO BECAUSE AS OF THE DATE OF THIS
STATEMENT THE PORTFOLIO HAS NOT YET COMMENCED OPERATIONS, HAS NO ASSETS OR
LIABILITIES, HAS INCURRED NO EXPENSES AND HAS RECEIVED NO INCOME. IT IS
ANTICIPATED THAT ERNST & YOUNG LLP, 515 SOUTH FLOWER STREET, LOS ANGELES,
CALIFORNIA 90071, WILL ACT AS THE PORTFOLIO'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
- 26 -
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1
A. 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.
- --------
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 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.
- 27 -
<PAGE>
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 CORPORATION'S
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. The Portfolio is
dependent on Investment Services' judgment, analysis and experience in the
evaluation of such bonds.
- 29 -
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in
Parts A or B of this Registration Statement.
(b) Exhibits
(1) Articles of Incorporation of Transamerica Variable
Insurance Fund, Inc. 1/
(2) Bylaws of Transamerica Variable Insurance Fund,
Inc. 1/
(3) Not Applicable.
(4) Not Applicable.
(5) (a) Form of Investment Advisory Agreement
between Transamerica Variable
Insurance Fund, Inc. and Transamerica
Occidental Life Insurance Company. 2/
(b) Form of Investment Sub-Advisory Agreement
between Transamerica
Occidental Life Insurance Company and
Transamerica Investment Services, Inc. 3/
(6) Form of Participation Agreement between
Transamerica Variable Insurance
Fund, Inc., Transamerica Securities Sales
Corporation ("TSSC") and
Transamerica Occidental Life Insurance Company. 4/
(7) Not Applicable.
(8) Form of Custodial Agreement between
Transamerica Variable Insurance Fund,
Inc. and State Street Bank and Trust
Company. 5/
(9) Not Applicable.
(10) Opinion and Consent of Counsel. 4/
-
(11) Consent of Sutherland, Asbill & Brennan. 4/
-
(12) No financial statements are omitted from
Item 23.
(13) Form of Agreement and Plan of
Reorganization. 1/
(14) Not Applicable.
(15) Not Applicable.
1
<PAGE>
(16) Performance Data Calculations. 6/
(17) Not Applicable.
(18) Not Applicable.
(19) Powers of Attorney.
Barbara A. Kelley 1/
Sally Yamada 1/
Donald E. Cantlay 1/
Richard N. Latzer 1/
DeWayne W. Moore 1/
Gary U. Rolle' 1/
Peter J. Sodini 1/
1/ Incorporated by reference to the like-numbered exhibit of the initial
filing of this Registration Statement
on Form N-1A, File No. 33-99016 (Nov. 3, 1995).
2/ Incorporated by reference to Exhibit D to Part A of the Registration
Statement on Form N-14 of
Transamerica Occidental's Separate Account Fund C, File No. 333-11599
(Sept. 9, 1996).
3/ Incorporated by reference to Exhibit E to Part A of the Registration
Statement on Form N-14 of
Transamerica Occidental's Separate Account Fund C, File No. 333-11599
(Sept. 9, 1996).
4/ Filed herewith.
5/ Incorporated by reference to Exhibit 8(a) to Pre-Effective Amendment
No. 1 to the Registration
Statement on Form N-1A of Transamerica Investors, Inc., File No.
33-90888 (Aug. 29, 1995).
6/ To be filed by subsequent amendment.
ITEM 25. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.
The Registrant, Transamerica Variable Insurance Fund, Inc., is
controlled by Transamerica Occidental Life Insurance Company ("Transamerica
Occidental"), a wholly-owned subsidiary of Transamerica Insurance Corporation of
California, which, in turn is a wholly-owned subsidiary of Transamerica
Corporation.
The following chart indicates the persons controlled by or under common
control with Transamerica Corporation:
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
*Coast Service Company - California
*Inter-America Corporation - California
*LMS Co. - California
*Mortgage Corporation of America - California
2
<PAGE>
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. (25% ownership) - Delaware
River Thames Insurance Company Ltd. (51% ownership) - United Kingdom
*RTI Holdings, Inc. - Delaware
*TCS Inc. - Delaware
*Trans International Entities Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
*Transamerica Corporation (Oregon) - Oregon
ss.Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
Transamerica Financial Services Finance Company - Delaware (TFG owns
100% of common stock; TFC owns 100% of preferred stock)
Transamerica HomeFirst, Inc. - California
Transamerica Finance Corporation - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Corporation, California -
California
Transamerica Insurance Finance Corporation, Canada -
Canada
Transamerica Insurance Finance Company (U.K.) - Maryland
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
*Pacific Agency, Inc. - Indiana
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation - Washington
Transamerica Financial Consumer Discount Company - Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services - Wyoming
Transamerica Financial Services Company - Ohio
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - Arizona
3
<PAGE>
Transamerica Financial Services, Inc. - Hawaii
Transamerica Financial Services, Inc. - Kansas
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services (Inc.) - Oklahoma
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Insurance Administrators, Inc. - Delaware
TELCO Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
BWAC Seventeen, Inc. - Delaware
*Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada -
Canada
*TCF Commercial Leasing Corporation, Canada - Ontario
Transamerica Commercial Finance France S.A. - France
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited -
United Kingdom (51%)
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmattschappij B.V. - Netherlands
*Transamerica Finanzierungs GmbH - Germany
(BWAC Twenty-One, Inc./Transamerica GmbH Inc.)
Transamerica Finanzierungs GmbH - Germany
TA Leasing Holding Co., Inc. - Delaware
Transamerica Leasing Inc. - Delaware
Transamerica Leasing Holdings, Inc. - Delaware
Greybox Services Ltd. - United Kingdom
Greybox L.L.C. - Delaware
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing Srl. - Italy
Transamerica Container Acquisition Corporation - Delaware
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil S/C Ltda. - Brazil
Transamerica Leasing GmbH - Germany
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing Limited - United Kingdom
ICS Terminals (U.K.) Limited - United Kingdom
Transamerica Leasing Proprietary Limited - South Africa
4
<PAGE>
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing (Belgium) N.V. -
Belgium
Transamerica Trailer Leasing (Netherlands) B.V. - Netherlands
Transamerica Trailer Leasing A/S - Denmark
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - France
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Spain, S.A. - Spain
Transamerica Transport Inc. - New Jersey
*Transamerica Homes, Inc. - Delaware
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
*Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas, Inc. - Texas
TBK Insurance Agency of Ohio - Ohio
Transamerica Financial Resources Insurance Agency of Alabama, Inc. -
Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts,
Inc. - Massachusetts
Transamerica Securities Sales Corporation - Maryland
Transamerica International Insurance Services, Inc. - Delaware
Bulkrich Trading Limited (50%) - Hong Kong
Home Loans & Finance Limited - United Kingdom
Transamerica Occidental Life Insurance Company - California
Bulkrich Trading Limited (50%) - Hong Kong
First Transamerica Life Insurance Company - New York
*NEF Investment Company - Delaware
Transamerica Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Missouri
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Service Company - Delaware
5
<PAGE>
Transamerica International Holdings, Inc. - Delaware
TC Cable, Inc. (75% ownership)
*Transamerica International Limited - Canada
Transamerica Investment Services, Inc. - Delaware
*Transamerica Land Capital, Inc. - California
*Bankers Mortgage Company of California - California
ss.Transamerica LP Holdings Corp. - Delaware
oTransamerica Real Estate Tax Service
oTransamerica Flood Hazard Certification - New Jersey
Transamerica Realty Services, Inc. - Delaware
*The Gilwell Company - California
Pyramid Investment Corporation - Delaware
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Transamerica Properties, Inc. - Delaware
Transamerica Real Estate Management Co. - California
Transamerica Retirement Management Corporation - Delaware
Ventana Inn, Inc. - California
*Transamerica Systems Corporation - Delaware
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
oA Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES (AS OF SEPTEMBER 10, 1996):
Title of Class Number of Record Holders
Growth None
ITEM 27. INDEMNIFICATION
The Bylaws of Transamerica Variable Insurance Fund, Inc. provide in
Article VIII as follows:
6
<PAGE>
ARTICLE VIII
Indemnification
Section 1. Every person who is or was a director, officer or
employee of the Corporation or of any other corporation which he served
at the request of the Corporation and in which the Corporation owns or
owned shares of capital stock or of which it is or was a creditor shall
have a right to be indemnified by the Corporation to the full extent
permitted by applicable law, against all liability, judgments, fines,
penalties, settlements and reasonable expenses incurred by him in
connection with or resulting from any threatened or actual claim,
action, suit or proceeding, whether criminal, civil, or administrative,
in which he may become involved as a party or otherwise by reason of
his being or having been a director, officer or employee, except as
provided in Article VIII, Sections 2 and 3 of these By-laws.
Section 2. Disabling Conduct. No such director, officer or
employee shall be indemnified for any liabilities or expenses arising
by reason of "disabling conduct," whether or not there is an
adjudication of liability. "Disabling conduct" means willful
misfeasance, active and deliberate dishonesty, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct
of office.
Whether any such liability arose out of disabling conduct
shall be determined: (a) by a final decision on the merits (including,
but not limited to, a dismissal for insufficient evidence of any
disabling conduct) by a court or other body, before whom the proceeding
was brought that the person to be indemnified ("indemnitee") was not
liable by reason of disabling conduct; or (b) in the absence of such a
decision, by a reasonable determination, based upon a review of the
facts, that such person was not liable by reason of disabling conduct,
(i) by the vote of a majority of a quorum of directors who are neither
interested persons of the Corporation nor parties to the action, suit,
or proceeding in question ("disinterested, non-party directors"), or
(ii) by independent legal counsel in a written opinion if a quorum of
disinterested, non-party directors so directs or if such quorum is not
obtainable, or (iii) by majority vote of the shareholders, or (iv) by
any other reasonable and fair means not inconsistent with any of the
above.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that any
liability or expense arose by reason of disabling conduct.
Section 3. Directors' Standards of Conduct. No person who is
or was a director shall be indemnified under this Article VIII for any
liabilities or expenses incurred by reason of service in that capacity
if an act or omission of a director was material to the matter giving
rise to the threatened or actual claim, action, suit or proceeding; and
such act (a) was committed in bad faith; or (2) was the result of
active and deliberate dishonesty.
Section 4. Expenses Prior to Determination. Any liabilities or
expenses of the type described in Article VIII, Section 1 may be paid
by the Corporation in advance of the final disposition of the claim,
action, suit or proceeding, as authorized by the directors in the
specific case, (a) upon receipt of a written affirmation by the
indemnitee of his good faith belief that his conduct met the standard
of conduct necessary for indemnification as authorized by this Article
VIII, Section 2; (b) upon receipt of a written undertaking by or on
behalf of the indemnitee to repay the advance, unless it shall be
ultimately determined that such person is entitled to indemnification;
and (c) provided that (i) the indemnitee shall provide security for
that undertaking, or (ii) the Corporation shall be insured against
losses arising by reason of any
7
<PAGE>
lawful advances, or (iii) a majority of a quorum of disinterested,
non-party directors, or independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe
the indemnitee ultimately will be found entitled to indemnification.
A determination pursuant to subparagraph (c)(iii) of this
Article VIII, Section 4 shall not prevent the recovery from any
indemnitee of any amount advanced to such person as indemnification if
such person is subsequently determined not to be entitled to
indemnification; nor shall a determination pursuant to said
subparagraph prevent the payment of indemnification if such person is
subsequently found to be entitled to indemnification.
Section 5. Provisions Not Exclusive. The indemnification
provided by this Article VIII shall not be deemed exclusive of any
rights to which those seeking indemnification may be entitled under any
law, agreement, vote of shareholders, or otherwise.
Section 6. General. No indemnification provided by this
Article shall be inconsistent
with the Investment Company Act of 1940 or the Securities Act of 1933.
Any indemnification provided by this Article shall continue as
to a person who has ceased to be a director, officer, or employee, and
shall inure to the benefit of the heirs, executors and administrators
of such person. In addition, no amendment, modification or repeal of
this Article shall adversely affect any right or protection of an
indemnitee that exists at the time of such amendment, modification or
repeal.
* * *
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 Variable Insurance Fund,
Inc. 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 $___,000,000 for Coverage A and
$___,000,000 for Coverage B for the period __ /__/95 to ___/__/96. Coverage B is
subject to a self insured retention of $___,000,000. The primary policy under
the program is with _____.
8
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:
Transamerica Occidental Life Insurance Company ("Transamerica Occidental") and
Transamerica Investment Services, Inc. (the "Sub-Adviser") are registered
investment advisers. Transamerica Occidental is a wholly-owned subsidiary of
Transamerica Insurance Corporation of California, which in turn is a
wholly-owned subsidiary of Transamerica Corporation. The Sub-Adviser is a direct
wholly-owned subsidiary of Transamerica Corporation.
Information as to the officers and directors of the Sub-Adviser is included in
its Form ADV filed in 1996 with the Securities and Exchange Commission
(registration number 801-7740) and is incorporated herein by reference.
The directors and officers of Transamerica Occidental have held, during the past
two fiscal years, the following positions of a substantial nature:
List of Officers for Transamerica Occidental Life Insurance Company
The names of Directors and Executive Officers of the Company, their positions
and offices with the Company, and their other affiliations are as follows. The
address of Directors and Executive Officers is 1150 South Olive Street, Los
Angeles, California 90015-2211, unless indicated by asterisk.
<TABLE>
<CAPTION>
Other business and business
address, profession, vocation or
employment of a substantial nature
engaged in for
Position and his own account during last two
Name and Principal Position and Offices Offices with fiscal years or as director, officer,
Business Address with Transamerica Old Account C employee, partner or trustee
<S> <C> <C> <C>
Robert Abeles Director, Executive Vice None None
President & Chief Financial
Officer
Thomas J. Cusack Director, President & None Senior Vice President of
Chief Executive Officer Transamerica Corporation
James W. Dederer Director, Executive None None
Vice President, General
Counsel and Corporate
Secretary
John A. Fibiger Director, Chairman None None
Richard H. Finn* Director None Executive Vice President of
Transamerica Corporation;
Director, President and
Chief Executive Officer of
Transamerica Finance
Group, Inc.
David E. Gooding Director, Executive None None
Vice President and
9
<PAGE>
Chief Information Officer
Edgar H. Grubb* Director None Executive Vice President,
and Chief Financial Officer
and Secretary of
Transamerica Corporation
Frank C. Herringer* Director None Director, Chairman and
Chief Executive Officer of
Transamerica Corporation
Daniel E. Jund Director None President and Chief
Executive Officer of
Transamerica Assurance
Company
Richard N. Latzer* Director and Chief Director Director, Senior Vice
President Investment Officer Officer of Transamerica
Corporation; Director,
President and Chief
Executive Officer of
Transamerica Investment
Services, Inc.
Charles E. LeDoyen** Director and President None None
Structured Settlements
Division
Karen O. MacDonald Director, Senior Vice None None
President & Corporate
Actuary
Gary U. Rolle Director and Chief Chairman, Executive Vice President
Investment Officer Board of and Chief Investment
Managers Officer of Transamerica
Investment Services, Inc.
James B. Roszak Director, President None None
Life Insurance Division
and Chief Marketing Officer
William E. Simms** Director and President, None None
Reinsurance Division
Nooruddin S. Veerjee Director and President, None Director, President of
Group Pension Division Transamerica Life Insurance
and Annuity Company
Robert A. Watson Director None Executive Vice President,
Transamerica Corporation
- --------------------
</TABLE>
10
<PAGE>
* 600 Montgomery Street, San Francisco, California 94111
** 100 N. Tryon Street, Suite 2500, Charlotte, N.C. 28202-4004
<TABLE>
<CAPTION>
LIST OF OFFICERS FOR TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<S> <C> <C>
Thomas J. Cusack President and Chief Executive Officer
John A. Fibiger, FSA Chairman
James B. Roszak President, Life Insurance Division and Chief Marketing Officer
William E. Simms President - Reinsurance Division
James W. Dederer, CLU Executive Vice President, General Counsel and
Corporate Secretary
David E. Gooding Executive Vice President and Chief Information Officer
Charles E. LeDoyen President-Structured Settlements Division
Bruce Clark Senior Vice President and Chief Actuary
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
Louise K. Neal Senior Vice President
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Senior Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
Nooruddin S. Veerjee, FSA President - Group Pension Division
Darrel K.S. Yuen President-Asian Operations
Richard N. Latzer Chief Investment Officer
Gary U. Rolle', CFA Chief Investment Officer
Glen E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Kent L. Colwell Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
Sharon K. Kilmer Investment Officer
Lyman Lokken Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
John J. Strain 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
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Vice President and Chief Actuary
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
11
<PAGE>
Peter DeWolf Vice President
Mary J. Dinkel, CLU Vice President
Randy Dobo Vice President and Actuary
Thomas P. Dolan, FLMI Vice President
John V. Dohmen Vice President
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
John D. Haack Vice President
Paul Hankwitz, MD Vice President and Chief Medical Director
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko 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
James D. Lamb, FSA Vice President and Chief Actuary
Ronald G. Larson, FLMI Regional Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Thomas Liu Vice President
Katherine Lomeli Vice President and Assistant Secretary
Philip E. McHale, FLMI Vice President
Vic Modugno Vice President and Associate Actuary
Mischelle Mullin Vice President
Wayne Nakano, CPA Vice President and Controller
Paul Norris Vice President and Actuary
John W. Paige, FSA Vice President and Associate Actuary
Stephen W. Pinkham Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Joel D. Seigle Vice President
Sandra Smith Vice President
James O. Strand Vice President
Deborah Tatro Vice President
Lawrence Taylor Vice President
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
William R. Wellnitz, FSA Senior Vice President and Actuary
Anthony Wilkey Vice President
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Flora Bahaudin Second Vice President
David Barcellos Vice President
Michael C. Barnhart Second Vice President
Dan Bass, ASA Second Vice President
Frank Beardsley Vice President
Esther Blount Second Vice President
Benjamin Bock Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
12
<PAGE>
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Art Cohen 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
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
Sharon Haley Second Vice President
Zahid Hussain Second Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Ronald G. Keller Second Vice President
Ken Kiefer Second Vice President
Dean LeCesne Second Vice President
Marilyn McCullough Vice President
Carl Marcero Second Vice President
Lisa Moriyama Second Vice President
Joseph K. Nelson Second Vice President
John Oliver Second Vice President
Daragh O'Sullivan Second Vice President
Stephanie Quincey Second Vice President
James R. Robinson Second Vice President
John J. Romer Vice President
Thomas M. Ronce Second Vice President and Assistant General Counsel
Hugh Shellenberger Second Vice President
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Second Vice President
David Stone Second Vice President
John Tillotson Second Vice President
Janet Unruh Second Vice President and Assistant General Counsel
Colleen Vandermark Vice President
Susan Viator Second Vice President
Richard T. Wang Second Vice President
James B. Watson Second Vice President and Assistant General Counsel
Joanne E. Whitaker Second Vice President
Sheila Wickens, MD Second Vice President and Medical Director
William Wojciechowski Second Vice President
Michael B. Wolfe Vice President
Wilbur L. Fulmer Tax Officer
James Wolfenden Statement Officer
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Transamerica Securities Sales Corporation ("TSSC") serves as the
principal underwriter of shares of the Funds. TSSC also serves as principal
underwriter for Transamerica Investors, Inc. and Transamerica
Occidental Separate Account C.
(b) TSSC is the principal underwriter for the Registrant. Set forth
below is a list of the directors and officers of TSSC and their positions with
the Registrant.
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICE POSITIONS WITH
BUSINESS ADDRESS* WITH TSSC REGISTRANT
<S> <C> <C> <C>
Barbara A. Kelley President and Director President
Regina M. Fink Secretary and Director None
Benjamin Tang Treasurer None
Nooruddin Veerjee Director None
James B. Roszak Director None
Dan S. Trivers Senior Vice President None
Nicki Bair Vice President None
Christopher W. Shaw Second Vice President None
</TABLE>
*The principal business address for each officer and director is 1150 South
Olive Street, Los Angeles, California 90015.
ITEM 30. LOCATION AND ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules promulgated thereunder are maintained at the offices
of:
Registrant, located at 1150 South Olive, Los Angeles, California
90015-2211; or at State Street Bank and Trust Company, Registrant's custodian,
located at 225 Franklin Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Parts A or B.
ITEMS 32. UNDERTAKINGS
(a) Not Applicable.
(b) Registrant undertakes that it will file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of this registration statement.
(c) Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of its most recent annual report to shareholders, upon
request and without charge.
(d) Registrant hereby undertakes to call for a meeting of shareholders for the
purpose of voting upon the question of removal of one or more of the directors
if requested to do so by the shareholders of at least 10% of the Fund's
outstanding shares, and to assist in communication with other shareholders as
required by Section 16(c).
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Transamerica Variable Insurance Fund, Inc. has
duly caused this Pre-Effective Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Los Angeles, and State of California on this 12th day of September, 1996.
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
By: __________________________*
Barbara A. Kelley
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* President September 12, 1996
Barbara A. Kelley
______________________* Treasurer September 12, 1996
Sally S. Yamada
______________________* Director September 12, 1996
Donald E. Cantlay
______________________* Director September 12, 1996
Richard N. Latzer
______________________* Director September 12, 1996
DeWayne W. Moore
______________________* Director September 12, 1996
Gary U. Rolle'
______________________* Director September 12, 1996
Peter J. Sodini
/s/ Regina M. Fink On September 12, 1996 as Attorney-in-Fact pursuant to
*By: Regina M. Fink powers of attorney filed with the initial registration
statement.
</TABLE>
15
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit
(6) Form of Participation Agreement between Transamerica
Variable Insurance Fund, Inc.,
Transamerica Securities Sales Corporation ("TSSC")
and Transamerica Occidental Life
Insurance Company.
(10) Opinion and Consent of Counsel.
(11)(a) Consent of Sutherland, Asbill & Brennan.
<PAGE>
Exhibit 6
Form of Participation Agreement between Transamerica Variable
Insurance Fund, Inc., Transamerica Securities Sales
Corporation ("TSSC") and Transamerica Occidental Life
Insurance Company.
<PAGE>
PARTICIPATION AGREEMENT
Among
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA SECURITIES SALES CORPORATION
and
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this ____ day of _________,
1996 by and among TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (hereinafter
"Transamerica"), a California life insurance company, on its own behalf and on
behalf of its SEPARATE ACCOUNT C (the "Account"); TRANSAMERICA VARIABLE
INSURANCE FUND, INC., a corporation organized under the laws of Maryland
(hereinafter the "Fund"); and TRANSAMERICA SECURITIES SALES CORPORATION,
(hereinafter the "Underwriter"), a _________ corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and/or variable annuity
contracts (collectively, the "Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements similar to
this Agreement (hereinafter "Participating Insurance Companies"), as well as
qualified pension and retirement plans; and
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares, each designated a "Portfolio" and representing interests in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (hereinafter the "SEC"), dated __________ (File No. 812-_____),
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T) (b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Underwriter is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, Transamerica has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are listed in Schedule A hereto, as it may be amended
from time to time by mutual written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of Transamerica on
________________, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, Transamerica has registered the Account as a unit investment trust
under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Transamerica intends to purchase shares in the Portfolios listed in
Schedule B hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios"), on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, Transamerica,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to Transamerica those shares of the
Designated Portfolios which Transamerica orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Portfolios. For purposes of this
Section 1.1, Transamerica shall be the designee of the Fund for receipt of such
orders and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by ____ a.m. _________ time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value.
1.2. The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by Transamerica on
those days on which the Fund calculates its net asset values, and the Fund shall
calculate such net asset value on each day which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the Board of Directors of the
Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Designated
Portfolios will be sold only to Participating Insurance Companies and their
separate accounts and qualified pension and retirement plans. No shares of any
Designated Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell shares of the Designated
Portfolios to any other insurance company, separate account or qualified pension
and retirement plan unless an agreement containing provisions substantially the
same as Sections 2.1, 3.6, 3.7, 3.8, and Article VII of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on Transamerica's request, any
full or fractional shares of the Fund held by Transamerica, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption or postpone the date of
payment or satisfaction upon redemption consistent with Section 22(e) of the
1940 Act. For purposes of this Section 1.5, Transamerica shall be the designee
of the Fund for receipt of requests for redemption and receipt by such designee
shall constitute receipt by the Fund; provided that the Fund receives notice of
such request for redemption by _________ a.m. ___________ time on the next
following Business Day.
1.6. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies and qualified pension and retirement plans (subject to
Section 1.4 and Article VI hereof) and the cash value of the Contracts may be
invested in other investment companies.
1.7. Transamerica shall pay for Fund shares by _______ a.m. ______________
time on the next Business Day after an order to purchase Fund shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire and/or by a credit for any shares redeemed the
same day as the purchase. Upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of Transamerica and shall
become the responsibility of the Fund.
1.8. The Fund shall pay and transmit the proceeds of redemptions of Fund
shares by _____ a.m. ____________ time on the next Business Day after a
redemption order is received, subject to Section 1.5 hereof. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares purchased the
same day as the redemption.
1.9. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to Transamerica or the Account. Shares
ordered from the Fund will be recorded in an appropriate title for the Account
or the appropriate subaccount of the Account.
1.10. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to Transamerica of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares.
Transamerica hereby elects to receive all such income dividends and capital gain
distributions in additional shares of that Portfolio. Transamerica reserves the
right to revoke this election and to receive all such income dividends and
capital gain distributions in cash. The Fund shall notify Transamerica by the
end of the next following Business Day of the number of shares so issued as
payment of such dividends and distributions.
1.11. The Fund shall make the net asset value per share for each Designated
Portfolio available to Transamerica on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by _____ p.m.
________ time. If the Fund provides incorrect per share net asset value
information, Transamerica shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value per share.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported immediately upon
discovery to Transamerica. Any error of a lesser amount shall be corrected in
the next Business Day's net asset value per share.
In the event adjustments are required to correct any error in the
computation of a Designated Portfolio's net asset value per share, or dividend
or capital gain distribution, the Underwriter (or the Underwriter or the Fund)
shall notify Transamerica as soon as possible after discovering the need for
such adjustments. Notification can be made orally, but must be confirmed in
writing. If an adjustment is necessary to correct an error which caused Contract
owners to receive less than the amount to which they are entitled, the Fund
shall make all necessary adjustments to the number of shares owned by the
Account and distribute to the Account the amount of the underpayment. In no
event shall Transamerica be liable to the Fund or the Underwriter for any such
adjustments or overpayment amounts.
ARTICLE II. Representations and Warranties
2.1. Transamerica represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. Transamerica further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
as a segregated asset account under Section 10506 of the California Insurance
Law and has registered the Account as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a segregated investment account for
the Contracts.
2.2. The Fund represents and warrants that Designated Portfolio shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
California and all applicable federal and state securities laws including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states if and to the extent required by applicable
law.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act or impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. In any
event, the Fund represents and warrant that the investment advisory or
management fees paid to the adviser by the Fund are legitimate and not
excessive. To the extent that the Fund decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Board, a majority of whom
are not interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b- 1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment policies and fees
and expenses of the Designated Portfolios are and shall at all times remain in
compliance with the insurance and other applicable laws of the State of
California and any other applicable state to the extent required to perform this
Agreement. The Fund further represents and warrants that Designated Portfolio
shares will be sold in compliance with the insurance laws of the State of
California and all applicable state securities laws or exemptions therefrom.
Without limiting the generality of the foregoing, the Fund represents and
warrants that it is and shall at all times remain in compliance with the
policies and restrictions enumerated in Schedule C hereto, as amended by
Transamerica from time to time, provided that such amendments shall either be
(a) agreed to by the Fund and Transamerica, or (b) necessary to comply with
applicable laws of the State of California.
2.5. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and that it does and
will comply in all material respects with the 1940 Act.
2.6. The Fund represents and warrant that all of their directors, officers,
employees, investment advisers, and other individuals or entities dealing with
the money and/or securities of the Fund are, and shall continue to be at all
times, covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less than the minimal coverage required by Section
17g-(1) of the 1940 Act or related provisions as may be promulgated from time to
time. The aforesaid bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.7. The Fund will provide Transamerica with as much advance notice as is
reasonably practicable of any material change affecting the Designated
Portfolios (including, but not limited to, any material change in its
registration statement or prospectus affecting the Designated Portfolios and any
proxy solicitation affecting the Designated Portfolios) and consult with
Transamerica in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectuses
for the Contracts. The Fund agrees to share equitably in expenses incurred by
Transamerica as a result of actions taken by the Fund, as set forth in the
allocation of expenses contained in Schedule D.
2.8. Transamerica represents, assuming that the Fund complies with Article
VI of this Agreement, that the Contracts are currently treated as annuity
contracts under applicable provisions of the Internal Revenue Code of 1986, as
amended, and that it will make every effort to maintain such treatment and that
it will notify the Underwriter immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.9. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify Transamerica immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1(a). At least annually, the Fund, at its expense, shall provide
Transamerica or its designee with as many copies of the Fund's current
prospectuses for the Designated Portfolios as Transamerica may reasonably
request for marketing purposes (including distribution to Contract owners with
respect to new sales of a Contract). If requested by Transamerica in lieu
thereof, the Fund shall provide such documentation (including a final "camera
ready" copy of the new prospectuses for the Designated Portfolios as set in type
at the Fund's expense or, at the request of Transamerica, as a diskette or such
other form as is required by the financial printer) and other assistance as is
reasonably necessary in order for Transamerica once each year (or more
frequently if the prospectus for the Designated Portfolio is amended) to have
the prospectus for the Contract and the Fund's prospectus for the Designated
Portfolios printed together in one document (the cost of such printing to be
born by the Fund and Transamerica in proportion to the size of the prospectuses
for the Fund and the Contracts).
3.1(b). The Fund agrees that the prospectuses for the Designated Portfolios
will describe only the Designated Portfolios and will not name or describe any
other portfolios or series that may be in the Fund, and that the Fund will bear
the cost of preparing and producing the prospectuses for the Designated
Portfolios that are so custom tailored for use in connection with the Contracts.
3.2. If applicable state or Federal laws or regulations require that the
Statement of Additional Information ("SAI") for the Fund be distributed to all
purchasers of the Contract, then the Fund shall provide Transamerica with the
Fund's SAI or documentation thereof for the Designated Portfolios in such
quantities and/or with expenses to be borne in accordance with paragraph 3.1(a)
hereof.
3.3. The Fund, at its expense, shall provide Transamerica with as many
copies of the SAI for the Designated Portfolios as may reasonably be requested.
The Fund, at its expense, shall also provide such SAI free of charge to any
owner of a Contract or prospective owner who requests such SAI.
3.4. The Fund, at its expense, shall provide Transamerica with copies of
its prospectus, SAI, proxy material, reports to shareholders and other
communications to shareholders for the Designated Portfolios in such quantity as
Transamerica shall reasonably require for distributing to Contract owners. If
the Contract and Fund prospectuses are printed together in one document, the
Fund shall bear the portion of such printing expense as is attributable to the
Fund's prospectus. If applicable SEC rules require that any of the foregoing
Fund prospectuses, Fund SAIs, proxy materials, Fund reports to shareholders or
other communications to shareholders be filed with the SEC, then the Fund or its
designee shall prepare and file with the SEC such prospectus, SAI, proxy
materials, reports to shareholders, or other communications to shareholders in
such format as required by such applicable rules and shall notify Transamerica
of such filing.
3.5. It is understood and agreed that, except with respect to information
regarding Transamerica provided in writing by Transamerica, Transamerica shall
not be responsible for the content of the prospectus or SAI for the Designated
Portfolios. It is also understood and agreed that, except with respect to
information regarding the Fund and provided in writing by the Fund, the Fund
shall not be responsible for the content of the prospectus or SAI for the
Contracts.
3.6. If and to the extent required by law Transamerica shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance with
instructions received from Contract owners: and
(iii) vote Designated Portfolio shares for which no instruction
have been received in the same proportion as Designated
Portfolio shares for which instructions have been received
from Contract owners, so long as and to the extent that the
SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners.
Transamerica reserves the right to vote Fund shares held in
any segregated asset account in its own right, to the extent
permitted by law.
3.7. Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts holding shares of a Designated Portfolio
calculates voting privileges in the manner required by the Shared Funding
Exemptive Order. The Fund agrees to promptly notify Transamerica of any
amendments or changes of interpretations of the Shared Funding Exemptive Order.
3.8. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. Transamerica shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature and other promotional
material that Transamerica develops or uses and in which the Fund (or a
Portfolio thereof), its investment adviser or one of its sub-advisers or the
Underwriter for the Fund shares is named in connection with the Contracts, at
least 10 (ten) Business Days prior to its use. No such material shall be used if
the Fund or its designee objects to such use within 10 (ten) Business Days after
receipt of such material.
4.2. Transamerica shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts inconsistent with the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund shall furnish, or shall cause to be furnished, to
Transamerica, each piece of sales literature and other promotional material in
which Transamerica and/or the Account is named at least 10 (ten) Business Days
prior to its use. No such material shall be used if Transamerica objects to such
use within 10 (ten) Business Days after receipt of such material.
Notwithstanding the fact that Transamerica or its designee may not initially
object to a piece of sales literature or other promotional material,
Transamerica reserves the right to object at a later date to the continued use
of any such sales literature or promotional material in which Transamerica is
named, and no such material shall be used thereafter if Transamerica or its
designee so objects.
4.4. The Fund shall not give any information or make any representations on
behalf of Transamerica or concerning Transamerica, the Account, or the Contracts
other than the information or representations contained in a registration
statement or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports for
the Account, or in sales literature or other promotional material approved by
Transamerica or its designee, except with the permission of Transamerica.
4.5. The Fund will provide to Transamerica at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
all supplements thereto, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Designated
Portfolios, contemporaneously with the filing of such document(s) with the SEC,
NASD or other regulatory authorities.
4.6. Transamerica will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
all supplements thereto, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Contracts or the Account, contemporaneously with the filing of
such document(s) with the SEC, NASD, or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature and
other promotional material" includes, but is not limited to, advertisements
(material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, telephone directories (other than routine
listings), electronic or other public media), sales literature (i.e., any
written or electronic communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, performance reports or summaries, form letters, telemarketing
scripts, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, Statements of Additional
Information, supplements thereto, shareholder reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested in connection with
compliance and regulatory requirements related to this Agreement or any party's
obligations under this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to Transamerica under
this Agreement, except that if the Fund or any Designated Portfolio adopts and
implements a plan pursuant to Rule 12b-1 of the 1940 Act to finance distribution
and shareholder servicing expenses, then the Underwriter may make payments to
Transamerica or to the distributor for the Contracts if and in amounts agreed to
by the Underwriter in writing and such payments will be made out of existing
fees otherwise payable to the Underwriter, past profits of the Underwriter or
other resources available to the Underwriter. No such payments shall be made
directly by the Fund. Nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arrange for appropriate compensation for,
other services relating to the Fund and/or the Account. Transamerica shall pay
no fee or other compensation to the Fund under this Agreement, although the
parties hereto will bear certain expenses in accordance with Schedule D,
Articles III, V, and other provisions of this Agreement.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, as further provided in Schedule E. The Fund shall see
to it that all shares of the Designated Portfolios are registered and authorized
for issuance in accordance with applicable federal law and, if and to the extent
required, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, supplements thereto, proxy materials and reports, setting the
prospectus in type, printing prospectuses for distribution to Contract owners,
setting in type, printing and filing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and the costs of distributing the Fund's prospectuses and proxy
materials to such Contract owners and any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act.
5.3. Transamerica shall bear the expenses of routine annual distribution of
the Fund's prospectus to owners of Contracts issued by Transamerica and of
distributing the Fund's proxy materials and reports to such Contract owners;
this shall not include distribution of the Fund's prospectus with respect to new
sales of a Contract. Transamerica shall bear all expenses associated with the
registration, qualification, and filing of the Contracts under applicable
federal securities and state insurance laws; the cost of preparing, printing,
and distributing the Contract prospectus and SAI; and the cost of preparing,
printing and distributing annual individual account statement to Contract owners
as required by state insurance laws.
5.4. The Fund acknowledges that a principal feature of the Contracts is the
Contract owner's ability to choose from a number of unaffiliated mutual funds
(and portfolios or series thereof), including the Designated Portfolios
("Unaffiliated Funds"), and to transfer the Con- tract's cash value between
funds and portfolios. The Fund and Underwriter agree to cooperate with
Transamerica in facilitating the operation of the Account and the Contracts as
intended, including but not limited to cooperation in facilitating transfers
between Unaffiliated Funds.
ARTICLE VI. Diversification and Qualification
6.1. The Fund and Underwriter represent and warrant that the Fund will at
all times sell its shares and invest its assets in such a manner as to ensure
that the Contracts will be treated as annuity contracts under the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund and
Underwriter represent and warrant that the Fund and each Designated Portfolio
thereof will at all times comply with Section 817(h) of the Code and Treasury
Regulation
1.817-5, as amended from time to time, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other modifications
or successor provisions to such Section or Regulations. The Fund and the
Underwriter agree that shares of the Designated Portfolios will be sold only to
Participating Insurance Companies and their separate accounts and qualified
pension and retirement plans.
6.2. No shares of any series or portfolio of the Fund will be sold to
the general public.
6.3. The Fund and Underwriter represent and warrant that the Fund and each
Designated Portfolio is currently qualified as a Regulated Investment Company
under Subchapter M of the Code, and that it will maintain such qualification
(under Subchapter M or any successor or similar provisions) as long as this
Agreement is in effect.
6.4. The Fund or Underwriter will notify Transamerica immediately upon
having a reasonable basis for believing that the Fund or any Portfolio has
ceased to comply with the aforesaid Section 817(h) diversification or Subchapter
M qualification requirements or might not so comply in the future.
6.5. The Fund and Underwriter acknowledge that full compliance with the
requirements referred to in Sections 6.1, 6.2, and 6.3 hereof is absolutely
essential because any failure to meet those requirements would result in the
Contracts not being treated as annuity contracts for federal income tax
purposes, which would have adverse tax consequences for Contract owners and
could also adversely affect Transamerica's corporate tax liability. The Fund and
Underwriter also acknowledge that it is solely within their power and control to
meet those requirements. Accordingly, without in any way limiting the effect of
Section 8.3 hereof and without in any way limiting or restricting any other
remedies available to Transamerica, the Underwriter will pay all costs
associated with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply with
Sections 6.1, 6.2, or 6.3 hereof, including all costs associated with correcting
or responding to any such failure; such costs may include, but are not limited
to, the costs involved in creating, organizing, and registering a new investment
company as a funding medium for the Contracts and/or the costs of obtaining
whatever regulatory authorizations are required to substitute shares of another
investment company for those of the failed Portfolio (including but not limited
to an order pursuant to Section 26(b) of the 1940 Act); such costs are to
include, but are not limited to, fees and expenses of legal counsel and other
advisors to Transamerica and any federal income taxes or tax penalties (or "toll
charges" or exactments or amounts paid in settlement) incurred by Transamerica
in connection with any such failure or anticipated or reasonably foreseeable
failure.
6.6. The Fund shall provide Transamerica or its designee with reports
certifying compliance with the aforesaid Section 817(h) diversification and
Subchapter M qualification requirements, at times provided for and substantially
in the form attached hereto as Schedule E; provided, however, that providing
such reports does not relieve the Fund or Underwriter of their responsibility
for such compliance or of their liability for any non-compliance.
6.7. The Fund and the Underwriter represent and warrant that the Fund will
comply with the investment limitations under applicable state law for investment
companies funding separate accounts.
ARTICLE VII. Potential Conflicts and Compliance With
Shared Funding Exemptive Order
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform Transamerica if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. Transamerica will report any potential or existing conflicts of which
it is aware to the Board. Transamerica will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by
Transamerica to inform the Board whenever contract owner voting instructions are
disregarded. Such responsibilities shall be carried out by Transamerica with a
view only to the interests of its Contract Owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Fund, its adviser or any
sub-adviser to any of the Portfolios (the "Independent Directors"), that a
material irreconcilable conflict exists, Transamerica and other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. Transamerica shall not be required by this
Section 7.3 to establish a new funding medium for the Contracts if an offer to
do so has been declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict.
7.4. If a material irreconcilable conflict arises because of a decision by
Transamerica to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Transamerica
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Underwriter and the
Fund shall continue to accept and implement orders by Transamerica for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Transamerica conflicts with
the majority of other state regulators, then Transamerica will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs Transamerica in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and the Fund shall continue to accept and implement
orders by Transamerica for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Fund be required to establish a new funding medium for the Contracts.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable:
and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By Transamerica
8.1(a). Transamerica agrees to indemnify and hold harmless the Fund
and its officers and each member of its Board (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Transamerica) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or
prospectus or SAI for the Contracts or contained in the Contracts
(or any
amendment or supplement to any of the foregoing), or arise out of
or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this Agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to
Transamerica by or on behalf of the Underwriter or Fund for use in
the
registration statement or prospectus for the Contracts or in the
Contracts
or sales literature (or any amendment or supplement) or otherwise
for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied
by Transamerica or persons under its control) or wrongful conduct of
Transamerica or persons under its control, with respect to the sale
or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished in writing to the Fund by or on behalf of Transamerica;
or
(iv) arise as a result of any failure by Transamerica to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Transamerica in this
Agreement or arise out of or result from any other material breach
of this Agreement by Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1
(c) hereof.
8.1(b). Transamerica shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject if caused
by such Indemnified Party's willful misfeasance, bad faith, or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). Transamerica shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Transamerica in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Transamerica of any
such claim shall not relieve Transamerica from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, Transamerica shall be entitled to participate,
at its own expense, in the defense of such action. Transamerica also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from Transamerica to such party of
Transamerica's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
Transamerica will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify Transamerica of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harm-less
Transamerica and each of its directors and officers and each person, if any, who
controls Transamerica within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or SAI or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information fur-
nished in writing to the Underwriter or Fund by or on behalf of
Transamerica for use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or
wrongful conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus or sales literature cov-
ering the Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished in writing to Transamerica by or on behalf of the
Underwriter or Fund; or
(iv) arise as a result of any failure by the Fund or Underwriter to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification and
other qualification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or Underwriter in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Underwriter specified in Article VI
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
Transamerica or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). Transamerica agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with respect to
some or all Portfolios, upon one (1) year advance written notice
delivered to the other parties; provided, however, that such notice
shall not be given earlier than one year following the date of this
Agreement; or (b) at the option of Transamerica by written notice to
the other parties with respect to any Portfolio based upon
Transamerica's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts; or (c)
at the option of Transamerica by written notice to the other parties
with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/ or federal law or such law precludes the use of
such shares as the underlying investment media of the Contracts issued
or to be issued by Transamerica; or (d) at the option of the Fund in
the event that formal administrative proceedings are instituted
against Transamerica by the National Association of Securities
Dealers, Inc. ("NASD"), the Securities and Exchange Commission, the
Insurance Commissioner or like official of any state or any other
regulatory body regarding Transamerica's duties under this Agreement
or related to the sale of the Contracts, the operation of any Account,
or the purchase of the Fund shares, provided, however, that the Fund
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon
the ability of Transamerica to perform its obligations under this
Agreement; or (e) at the option of Transamerica in the event that
formal administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the Securities and Exchange Commission, or
any state securities or insurance department or any other regulatory
body, provided, however, that Transamerica determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Fund or Underwriter to perform its obligations under this
Agreement; or (f) at the option of Transamerica by written notice to
the Fund and the Underwriter with respect to any Portfolio if
Transamerica reasonably believes that the Portfolio may fail to meet
the Section 817(h) diversification requirements or Subchapter M
qualifications specified in Article VI hereof; or (g) at the option of
either the Fund or the Underwriter, if (i) the Fund or Underwriter,
respectively, shall determine, in their sole judgement reasonably
exercised in good faith, that Transamerica has suffered a material
adverse change in its business or financial condition or is the
subject of material adverse publicity and that material adverse change
or publicity will have a material adverse impact on Transamerica's
ability to perform its obligations under this Agreement, (ii) the Fund
or Underwriter notifies Transamerica of that determination and its
intent to terminate this Agreement, and (iii) after considering the
actions taken by Transamerica and any other changes in circumstances
since the giving of such a notice, the determination of the Fund or
Underwriter shall continue on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the effective date
of termination; or (h) at the option of Transamerica, if (i)
Transamerica shall determine, in its sole judgement reasonably
exercised in good faith, that either the Fund or the Underwriter have
suffered a material adverse change in their business or financial
condition or is the subject of material adverse publicity and that
material adverse change or publicity will have a material adverse
impact on the Fund's or Underwriter's ability to perform its
obligations under this Agreement, (ii) Transamerica notifies the Fund
or Underwriter, as appropriate, of that determination and its intent
to terminate this Agreement, and (iii) after considering the actions
taken by the Fund or Underwriter and any other changes in
circumstances since the giving of such a notice, the determination of
Transamerica shall continue on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the effective date
of termination; or (i) at the option of any party to this Agreement,
upon another party's material breach of any provision of this
Agreement; or (j) upon assignment of this Agreement, unless made with
the written consent of the parties hereto; or (k) at the option of
Transamerica or the Fund by written notice to the other party upon a
determination by the Fund's Board that a material irreconcilable
conflict exists among the interests of (i) all contract owners of all
separate accounts investing in the Fund or (ii) the interests of the
Participating Insurance Companies; or (l) at the option of
Transamerica by written notice to the Fund or the Underwriter upon the
sale, acquisition or change of control of the Underwriter.
10.2. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
shall set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of Transamerica,
continue to make available additional shares of the Fund for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts") pursuant to the terms and conditions of
this Agreement. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.3 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties shall survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing Contracts, all provisions of this
Agreement shall also survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail or by overnight mail sent through a nationally-recognized delivery service
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund:
Transamerica Variable Insurance Fund, Inc.
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: General Counsel
If to Transamerica:
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: President, Living Benefits Division
If to the Underwriter:
Transamerica Securities Sales Corporation, Inc.
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party reasonably considers to be proprietary.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable annuity operations of Transamerica are being
conducted in a manner consistent with the California Variable Annuity
Regulations and any other applicable law or regulations.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
12.8. The Schedules attached hereto, as modified from time to time, are
incorporated herein by reference and are part of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY
By its authorized officer
SEAL By:
Title:
Date:
TRANSAMERICA VARIABLE INSURANCE FUND, INC.:
By its authorized officer,
SEAL By:
Title:
Date:
TRANSAMERICA SECURITIES SALES CORPORATION:
By its authorized officer,
SEAL By:
Title:
Date:
<PAGE>
SCHEDULE A
Contracts Form Numbers
<PAGE>
SCHEDULE B
Designated Portfolios
<PAGE>
SCHEDULE C
Certain Investment Policies and Restrictions
Imposed by the
California Department of Insurance
Pursuant to Section 2.4 hereof, the Fund represents and warrants that it is
and shall all times remain in compliance with the following investment policies
and restrictions. THESE ARE IN ADDITION TO other related obligations of the
Fund, including the general obligation to comply with all applicable laws and
regulation, including but not limited to California insurance laws and
regulations, the Investment Company Act of 1940, and other applicable insurance
and securities laws.
[Note: The following are derived from a questionnaire used by the California
Department of Insurance as part of an insurance company's application for
qualification to transact a variable annuity business. The parenthetical
references below are to question numbers in that questionnaire.]
The Fund represents and warrants that:
1. All repurchase agreements will be transacted only with entities meeting
specific credit and solvency standards administered and verified by the
Underwriter (46(a)).
2. All repurchase transactions will be executed pursuant to a comprehensive
master repurchase agreement setting forth the terms and conditions of the
transaction, and having the incidents of a valid promissory note in favor of the
Fund (46(b)).
3. A valid, binding security interest in favor of the Fund or portfolio thereof
will be created and perfected in all collateral securing such repurchase
agreements (46(c)).
4. All such repurchase agreements will be secured at all times by collateral
consisting of liquid assets having a market value of not less than 102% of the
cash or assets transferred to the other party (46(d)).
5. All securities lending activities will be entered into only with entities
meeting specific credit and solvency standards administered and verified by the
Underwriter (47).
6. All investments in instruments or certificates of any sort issued by the U.S.
Office of a bank or other savings institution domiciled in a foreign nation, or
a foreign branch of a U.S. savings institution, will be instruments or
certificates payable in the United States and in U.S.
dollars (48).
7. All investments of the Fund which possess a readily-available market value
will be valued either at their market value on the date of valuation, or at
amortized cost if it approximates market value within the limits and constraints
imposed by the U.S. Securities and Exchange Commission (49).
8. All investments of the Fund which lack a readily-available market will be
valued according to specific, objective methods or procedures set forth in
writing (50).
9. The investment manager of each portfolio or series of the Fund possesses
substantial expertise and experience as an investment manager or advisor of a
portfolio consisting of asset and investments of the same type as he or she will
manage in regard to the portfolio or series. (If experience is less than three
years, please provide resume of investment manager; note that in this case, the
Company must provide notarized certifications that it has fully investigated and
is satisfied with the qualifications, background, and expertise of the
investment manager.) (52).
10. At no time during the past ten years have the managers of any portfolio or
series resigned to avoid dismissal or been dismissed or requested to resign from
any position involving investment duties, on account of violation of any law,
rule or ethical standard relating to insurance, annuities, or securities (53).
11. The investment advisory agreements concerning the Fund's operations provide
in substance that notwithstanding any other provisions of the agreement, it is
understood and agreed that the Fund shall retain the ultimate responsibility for
and control of all investments made pursuant to the agreement, and reserve the
right to direct, approve or disapprove any action taken on its behalf by the
investment advisor (54).
12. Every custodian holding securities or other assets of the Fund is an
institution permitted to serve in such capacity by the Investment Company Act of
1940 and/or reviewed and approved for such purpose by the U.S. Securities and
Exchange Commission (55).
13. The Fund refuses to employ in any material connection with the handling of
assets of the Fund, any person who:
(a) In the last 10 years has been convicted of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Title 18,
United States Code 1341, 1342, or 1343 (58(a)).
(b) Within the last 10 years has been found by any-state regulatory authority to
have violated, or has acknowledged violation of, any provision of any state
insurance law involving fraud, deceit or knowing misrepresentation (59(b)).
(c) Within the last 10 years has been found by any federal or state regulatory
authorities to have violated, or have acknowledged violation of, any provisions
of federal or state securities laws involving fraud, deceit, or knowing
misrepresentation (58(c)).
14. The Fund will make inquiries and attempt to determine that no persons,
firms, or employees of firms which supply consulting, investment,
administrative, custodial or other services affecting the administration of the
Company's variable annuity business (including such services for the Fund), have
been subject to the sanctions described in the preceding representation (59).
15. The Fund will seek to prevent its officers and Board members, and officers,
directors and portfolio managers of the investment advisor, from receiving,
directly or indirectly, any commission, or any other compensation with respect
to the purchase or sale of assets of the Fund (61).
16. No officer, director, trustee, or member of any governing board or body of
the Fund will receive directly or indirectly any commissions or any other
compensation contingent upon the writing, issuance, sale, procurement of
application for, or renewal, of any variable annuity contract (62).
17. All service agreements affecting the administration of the Fund allow the
Fund to terminate such contracts without payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which could
deter termination (65).
18. All service agreements affecting the administration of the Fund afford the
Fund a right to cancel the contract and discharge the servicing entity or person
in the event such entity or person fails to perform in a satisfactory manner
(66).
19. All service agreements affecting the administration of the Fund provide that
the Fund shall own and control all the pertinent records pertaining to its
operations (67).
20. All service agreements affecting the administration of the Fund provide that
the Fund shall have the right to inspect, audit and copy all records pertaining
to performance of services under the agreement (68).
<PAGE>
SCHEDULE D
Expenses
ITEM
FUNCTION
RESPONSIBLE
PARTY
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
MARKETING
1. Prospectus
2. Initial Sales
Printing
Supply copies of prospectus described in Parts 3.1 and 3.3 in numbers equal to
Transamerica's reasonable request.
If requested by Transamerica in lieu thereof such documentation and other
assistance as is reasonably necessary for Transamerica to have the prospectus
for the Contracts and the prospectus for the Fund printed together in one
document.
Distribution
Printing
Distribution
EXISTING OWNERS
1. Annual
Updates
2. Interim
Updates
Printing
Distribution
Printing & Distribution
(a) If required by Fund or Adviser or Distributor (b) If required by
Transamerica (c) If required by other participating insurance company (PIC)
PROXY MATERIALS OF
THE FUND
Printing and Distribution
(a) If required by law
(b) If required by Transamerica
(c) If required by other participating insurance company
(d) If required by Fund or Adviser or Distributor
SHAREHOLDER REPORTS
Printing
Distribution
OTHER COMMUNICATIONS
WITH SHAREHOLDERS OF
THE FUND
Printing & Distribution
(a) If required by law
(b) If required by Transamerica
(c) If required by other participating insurance company
(d) If required by Fund or Adviser or Distributor
OPERATIONS OF FUND
All operations and related expenses, including the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, the
preparation of all statements and notices required by any federal or state law
and all taxes on the issuance or transfer of the Fund's shares, and all costs of
management of the business affairs of the Fund
<PAGE>
SCHEDULE E
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of
compliance with the requirement of Section 817(h) and Subchapter M under the
Internal Revenue Code (the "Code") and the regulations thereunder, the Fund
shall provide within twenty (20) Business Days of the close of the calendar
quarter a report [in a form to be attached] regarding the status under such
sections of the Code of the Designated Portfolios, and if necessary,
identification of any remedial action to be taken to remedy non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred to
hereinafter as "RIC status," the Fund will provide the reports on the following
basis: (i) the last quarter's quarterly reports can be supplied within the
20-day period, and (ii) the year-end report [in a form to be attached] will be
provided 45 days after the end of the calendar year, but prior thereto, the Fund
will provide the additional interim and supplemental reports, described below.
The additional reports are as follows:
1. A report in the usual reporting format and content, as of
November 30, of each future fiscal year. The report will be
provided under cover of a letter from the Underwriter
stating that the Fund is in full compliance with the
requirements of Section 817(h) and Subchapter M of the Code.
Assuming such satisfactory report, the Fund will not provide
any additional interim reports. The report will be delivered
by facsimile by the twentieth day of December.
2.In the alternative, if a problem, as defined below, is identified in the
November report or its accompanying transmittal letter, additional interim
reports, on a weekly basis, starting on the 15th of December and through the
30th of December, also will be supplied ("additional interim reports"). The
additional interim reports will not follow the format of the regular reports,
but will specifically address the problem identified in the November 30 report.
If any interim report, thereafter, memorialize the cure of the problem,
subsequent additional reports will not be required.
With regard to delivery of the additional reports, they will be
transmitted by facsimile on the next Business Day, subject to the
following schedule of special dates: if the 15th of December is a
Saturday, the required report date will be accelerated to the 14th
of December; if the 15th of December is a Sunday, the report will be
transmitted on the 16th of December.
3. A problem with regard to RIC status is defined as any violation of the
following standards, as referenced to the applicable sections of the Code:
(a) Less than ninety-five percent of gross income is derived from sources
of income specified in Section 851(b)(2);
(b) Twenty-five percent or greater gross income is derived from the sale
or disposition of assets specified in Section 851(b)(3);
(c) Fifty-five percent or less of the value of total assets consists of assets
specified in Section 851(b)(4)(A); and
(d) Twenty percent or more of the value of total assets is
invested in the securities of one issuer, as that
requirement is set forth in Section 851(b)(4)(B).
<PAGE>
Exhibit 10
Opinion and Consent of Counsel.
<PAGE>
September 12, 1996
Transamerica Occidental Life
Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Gentlemen:
With reference to the Registration Statement on Form N-1A filed by Transamerica
Variable Insurance Fund, Inc. with the Securities and Exchange Commission,
(File Nos. 33-99016 and 811-9126), I have examined such documents and such law
as I considered necessary and appropriate, and on the basis of such
examinations, it is my opinion that:
1). Transamerica Variable Insurance Fund, Inc., is duly organized
and validly existing under the laws of the State of Maryland.
2). The shares will be, and there is no legal impediment to being, duly
authorized and when issued and delivered as provided in Registration Statement
filed herewith, will be legally issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the said Form
N-1A Registration Statement. In giving this consent, I am not admitting that I
am in the category of person whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
Regina M. Fink
Counsel
<PAGE>
Exhibit 11(a)
Consent of Sutherland, Asbill & Brennan.
<PAGE>
September 11, 1996
Transamerica Occidental Life
Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Re: Transamerica Variable Insurance Fund, Inc.
File No. 33-99016
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Counsel" in the Statement of Additional Information included in Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A for Transamerica
Variable Insurance Fund, Inc. (File No. 33-99016). In giving this consent, we
do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Frederick R. Bellamy
Frederick R. Bellamy
