As filed with the Securities and Exchange Commission on October 31, 1997
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.
Post-Effective Amendment No. 5
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 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:
JAMES W. DEDERER, Esq.
Executive Vice President, General Counsel
and Corporate Secretary
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015-2211
Copy to:
FREDERICK R. BELLAMY, Esq.
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the registration statement.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Form 24f-2 for the year ended December 31, 1996 was filed on February 25, 1997.
It is proposed that this filing will become effective: x
immediately upon filing pursuant to paragraph (b) o
on __________ pursuant to paragraph (b) o 60 days
after filing pursuant to paragraph (a)(1) o on _
pursuant to paragraph (a)(1) o 75 days after filing
pursuant to paragraph (a)(2) o on _________________
pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
o this Post-Effective Amendment designates a new
effective date for a previously filed Post-Effective Amendment.
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TRANSAMERICA VARIABLE INSURANCE FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495
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
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.
The prospectus dated May 1, 1997, for the above-referenced Growth
Portfolio of the Transamerica Variable Insurance Fund, Inc., as filed with
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A for
the Transamerica Variable Insurance Fund, Inc., File No. 33-99016 (May 1, 1997),
is incorporated by reference herein.
<PAGE>
GROWTH PORTFOLIO
and
MONEY MARKET PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street, Los Angeles, California 90015,
(213) 742-2111
PROSPECTUS October 31, 1997
The Transamerica Variable Insurance Fund, Inc. (the "Fund") is designed
to provide investment vehicles for variable annuity and variable life insurance
contracts of various insurance companies. The Fund currently
offers the following investment portfolios:
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.
The Money Market Portfolio seeks to maximize current income from money
market securities consistent with liquidity and the preservation of principal.
Shares of each Portfolio may currently be purchased only by separate
accounts of insurance companies for the purpose of funding variable annuity
contracts and variable life insurance policies (collectively "variable insurance
contracts"). 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.
A Statement of Additional Information containing more detailed
information about the Fund is available free by writing to the Fund at the
Transamerica Annuity Service Center, 401 North Tryon Street, Suite 700,
Charlotte, North Carolina 28202, or by calling (800) 258-4260, ext. 5560. The
Statement of Additional Information, which has the same date as this Prospectus,
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.
This Prospectus contains vital information about the Portfolios that a
prospective purchaser of a variable insurance contract should know before
allocating premiums to one of the Portfolios. For your own benefit and
protection, please read it before you invest. Keep it on hand for future
reference.
Like all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities 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.
Please note that these Portfolios:
o are not bank deposits
o are not endorsed by any bank or government agency
o are not federally insured
o are not guaranteed to achieve their goal(s)
AN INVESTMENT IN ANY PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U. S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
CONDENSED FINANCIAL INFORMATION.....................................
TRANSAMERICA VARIABLE INSURANCE FUND, INC...........................
INVESTMENT OBJECTIVE AND POLICIES...................................
INVESTMENT METHODS AND RISKS........................................
Small Capitalization Companies.............................
Convertible Securities
High-Yield ("Junk") Bonds..................................
Repurchase Agreements......................................
Money Market Securities
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 and
Administrative Services...................................
Summary of Bond Ratings....................................
FOR MORE INFORMATION................................................
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following table gives information regarding income, expenses and
capital changes in the Growth Portfolio of the Transamerica Variable Insurance
Fund, Inc. (formerly Transamerica Occidental's Separate Account Fund C)
attributable to a Portfolio share outstanding throughout the periods indicated.
The information is presented as if the reorganization of Separate Account Fund C
described below had always been in effect.
The activity prior to the November 1, 1996, reorganization of Separate
Account Fund C, represents accumulation unit values of Separate Account Fund C
which have been converted into share value for presentation purposes.
The per share data in the table for the period January 1, 1992, through
December 31, 1996, has been audited by Ernst & Young LLP, independent auditors
of the Fund, in connection with the annual audit of the Portfolio's financial
statements. The per share data in the table for the period January 1, 1987,
through December 31, 1991, is based upon data from the audited financial
statements of Separate Account Fund C, but Ernst & Young, LLP has not audited
the conversion of that data to Growth Portfolio share values. The financial
statements which appear in the Statement of Additional Information are dated as
of December 31, 1996.
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GROWTH PORTFOLIO
1996 1995 1994 1993 1992
----------------------------------------------------
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Net asset value, beginning of year $8.582 $5.615 $5.239 $4.287 $3.783
Investment Operations
Net investment income (loss) (0.065) (0.069) (0.042) (0.030) 0.012
Net realized and unrealized gain 2.413 3.036 0.418 0.982 0.492
Total from investment operations 2.348 2.967 0.376 0.952 0.504
Net asset value, end of year $10.930 $8.582 $5.615 $5.239 $4.287
======================================================
Total Return 27.36% 52.84% 7.19% 22.20% 13.32%
Ratios and Supplemental Data
Net assets, end of year (in thousands) $32,238 $25,738 $17,267 $16,584 $13,966
Expenses to average net assets 1.27%(1) 1.41% 1.43% 1.43% 1.43%
Net investment income (loss)
to average net assets (0.68%)(2) (0.94%) (0.80%) (0.65%) 0.31%
Portfolio turnover rate 34.58% 18.11% 30.84% 42.04% 43.07%
Average commission rate (3) $0.07 - - - -
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
Net asset value, beginning of year $2.689 $3.026 $2.266 $1.694 $1.504
Investment Operations
Net investment income (loss) (0.009) (0.022) (0.010) (0.054) 0.017
Net realized and unrealized gain 1.085 (0.360) 0.750 0.517 0.173
Total from investment operations 1.095 (0.337) 0.760 0.572 0.190
Net asset value, end of year $3.783 $2.689 $3.026 $2.266 $1.694
======================================================
Total Return 40.71% (11.14%) 33.56% 33.74% 12.60%
Ratios and Supplemental Data
Net assets, end of year (in thousands) $12,516 $9,281 $10,861 $8,453 $6,466
Expenses to average net assets 1.43% 1.43% 1.44% 1.43% 1.44%
Net investment income (loss)
to average net assets 0.28% 0.81% 0.37% 2.66% 0.94%
Portfolio turnover rate 32.90% 49.87% 22.39% 52.18% 83.37%
Average commission rate (3) - - - - -
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(1) If the Investment Advisor had not reimbursed expenses for the year ended
December 31, 1996, the ratio of operating expenses
to average net assets would have been 1.34%.
(2) If the Investment Advisor had not reimbursed expenses for the year ended
December 31, 1996, the ratio of net investment loss
to average net assets would have been (0.75%).
(3) This disclosure is required for fiscal periods beginning on or after
September 1, 1995. (4) Prior to November 1, 1996, activity represents
accumulated unit values of Separate Account Fund C which have been converted to
share values for presentation purposes.
<PAGE>
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. The Fund currently consists of two investment portfolios, the
Growth Portfolio and the Money Market Portfolio. (Additional Portfolios may be
created from time to time.) By investing in one of the Portfolios, 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 that Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust was approved at a meeting of the Contract owners held on
October 30, 1996. The assets of Separate Account Fund C as of the close of
business October 31, 1996, were transferred intact to the Growth Portfolio in
exchange for shares 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
investment adviser to the Portfolios and conducts the business and affairs of
the Fund. Transamerica has engaged Transamerica Investment Services, Inc.
("Investment Services") to act as the Portfolios' sub-advisor to provide their
day-to-day portfolio management.
The Portfolios are designed primarily to serve as investment vehicles
for variable annuity and variable life insurance contracts offered by separate
accounts of various insurance companies. The Fund may sell its shares to
qualified pension and retirement plans, but currently does not do so. The Fund
does not offer its stock directly to the general public.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Portfolios are described
below. There can be no assurance that a Portfolio will achieve its investment
objective. Investors should not consider any one Portfolio alone to be a
complete investment program. As with any security, a risk of loss, including
possible loss of principal, is inherent in an investment in the shares of a
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. Each 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 each 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 each Portfolio are fundamental, however, and may not be changed without the
approval of a majority of the votes attributable to the outstanding shares of
that Portfolio. See "Investment Restrictions" in the Statement of Additional
Information.
Growth Portfolio
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 Growth Portfolio may invest up to 10% of its 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 Growth Portfolio to more than 10%.
The Growth 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 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 Growth Portfolio may not
purchase more than 10% of the voting securities of any one issuer. And it 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 Growth Portfolio's net assets.
Money Market Portfolio
The Money Market Portfolio seeks to maximize current income from money
market securities consistent with liquidity and preservation of principal. The
Money Market Portfolio invests primarily in high quality U. S.
dollar-denominated money market instruments with remaining maturities of 13
months or less, including:
o obligations issued or guaranteed by the U. S. and foreign
governments and their agencies and
instrumentalities;
o obligations of U. S. and foreign banks, or their foreign
branches, and U. S. savings banks;
o short-term corporate obligations, including commercial paper
notes and bonds;
o other short-term debt obligations with remaining maturities
of 397 days or less; and
o repurchase agreements involving any of the securities
mentioned above.
The Money Market Portfolio may also purchase other marketable, non
convertible corporate debt securities
of U. S. issuers. These investments include bonds, debentures, floating rate
obligations, and issues with
optional maturities. See the SAI for a description of these securities.
Bank obligations are limited to U. S. or foreign banks having total
assets over $1.5 billion.
Investments in saving association obligations are limited to U. S. savings banks
with total assets over $1.5
billion. Investments in bank obligations can include instruments issued by
foreign branches of U. S. or foreign
banks or domestic branches of foreign banks.
In addition, the Money Market Portfolio may invest in U. S.
dollar-denominated obligations issued or guaranteed by foreign governments or
their political subdivisions, agencies, or instrumentalities. Investment
Services may buy these foreign securities and other instruments if they meet the
same criteria described above for the Money Market Portfolio's investments in
general. Investment Services may invest up to 25% of the Portfolio's assets in
obligations of Canadian and other foreign issuers. At times the Portfolio may
have no foreign investments.
Investment Services will determine that any commercial paper and other
short-term corporate obligations in which the Portfolio invests present minimal
credit risks. Investment Services will determine that such investments are
either: a) rated in the highest short-term rating category by at least two
nationally recognized statistical rating organizations; or b) rated in the
highest short-term rating by a single rating organizations if it is the only
organization that has assigned the obligations a short-term rating; or c) is
unrated, but determined to be of comparable quality (also called "First Tier
Securities").
The Money Market Portfolio will seek to maintain a stable net asset
value of $1.00 per share by investing in assets which present minimal credit
risks as defined above, and by maintaining an average maturity of 90 days or
less. Securities are valued on an amortized cost basis. The Money Market
Portfolio may be appropriate for investors who would like to earn income at
current money market rates while preserving the value of their investment. It
stresses preservation of capital, liquidity and income and does not seek the
higher yields or capital appreciation that more aggressive investments may
provide. The Portfolio's yield will vary from day to day and generally reflects
current short-term interest rates and other market conditions.
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE
UNITED STATES GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENT METHODS AND RISKS
The Portfolios are subject to the risk of changing economic conditions
and fluctuations in the prices of securities owned by the Portfolios.
In addition, the different types of securities, investments, and
investment techniques used by each 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 Portfolios 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, 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.
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.
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 Appendix A to the Statement of Additional Information
for a description of bond rating categories.
Repurchase Agreements
The Portfolios may enter into repurchase agreements with Federal
Reserve System member banks or U. S. securities dealers. A repurchase agreement
occurs when a 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 a 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. A 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, a 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 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.
Each 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.
Money Market Securities
The Money Market Portfolio will invest in money market securities,
which are high-quality, short-term obligations issued by the U. S. government,
corporations, financial institutions, and other entities. These obligations may
carry fixed, variable, or floating interest rates. Some money market securities
employ a trust or other similar structure to modify the maturity, price
characteristics, or quality of financial assets so that they are eligible
investments for money market funds. If the structure does not perform as
intended, adverse tax or investment consequences may result.
State Insurance Regulation
The Portfolios are 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 Portfolios, a 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 intention of each Portfolio 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 Portfolios will not consider portfolio turnover to be a limiting
factor in making investment decisions. Changes will be made in a Portfolio if
such changes are considered advisable to better achieve that 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 a 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.
MANAGEMENT
Directors and Officers
The Fund's Board of Directors is responsible for deciding matters of
general policy and reviewing the actions of the Investment Adviser and
InvestmentSub-Adviser, the custodian, the accounting and administrative services
providers and other providers of services to the Portfolios. 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 Portfolios. 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 predecessor to the Growth Portfolio.
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 Portfolios 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 Portfolios, 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 receives an annual advisory fee of 0.35% of the
average daily net assets of the Money Market Portfolio. Transamerica may waive
some or all of its fee from time to time at its discretion.
Each Portfolio pays all the costs of its operations that are not
assumed by Transamerica, including custodian fees, legal and auditing fees,
registration fees and expenses, and fees and expenses of directors unaffiliated
with Transamerica. Fund expenses that are not Portfolio-specific will be
allocated between the Portfolios based on the net assets of each Portfolio.
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 Portfolios. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and to the Transamerica Life Companies since 1981.
Investment Services is located at 1150 South Olive Street, Los Angeles,
California 90015-2211. Transamerica has agreed to pay Investment Services a
monthly fee at the annual rate of 0.30% of the first $50 million of the Growth
Portfolio's average daily net assets, 0.25% of the next $150 million, and 0.20%
of assets in excess of $200 million. Transamerica will pay Investment Services a
fee at an annual rate of 0.15% of the Money Market Portfolio's average daily net
assets. 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 Portfolios. Some of these brokers or
dealers may be affiliated persons of Transamerica and Investment Services,
although presently none are. 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 Portfolios 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 in 1980. Mr. Van Harte
has been managing the portfolio of the Fund's predecessor, Separate Account
Fund C, since 1984.
The portfolio manager for the Money Market Portfolio is Kevin J.
Hickam, C.F.A., Assistant Vice
President and Fund Manager at Investment Services. Mr. Hickam is a member of
the Los Angeles Society of
Financial Analysts. He received his M.B.A. from Cornell University in 1989 and
his B.S. from California State
University at Chico in 1984. Mr. Hickam has managed the Transamerica Premier
Short-Intermediate Government Fund
and the Transamerica Premier Cash Reserve Fund from 1995 until the present.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return
and yield figures for the Portfolios 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 Portfolios 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.
Seven-day yield illustrates the income earned by an investment in a
money market fund over a recent seven-day period. Since money market funds
maintain a stable $1.00 share price, current seven-day yields are the most
common illustration of money market fund performance.
In addition, the Fund may from time to time publish performance of a
Portfolio relative to certain performance rankings and indices.
As the successor to Separate Account Fund C, the Growth Portfolio
treats the historical performance data of Separate Account Fund C as its own for
periods prior to the reorganization. The performance data for the Growth
Portfolio prior to the reorganization does not reflect any sales or insurance
charges or any other separate account or contract level charges that were
imposed under the annuity contracts issued through Separate Account Fund C.
Since each Portfolio is not available directly to the public, its
performance data is not advertised unless accompanied by comparable data for the
applicable variable annuity or variable life insurance policy. The Portfolios'
performance data does not reflect separate account or contract level charges.
The investment results of each 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 a 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 a Portfolio's holdings available to investors upon request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Growth 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 Growth 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 Money Market Portfolio
is determined only on days that the Federal Reserve is open.
The net asset value of each 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.
The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. All securities held by the Money
Market Portfolio and any short-term debt securities of the Growth Portfolio
having remaining maturities of sixty days or less are valued by the amortized
cost method, which approximates market value. Amortized cost involves valuing an
investment at its cost and assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of movements in interest rates.
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. For more information, see "Determination of
Net Asset Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to a participation agreement between the Fund and
Transamerica, shares of the Portfolios are sold in a continuous offering and are
authorized to be offered to the separate accounts of various insurance companies
in order to support variable annuity and life insurance contracts. The separate
accounts purchase and redeem shares of the Portfolios at net asset value without
sales or redemption charges.
For each day on which a Portfolio's net asset value is calculated, the
separate account 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 are
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 event that shares of a 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 insurance contract
owners and plan participants. The Fund currently does not foresee any
disadvantage to owners of the annuity contracts arising from the fact that
shares of a Portfolio might be held by such entities. However, in such an event,
the Fund's Board of Directors will monitor the Portfolios 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
Each Portfolio distributes substantially all of its net investment
income in the form of dividends to its shareholders. The Growth Portfolio
declares its dividends and capital gain distributions at least annually. The
Money Market Portfolio declares its dividends and capital gain distributions on
a monthly basis.
Although the Fund pays dividends on the Money Market Portfolio monthly,
dividends are determined daily.
TAXES
The Fund believes that each Portfolio qualifies as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and each 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 Portfolios. In addition, each 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.
OTHER INFORMATION
Reports
Each year a Contract Owner (or annuitant or beneficiary, as
appropriate) will receive the Fund's Annual Report containing audited financial
statements and the Fund's Semi-Annual Report containing unaudited financial
statements. Proxy materials, if issued, will also be sent. Questions may be
directed to the Fund at the telephone number or address listed on the cover page
of this Prospectus.
Voting and Other Rights
Each share outstanding is entitled to one vote on all matters submitted
to a vote of shareholders (of the Portfolios or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolios and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share of the Portfolios, 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 and does not intend to do so. 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.
Transamerica currently owns more than 25% of the outstanding shares of
the Growth Portfolio which may result in it being deemed a controlling person of
the Growth 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
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.
<PAGE>
FOR MORE INFORMATION
The Statement of Additional Information (SAI) contains more detailed information
on the Portfolios. The current SAI has been filed with the Securities and
Exchange Commission and is incorporated by reference into this prospectus (is
legally part of this prospectus).
To request a free copy of the SAI, please write or call the Fund at:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28201
(800) 258-4260, ext. 5560.
The following is the Table of Contents for the SAI:
TABLE OF CONTENTS
Page
INTRODUCTION...........................................................
ADDITIONAL INVESTMENT POLICY INFORMATION...............................
SPECIAL INVESTMENT METHODS AND RISKS...................................
..............................................................
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............................................
DESCRIPTION OF FIXED-INCOME INSTRUMENTS................................
U. S. Government Obligations..................................
Certificates of Deposit.......................................
Time Deposits.................................................
Bankers' Acceptance...........................................
Commercial Paper..............................................
Variable Rate, Floating Rate, or Variable Amount Securities...
Corporate Debt Securities.....................................
Asset-Backed Securities.......................................
Participating Interests in Loans..............................
International Organization Obligations........................
Custody Receipts..............................................
Pass-Through Securities.......................................
INVESTMENT RESTRICTIONS................................................
Fundamental Policies and 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................................................
Growth Portfolio Performance..................................
Money Market Portfolio Performance............................
Published Performance.........................................
FEDERAL TAX MATTERS....................................................
SHARES OF STOCK........................................................
CUSTODY OF ASSETS......................................................
DIRECTORS AND OFFICERS.................................................
Compensation..................................................
LEGAL PROCEEDINGS......................................................
OTHER INFORMATION......................................................
Legal Counsel.................................................
Other Information.............................................
Independent Public Accountants................................
Financial Statements..........................................
APPENDIX A....................................................
<PAGE>
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
The Statement of Additional Information dated May 1, 1997 for the
above-referenced Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc., as filed with Post-Effective Amendment No. 2 to
the Registration Statement on Form N-1A for the Transamerica Variable
Insurance Fund, Inc., File No. 33-99016 (May 1, 1997) is incorporated
by reference herein.
<PAGE>
-------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-------------------------------------------
GROWTH PORTFOLIO
and
MONEY MARKET PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
October 31, 1997
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 and Money Market Portfolios of the Transamerica
Variable Insurance Fund, Inc. (the "Fund"). Please read this Statement in
conjunction with the Prospectus for the Fund. To obtain a free copy of the
Prospectus with the same date as this Statement of Additional Information, write
to the Fund at the Transamerica Annuity Service Center, 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202, or call (800) 258-4260, ext. 5560.
<PAGE>
TABLE OF CONTENTS
ge
INTRODUCTION...............................................................
ADDITIONAL INVESTMENT POLICY INFORMATION...................................
SPECIAL INVESTMENT METHODS AND RISKS.......................................
..................................................................
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................................................
DESCRIPTION OF FIXED-INCOME INSTRUMENTS....................................
U. S. Government Obligations......................................
Certificates of Deposit...........................................
Time Deposits.....................................................
Bankers' Acceptance...............................................
Commercial Paper..................................................
Variable Rate, Floating Rate, or Variable Amount Securities.......
Corporate Debt Securities.........................................
Asset-Backed Securities...........................................
Participating Interests in Loans..................................
International Organization Obligations............................
Custody Receipts..................................................
Pass-Through Securities...........................................
INVESTMENT RESTRICTIONS....................................................
Fundamental Policies and 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....................................................
Growth Portfolio Performance......................................
Money Market Portfolio Performance................................
Published Performance.............................................
FEDERAL TAX MATTERS........................................................
SHARES OF STOCK............................................................
CUSTODY OF ASSETS..........................................................
DIRECTORS AND OFFICERS.....................................................
Compensation......................................................
LEGAL PROCEEDINGS..........................................................
OTHER INFORMATION..........................................................
Legal Counsel.....................................................
Other Information.................................................
Independent Public Accountants....................................
Financial Statements..............................................
APPENDIX A.................................................................
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
As of October 31, 1997, 100% of the outstanding shares of the Growth
Portfolio are owned by Transamerica on behalf of Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio and the Money Market Portfolio. By investing in a 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" or "Sub-Adviser") to act as the Fund's sub-adviser to provide the
day-to-day portfolio management for the Portfolios.
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 Portfolio,
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.
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 Growth
Portfolio invests the majority of its assets in common stocks, the Growth
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.
The Money Market Portfolio seeks to maximize current income from money
market securities consistent with
liquidity and preservation of principal. The Money Market Portfolio invests
primarily in high quality U. S.
dollar-denominated money market instruments with remaining maturities of 13
months or less, including: (i)
obligations issued or guaranteed by the U. S. and foreign governments and their
agencies and instrumentalities;
(ii) obligations of U. S. and foreign banks, or their foreign branches, and U.
S. savings banks; (ii) short-term
corporate obligations, including commercial paper, notes and bonds; (iv) other
short-term debt obligations with
remaining maturities of 397 days or less; and (v) repurchase agreements
involving any of the securities mentioned
above. The Money Market Portfolio may also purchase other marketable, non-
convertible corporate debt securities
of U. S. issuers. These investments include bonds, debentures, floating rate
obligations, and issues with
optional maturities.
SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
Each 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% and the
Money Market Portfolio no more than 10% of its respective 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 each 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 a
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 Portfolios 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 a 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. A
Portfolio will not borrow for leveraging purposes. Each 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 a 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
Each 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 (except that the Money Market Portfolio will only invest in
other money market funds). Each 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. Each 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, a
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 Portfolio currently does not intend to
invest more than 5% of its net assets in options on securities and securities
indices. The 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
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. Such Portfolio would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio may 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 Growth 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 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 agreements have the characteristics of loans issued by a
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, a 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. A 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, other
short-term obligations with remaining maturities of 397 days or less,
obligations issued or guaranteed by the United States government and foreign
governments and their agencies or instrumentalities, and obligations of United
States and foreign banks, or their foreign branches, and United States savings
banks, in which the Portfolios may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The Growth Portfolio may invest in high-yield bonds. The total return
and yield of lower quality, high yield bonds, commonly referred to as "junk
bonds," can be expected to fluctuate more than the total return and yield of
higher quality bonds but not as much as common stocks. Junk bonds are regarded
as predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Successful investment in low and
lower-medium quality bonds involves greater investment risk and is highly
dependent on Investment Services' credit analysis. A real or perceived economic
downturn or higher interest rates could cause a decline in high yield bond
prices, because such events could lessen the ability of issuers to make
principal and interest payments. These bonds are often thinly-traded and can be
more difficult to sell and value accurately than high-quality bonds. Because
objective pricing data may be less available, judgment may plan a greater role
in the valuation process. In addition, the entire junk bond market can
experience sudden and sharp price swings due to a variety of factors, including
changes in economic forecasts, stock market activity, large or sustained sales
by major investors, a high-profile default, or just a change in the market's
psychology. This type of volatility is usually associated more with stocks than
bonds, but junk bond investors should be prepared for it.
The Growth 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 Portfolios 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 a 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, a
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.
DESCRIPTION OF FIXED-INCOME INSTRUMENTS
U. S. Government Obligations
The Portfolios may invest in securities issued or guaranteed as to
principal and interest by the United States Government that include a variety of
Treasury securities, differing in their interest rates, maturities and times of
issuance. Treasury bills have a maturity of one year or less; Treasury notes
have maturities of one to ten years; and Treasury bonds can be issued with any
maturity period but generally have a maturity of greater than ten years.
Agencies of the United States Government which issue or guarantee obligations
include, among others, the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration and The
Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others,
banks of the Farm Credit System, the Federal National Mortgage Association,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Student Loan
Marketing Association, Federal Intermediate Credit Banks, Federal Land Banks,
Banks for Cooperatives, and the U. S. Postal Service. Some of these securities
are supported by the full faith and credit of the U. S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury, while still
others are supported only by the credit of the instrumentality.
Certificates of Deposit
Certificates of deposit are generally short-term, interest-bearing
negotiable certificates issued by banks or savings and loan associations and
savings banks against funds deposited in the issuing institution.
Time Deposits
Time deposits are deposits in a bank or other financial institution for
a specified period of time at a fixed interest rate for which a negotiable
certificate is not received. Certain time deposits may be considered illiquid.
Bankers' Acceptance
A bankers' acceptance is a draft drawn on a commercial bank by a
borrower usually in connection with an international commercial transaction (to
finance the import, export, transfer or storage of goods). The borrower is
liable for payment as well as the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity.
Commercial Paper
Commercial paper refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding 270 days.
Variable Rate, Floating Rate, or Variable Amount Securities
Variable rate, floating rate, or variable amount securities are
short-term unsecured promissory notes issued by corporations to finance
short-term credit needs. These are interest-bearing notes on which the interest
rate generally fluctuates on a scheduled basis.
Corporate Debt Securities
Debt issued by a corporation that pays interest and principal to the
holders at specified times.
Asset-Backed Securities
Asset-backed securities are securities which represent an undivided
fractional interest in a trust whose assets generally consist of mortgages,
motor vehicle retail installment sales contracts, or other consumer-based loans.
Participation Interests in Loans
A participation interest in a loan entitles the purchaser to receive a
portion of principal and interest payments due on a commercial loan extended by
a bank to a specified company. The purchaser of such an interest has no recourse
against the bank if payments of principal and interest are not made by the
borrower and generally relies on the bank to administer and enforce the loan's
terms.
International Organization Obligations
International organization obligations include obligations of those
organizations designated or supported by U. S. or foreign government agencies to
promote economic reconstruction and development or international banking, and
related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank, and the InterAmerican Development Bank.
Custody Receipts
A Portfolio may acquire custody receipts in connection with securities
issued or guaranteed as to principal and interest by the U. S. Government, its
agencies, authorities or instrumentalities. Such custody receipts evidence
ownership of future interest payments, principal payments or both on certain
notes or bonds issued by the U. S. Government, its agencies, authorities or
instrumentalities. These custody receipts are known by various names, including
"Treasury Receipts," "Treasury Investors Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). For certain
securities law purposes, custody receipts are not considered U. S. Government
securities.
Pass-Through Securities
The Portfolios may invest in mortgage pass-through securities such as
Government National Mortgage Association ("GNMA") certificates or Federal
National Mortgage Association ("FNMA") and other mortgage-backed obligations, or
modified pass-through securities such as collateralized mortgage obligations
issued by various financial institutions. In connection with these investments,
early repayment of investment principal arising from prepayments of principal on
the underlying mortgage loans due to the sale of the underlying property, the
refinancing of the loan, or foreclosure may expose a Portfolio to a lower rate
of return upon reinvestment of the principal. Prepayment rates vary widely and
may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the mortgage-related security. Conversely, when interest
rates are rising, the rate of prepayment tends to decrease, thereby lengthening
the actual average life of the mortgage-related security. Accordingly, it is not
possible to accurately predict the average life of a particular pool of
pass-through securities. Reinvestment of prepayments may occur at higher or
lower rates than the original yield on the certificates. Therefore, the actual
maturity and realized yield on pass-through or modified pass-through
mortgage-related securities will vary based upon the prepayment experience of
the underlying pool of mortgages. For purposes of calculating the average life
of the assets of the relevant Portfolio, the maturity of each of these
securities will be the average life of such securities based on the most recent
or estimated annual prepayment rate.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolios. It is fundamental that each
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of each Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolios' 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 each 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 such 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 such Portfolio.
The fundamental policies and restrictions of the Portfolios are:
1. 5% Fund Rule. With respect to 75% of total assets, the Growth
Portfolio may not purchase securities of any issuer if, as a result of the
purchase, more than 5% of such 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"). All securities of a foreign government and its
agencies will be treated as a single issuer for purposes of this restriction.
The Money Market Fund may invest more than 5%, but no more than 25%, of total
assets in the securities of one issuer for a period not to exceed three business
days.
2. 10% Issuer Rule. With respect to 75% of total assets, the Growth
Portfolio may not purchase more than 10% of the voting securities of any one
issuer. This limitation is not applicable to a Portfolio's investment in
Government Securities. All securities of a foreign government and its agencies
will be treated as a single issuer for purposes of this restriction. The Money
Market Portfolio will not invest in voting securities.
3. 25% Industry Rule. Each Portfolio may not invest more than 25% of
the value of its total assets in securities issued by companies engaged in any
one industry, including non-domestic banks or any foreign government. This
limitation does not apply to investments in Government Securities. For the Money
Market Portfolio, investments in the following are not subject to the 25%
limitation: repurchase agreements and securities loans collateralized by United
States government securities, certificates of deposit, bankers' acceptances, and
obligations (other than commercial paper) issued or guaranteed by United States
banks and United States branches of foreign banks.
4. Borrowing. Each 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. Each 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. (Each 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. Each 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 Growth 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 Portfolios may not purchase or sell commodities or
commodities contracts.
9. Senior Securities. The Portfolios may not issue senior securities.
All other investment policies and restrictions of the Portfolios are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolios' 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 Growth Portfolio's total assets (10% for the Money Market
Portfolio).
2. Securities of Other Investment Companies. The Portfolios do not
currently intend to make investments in the securities of other investment
companies. Each Portfolio does reserve the right to purchase such securities,
provided the purchase of such securities does not cause: (1) more than 10% of
the value of the total assets of the Portfolio to be invested in securities of
registered investment companies; or (2) the Portfolio to own more than 3% of the
total outstanding voting stock of any one investment company; or (3) the
Portfolio to own securities of any one investment company that have a total
value greater than 5% of the value of the total assets of the Portfolio; or (4)
together with other investment companies advised by Transamerica, the Portfolio
to own more than 10% of the outstanding voting stock of a closed-end investment
company.
3. Short Sales. The Growth 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. The Money Market
Portfolio may not make short sales of securities or maintain a short position.
4. Margin Purchases. Each Portfolio may not purchase securities on
margin, except that a Portfolio may obtain any short-term credits necessary for
the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by a Portfolio.
5. Invest for Control. No Portfolio may invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options. No Portfolio may 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, a Portfolio. In
addition, with regard to exceptions recited in a restriction, a Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
INVESTMENT ADVISER
Transamerica Occidental Life Insurance Company ("Transamerica") is the
investment adviser of the Fund and its Portfolios. It will oversee the
management of the assets of the Portfolios by Investment Services. In turn,
Investment Services is responsible for the day-to-day management of the
Portfolios.
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 Portfolios 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 Portfolios' investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an annual advisory
fee of 0.75% of the average daily net assets of the Growth Portfolio and 0.xx%
of the average daily net assets of the Money Market Portfolio. The fee is
deducted daily from the assets of each 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 and the fees of the
Sub-Adviser.
As explained in the prospectus, the Growth Portfolio of the Fund began
operations on November 1, 1996, as the successor to Separate Account Fund C of
Transamerica Occidental Life Insurance Company, and Transamerica was the
investment adviser to the separate account. The advisory fee paid by the
separate account was .30% of its average daily net assets. The dollar amounts
paid by the separate account to Transamerica in 1994 and 1995 were $49,280 and
$67,198, respectively. The total dollar amount paid to Transamerica in 1996,
including amounts paid by the separate account through October 31 and amounts
paid by the Growth Portfolio after October 31, 1996, was $66,831.
Each Portfolio pays all the costs of its operations that are not
assumed by Transamerica, including custodian fees, legal and auditing fees,
registration fees and expenses, and fees and expenses of directors unaffiliated
with Transamerica. Fund expenses that are not Portfolio-specific will be
allocated between the Portfolios based on the net assets of each Portfolio.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of either 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 each Portfolio separately, exceed .10% of the Growth Portfolio's and
.25% of the Money Market 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 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") for the
Growth Portfolio on July 24, 1996 and for the Money Market Portfolio on July 31,
1997. The investment advisory agreement will remain in effect from year to year
provided such continuance is specifically approved as to each Portfolio at least
annually by: (a) the Board of Directors or the vote of a majority of the votes
attributable to shares of such 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.
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 since 1968 and the Transamerica Life Companies since 1981. Investment
Services will provide recommendations on the management of each Portfolio's
assets, provide investment research reports and information, supervise and
manage the investments of each Portfolio, and direct the purchase and sale of
portfolio investments. Investment decisions regarding the composition of each
Portfolio and the nature and timing of changes in each Portfolio are subject to
the control of the Board of Directors of the Fund.
Transamerica has agreed to pay Investment Services a monthly fee at the
annual rate of 0.30% of the first $50 million of the Growth Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. And Transamerica has agreed to pay Investment Services a
monthly fee at the annual of 15% of the average daily net assets of the Money
Market Portfolio.
The investment sub-advisory agreement was approved 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"),
for the Growth Portfolio on July 24, 1996, and for the Money Market Portfolio on
October 31, 1997. The investment sub-advisory agreement will remain in effect
from year to year provided such continuance is specifically approved as to each
Portfolio at least annually by: (a) the Board of Directors or the vote of a
majority of the votes attributable to shares of such 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 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 such Portfolio (a) without
penalty and (b) on 30 days' written notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for each 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 a 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, each Growth 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
Growth Portfolio, Investment Services and its affiliates, or other clients of
Investment Services or its affiliates. Such research and investment services
include statistical and economic data and research reports on particular
companies and industries. Such services are used by Investment Services in
connection with all of its investment activities, and some of such services
obtained in connection with the execution of transactions for each 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 Growth
Portfolio, and the services furnished by such brokers may be used by Investment
Services in providing investment sub-advisory services for the Growth Portfolio.
For the three most recent fiscal years, the aggregate dollar amounts of the
brokerage commissions paid with respect to portfolio transactions of the Growth
Portfolio by Investment Services as sub-adviser to Separate Account Fund C (the
Growth Portfolio's predecessor) were $10,420 for 1994, $7,253 for 1995, and
$19,115 for the first ten months of 1996. The aggregate dollar amount of
brokerage commissions paid by the Growth Portfolio after the reorganization,
during November and December 1996, was $5,550; so that the total paid during
1996 was $24,665 The brokerage commissions for 1996 were higher than the
previous two years because at the end of 1996 the Growth Portfolio acquired
shares available through an initial public offering for which brokerage
commissions are usually higher than standard commissions.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of a 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 a
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 such Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for a 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 Growth Portfolio if such
changes are considered advisable to better achieve the Growth 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 Growth Portfolio's predecessor) for 1995 was 30.84%, the portfolio turnover
rate for 1996, when combining the experience of Separate Account Fund C through
October 31, 1996, and the Growth Portfolio's experience for November and
December 1996 was 34.58%.
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 each 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 each Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of that Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange.
In the event that the New York Stock Exchange, the Federal Reserve, 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 Portfolios may compute their net asset value as of any time
permitted pursuant to any exemption, order or statement of the SEC or its staff.
Assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments ("Equities")
listed on any U. S. stock market
or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") are
valued at the last sale price on that exchange or NASDAQ on
the valuation day; if no sale
occurs, Equities traded on a U. S. exchange or NASDAQ are
valued at the mean between the
closing bid and closing asked prices;
(b) over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices;
(c) debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors;
(d) options and futures contracts are valued at the last sale
price on the market where any such option contracts 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 price will be determined in good faith by or under procedures
established by the Board of Directors.
All of the assets of the Money Market Portfolio are valued on the basis
of amortized cost in an effort to maintain a constant net asset value per share
of $1.00. The Board of Directors has determined the use of the amortized cost
method to be in the best interests of the Money Market Portfolio and its
shareholders. Under the amortized cost method of valuation, securities are
valued at cost on the date of their acquisition, and thereafter a constant
accretion of any discount or amortization of any premium to maturity is assumed,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value as determined by amortized cost is higher or
lower than the price the Portfolio would receive if it were to sell the
security. During such periods, the quoted yield to investors may differ somewhat
from that obtained by a similar fund which uses available market quotations to
value all of its securities.
The Board has established procedures reasonably designed, taking into
account current market conditions and the Money Market Portfolio's investment
objective, to stabilize the net asset value per share for purposes of sales and
redemptions at $1.00. These procedures include review by the Board, at such
intervals as it deems appropriate, to determine the extent, if any, to which the
net asset value per share calculated by using available market quotations
deviates from $1.00 per share. In the event such deviation should exceed one
half of one percent, the Board will promptly consider initiating corrective
action. If the Board believes that the extent of any deviation from a $1.00
amortized cost price per share may result in material dilution or other unfair
results to new or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce these consequences to the extent reasonably
practicable. Such steps may include: (1) selling securities prior to maturity;
(2) shortening the average maturity of the Portfolio; (3) withholding or
reducing dividends; or (4) utilizing a net asset value per share determination
from available market quotations. Even if these steps were taken, the Money
Market Portfolio's net asset value might still decline.
PERFORMANCE INFORMATION
Growth Portfolio Performance
The Fund may from time to time quote or otherwise use average annual
total return information for the Growth 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 Growth Portfolio will represent
historical performance and the investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
In computing its standardized total returns for periods prior to the
reorganization, the Fund assumes that the charges currently imposed by the
Growth Portfolio were in effect through each of the periods for which the
standardized returns are presented. The Growth Portfolio's performance data does
not reflect any sales or insurance charges, or any other separate account or
contract level charges, that were imposed under the annuity contracts issued
through Separate Account Fund C.
Any performance data quoted for the Growth Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Growth Portfolio does not reflect
charges deducted under the variable annuity contracts. If contract charges are
taken into account, such performance data would reflect lower returns.
Accordingly, any advertisement that includes performance data for the Growth
Portfolio also includes 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.
Money Market Portfolio Performance
Current yield for the Money Market Portfolio will be computed by
determining the net change, exclusive of capital changes at the beginning of a
seven-day period in the value of a hypothetical investment, subtracting any
deductions from shareholder accounts, and dividing the difference by the value
of a hypothetical investment at the beginning of the base period to obtain the
base period return. This base period return is then multiplied by (365/7) with
the resulting yield figure carried to at least the nearest hundredth of one
percent.
Calculation of "effective yield" begins with the same "base period return"
used in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
365/7
Effective yield = [(1 + (Base Period Return) ] - 1
<PAGE>
Published Performance
From time to time the Fund may publish, or provide telephonically, an
indication of the Portfolios' 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 the Portfolios'
performance relative to certain indices and benchmark investments, including:
o 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);
o 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);
o the Consumer Price Index published by the U. S. Bureau of Labor
Statistics (which measures changes in
the price of goods and services);
o Stocks, Bonds, Bills and Inflation published by Ibbotson Associates
(which provides historical performance figures for stocks,
government securities and inflation);
o the Hambrecht & Quist Growth Stock Index; o the NASDAQ OTC Composite
Prime Return; o the Russell Midcap Index; o the Russell 2000 Index - Total
Return; o the ValueLine Composite-Price Return; o the Wilshire 5000 Index;
o the Salomon Brothers' World Bond Index (which measures the total
return in U. S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries,
with all such bonds having a minimum
maturity of five years);
o 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);
o the S&P Bond indices (which measure yield and price of corporate,
municipal and U. S. Government
bonds);
o 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);
o other taxable investments including certificates of deposit, money
market deposit accounts, checking accounts, savings accounts, money
market mutual funds and repurchase agreements;
o 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;
o the FT-Actuaries Europe and Pacific Index;
o mutual fund performance indices published by Variable Annuity Research &
Data Service; o S&P 500 Index; and o 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 each 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 Portfolios' 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 Portfolios' investments and
discussions of the Portfolios' current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of a Portfolio varies based on
market conditions, portfolio expenses, portfolio investments and other factors.
The value of a Portfolio's shares fluctuates and an investor's shares may be
worth more or less than their original cost upon redemption. The Fund may also,
at its discretion, from time to time make a list of the Portfolios' holdings
available to investors upon request.
FEDERAL TAX MATTERS
Each 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, each
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, each Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, each 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. Each
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, each Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. Each 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 each 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 each Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where a Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U. S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of each Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of each
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 Portfolios will not be subject to the
4% Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because each Portfolio intends to make sufficient distributions to
avoid such excise tax. If a Portfolio failed to qualify as a regulated
investment company, owners of variable annuity contracts or variable life
policies ("Contracts") based on such 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 a Portfolio failed to qualify as a regulated investment company, or if a
Portfolio failed to comply with the diversification requirements of Section
817(h) of the Code, owners of Contracts based on that 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 each 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 of each 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 each Portfolio is entitled to
participate equally in dividends and distributions declared for that Portfolio's
stock and, upon liquidation or dissolution, in that Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of each
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of each 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 a Portfolio to dispose of securities owned by
it or fairly to determine the value of its net assets; or for such other period
as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street") holds the cash and portfolio securities of the
Portfolios of the Fund as custodian.
State Street is responsible for holding all securities and cash of the
Portfolios, 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 Portfolios or the Fund. Portfolio
securities of the Portfolios purchased domestically are maintained in the
custody of State Street and may be entered into the Federal Reserve, Depository
Trust Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------- ------------- -----------------------------------------------
<S> <C> <C>
Donald E. Cantlay (75) 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 (60)* Board of Directors President, Chief Executive Officer and Director of
Transamerica Investment Services, Inc.; Senior
Vice President and Chief Investment Officer of
Transamerica Corporation. Director and Chief
Investment Officer of Transamerica Occidental Life
Insurance Company.
DeWayne W. Moore (83) 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 (56)* Chairman, Board of Director, Executive Vice President and Chief
Directors Investment Officer of Transamerica Investment
Services, Inc.; Director and Chief Investment
Officer of
Transamerica Occidental Life Insurance Company;
Director, Transamerica Investors, Inc..
Peter J. Sodini (56) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive Officer and
Director, The Pantry, Inc. (a supermarket).
Director Pamida Holdings Corp. (a retail
merchandiser) and Buttrey Food and Drug Co. (a
supermarket).
Barbara A. Kelley (44) 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 (36)*** Vice President Vice President, Broker/Dealer Channel of the
Institutional Marketing Services Division of
Transamerica Life Insurance and Annuity Company
and prior to 1994, Vice President and National
Sales Manager of the Dreyfus Service Organization .
Sally S. Yamada (46) Treasurer and Vice President and Treasurer of Transamerica
Assistant Secretary Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Regina M. Fink (41) Secretary Counsel for Transamerica Occidental Life Insurance
Company and prior to 1994 Counsel and Vice
President for Colonial Management Associates, Inc.
Thomas M. Adams (62) Assistant Secretary Partner in the law firm of Lanning , Adams &
Peterson.
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940 Act.
** Except as otherwise noted, the mailing address of each Board member
and officer is 1150 South Olive,
Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same 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 by the
Fund and the Fund Complex during the current fiscal year ending December 31,
1997, to all Directors of the Fund.
<TABLE>
<CAPTION>
Total Pension or Compensation
Aggregate Retirement Benefits From Registrant
Compensation Accrued As Part of Fund and Fund Complex
Name of Person From Fund1/ Expenses2/ Paid to Directors3/
<S> <C> <C> <C>
Donald E. Cantlay $1000 -0- $6,000
Richard N. Latzer -$1000 -0- -0-
DeWayne W. Moore -$1000 -0- $6,250
Gary U. Rolle -$1000 -0- -0-
Peter J. Sodini -$1000 -0- $4,750
</TABLE>
- ---------------------
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year 1996, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan, L.L.P., 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Public Accountants
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, will act as the Fund's independent certified public accountants.
Financial Statements
Audited financial statements for the Growth Portfolio of Transamerica
Variable Insurance Fund, Inc. dated December 31, 1996, as filed with Post-
Effective Amendment No. 2 to the Registration Statement on Form N-1A
for Transamerica Variable Insurance Fund, Inc., File No. 33-99016 (May 1, 1997)
is incorporated by reference
herein.
No financial statements are provided for the Money Market Portfolio
because as of the date of this Statement of Additional Information, the Money
Market Portfolio has not yet commenced operations, has no assets or liabilities,
has incurred no expenses and has received no income.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
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.
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.
<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. and Transamerica Life Insurance and
Annuity Company. 9/
(7) Not Applicable.
(8) Form of Custodial Contract between Transamerica
Variable Insurance Fund, Inc. and State Street Bank and Trust Company. 5/
(9) Form of Adminstrative Services Agreement between
Transamerica Variable Insurance Fund, Inc. and State Street Bank and Trust
Company6/
(10) Opinion and Consent of Counsel.
(11) (a) Consent of Sutherland, Asbill & Brennan, L.L.P. 6/
-
(b) Consent of Ernst & Young LLP. 6/
(12) No financial statements are omitted from Item 23.
(13) Form of Agreement and Plan of Reorganization. 1/
-
(14) Not Applicable.
(15) Not Applicable.
(16) Performance Data Calculations. 6/
(17) Not Applicable.
(18) Not Applicable.
(19) Powers of Attorney.
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/ Incorporated by reference to the like-numbered exhibit to Pre-Effective
Amendment No. 1 to this
Registration Statement on Form N-1A, File No. 33-99016
(Sept. 12, 1996).
<PAGE>
5/ Incorporated by reference to the like-numbered exhibit to Post-
Effective Amendment No. 1 to this
Registration Statement on Form N-1A, File No. 33-99016 (November 4,
1996).
6/ Incorporated by reference to the like-numbered exhibit to Post-
Effective Amendment No. 2 to this
Registration Statement on Form N-1A, File No. 33-99016 (May 1, 1997).
7/ . Incorporated by reference to the like numbered exhibit to
Post-Effective Amendment No. 3 to this Registration Statement on Form
N-1A, File No. 33-99016 (June 11, 1997).
8/ Incorporated by reference to the like numbered exhibit to
Post-Effective Amendment No. 4 to this Registration Statement on Form
N-1A, File No. 33-99016 (August 25, 1997).
9/ Filed herewith.
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
Inter-America Corporation - California
Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. - Delaware
River Thames Insurance Company Limited - England
RTI Holdings, Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
Transamerica CBO I, Inc. - Delaware
Transamerica Corporation (Oregon) - Oregon
Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Company (Europe) - Maryland
Transamerica Insurance Finance Corporation, California - California
Transamerica Insurance Finance Corporation, Canada - Ontario
Transamerica Finance Corporation - Delaware
TA Leasing Holding Co., Inc. - Delaware
Trans Ocean Ltd. - Delaware
Trans Ocean Container Corp. - Delaware
Cool Solutions, Inc. - Delaware
TOD Liquidating Corp. - California
TOL S.R.L. - Italy
Trans Ocean Leasing Deutschland GMBH - Germany
Trans Ocean Leasing PTY Limited - Australia
Trans Ocean Management Corporation -
Trans Ocean Regional Corporate Holdings - California
Trans Ocean SARL - France
Trans Ocean Tank Services Corporation - Delaware
Trans Ocean Container Finance Corp. - Delaware
Transamerica Leasing Inc. - Delaware
Better Asset Management Company LLC - Delaware
Greybox L.L.C. - Delaware
Transamerica Leasing Holdings Inc. - Delaware
Greybox Services Limited - United Kingdom
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing SRL - Italy
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil Ltda. - Brazil
Transamerica Leasing GmbH - West Germany
Transamerica Leasing Limited - United Kingdom
ICS Terminals (UK) Limited - United Kingdom
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing (Proprietary) Limited - South Africa
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III Inc. - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing A/S - Denmark.
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - Fra.
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
TELColorado Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
The Plain Company - Delaware
Transamerica Global Distribution Finance Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
BWAC Seventeen, Inc. - Delaware
Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada - Canada
TCF Commercial Leasing Corporation, Canada - Ontario
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited - United Kingdom
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
Transamerica Commercial Finance France S.A. - France
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmaatschappij B.V. - Netherlands
Transamerica GmbH - Germany - Germany
Transamerica Finance Loan Company - Delaware
Transamerica Financial Services Holding Company - Delaware
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
Pacific Agency, Inc. - Indiana
Pacific Agency, Inc. - Nevada
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Financial Services Limited, United Kingdom -
United Kingdom Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation (Washington) - Washington
Transamerica Financial Consumer Discount Company (Pennsylvania) -
Pennsylvania Transamerica Financial Corporation - Nevada
Transamerica Financial Services Mortgage Company - Delaware
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services Company - Ohio
Transamerica Financial Services Inc. - Hawaii
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services, Inc. - West Virginia
Transamerica Insurance Administrators, Inc. - Delaware
Transamerica Mortgage Company - Delaware
Transamerica Financial Services Finance Co. - Delaware
Transamerica HomeFirst, Inc. - California
Transamerica Foundation - California
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 - Texas
TBK Insurance Agency of Ohio, Inc. - Ohio
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - Massachusetts
Transamerica International Insurance Services, Inc. - Delaware
Home Loans and Finance Ltd. - United Kingdom
Transamerica Occidental Life Insurance Company - California Bulkrich
Trading Limited - Hong Kong First Transamerica Life Insurance
Company - New York NEF Investment Company - California Transamerica
Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Colorado
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 II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Securities Sales Corporation - Maryland
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
Transamerica Investment Services, Inc. - Delaware
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- - Maryland
Transamerica LP Holdings Corp. - Delaware
Transamerica Properties, Inc. - Delaware
Transamerica Retirement Management Corporation - Delaware
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - Delaware
Bankers Mortgage Company of California - California
Pyramid Investment Corporation - Delaware
The Gilwell Company - California
Transamerica Affordable Housing, Inc. - California
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Ventana Inn, Inc. - California
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 26. Numbers of Holders of Securities (as of September 30, 1997):
Title of Class Number of Record Holders
Growth One
Money Market None
Item 27. Indemnification
The Bylaws of Transamerica Variable Insurance Fund, Inc. provide in
Article VIII as follows:
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 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 and corporate reimbursement to
reimburse the Fund 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 $5,000,000 for the period __ from the
effectiveness of this registration statement to 2/1/98. The primary policy under
the program is with ICI Mutual Insurance Company.
Item 28. Business and Other Connections of the Investment Adviser:
Transamerica Occidental Life Insurance Company ("Transamerica") and Transamerica
Investment Services, Inc. (the
"Sub-Adviser") are registered investment advisers. Transamerica 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 1997 with the Securities and Exchange Commission
(registration number 801-7740) and is incorporated herein by reference.
The names of the Directors and Executive Officers of Transamerica, 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, Chariman,
President and None Executive Vice President of
Chief Executive Officer Transamerica Corporation
James W. Dederer Director, Executive None None
Vice President, General
Counsel and Corporate
Secretary
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
Chief Information Officer
Edgar H. Grubb* Director None Executive Vice President,
and Chief Financial Officer
of Transamerica Corporation
Frank C. Herringer* Director None Director, President and
Chief Executive Officer of
Transamerica Corporation
Daniel E. Jund Director None President and Chief
Executive Officer of
Transamerica Assurance
Company
Richard N. Latzer* Director Director Senior Vice
President
and
Chief
Invesment
Officer
of
Transamerica
Corporation;
Director,
President
and
Chief
Executive
Officer
of
Transamerica
Investment
Services,
Inc.
Karen O. MacDonald Director, Senior Vice None None
President and 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.
T. Desmond Sugrue Director and Executive None None
Vice President
Nooruddin S. Veerjee Director and President, None President of
Group Pension Division Transamerica Life Insurance
and
Annuity Company
Robert A. Watson* Director None Executive Vice President of
Transamerica Corporation
- --------------------
</TABLE>
* 600 Montgomery Street, San Francisco, California 94111
** 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202
List of Officers for Transamerica Occidental Life Insurance Company
<TABLE>
<CAPTION>
<S> <C> <C>
Thomas J. Cusack Chairman, President and Chief Executive Officer
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer, CLU Executive Vice President, General Counsel and
Corporate Secretary
David E. Gooding Executive Vice President and Chief Information Officer
Bruce Clark Senior Vice President and Chief Actuary
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Executive Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
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
Stephen J. Ahearn Investment Officer
Glen E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Lyman Lokken Investment Officer
Michael F. Luongo Investment Officer
Thomas D. Lyon Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
William D. Adams Vice President
Sandra Bailey-Whichard Vice President
Nicki Bair Senior Vice President
Dennis Barry Vice President
Laurie Bayless Vice President
Marsha Blackman Vice President
Nancy Blozis Vice President and Controller
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Senior Vice President and Actuary
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
Peter DeWolf Vice President
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 Actuary
Harry Dunn, FSA Vice President and Chief Reinsurance Actuary
Ken Ellis Vice President
George Garcia Vice President and Chief Medicare Officer
David M. Goldstein Vice President and Deputy General Counsel
John D. Haack Vice President
Jay Han Vice President
Paul Hankwitz, MD Vice President and Chief Medical Director
Kevin Hobbs Vice President
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko Vice President
Phoebe Huang Vice President
William M. Hurst Vice President and Associate General Counsel
James M. Jackson Vice President and Deputy General Counsel
Allan H. Johnson, FSA Vice President and Actuary
Ken Kilbane Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Maureen McCarthy Vice President
Philip E. McHale, FLMI Vice President
Mark Madden Vice President
Vic Modugno Vice President and Associate Actuary
Mischelle Mullin Vice President
Jess Nadelman Vice President
Wayne Nakano, CPA Vice President and Controller
Paul Norris Vice President and Actuary
Michael Palace, ASA Vice President and Actuary
Jerry Paul Vice President
Stephen W. Pinkham Vice President
Kristy M. Pipes Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Gary L. Seagraves Vice President
Joel D. Seigle Vice President
James O. Strand Vice President
Alice Su Vice President
Lee Tang Vice President and Assistant Secretary
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
William R. Wellnitz, FSA Senior Vice President and Actuary
Virginia M. Wilson Vice President and Controller
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Olisa Abaelu Second Vice President
Flora Bahaudin Second Vice President
David Barcellos Vice President
Michael C. Barnhart Regional Vice President
Dan Bass, ASA Second Vice President
Frank Beardsley Vice President
Esther Blount Second Vice President
Benjamin Bock Vice President
Ken Bromberg Second Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Lance Cockings, CPA Second Vice President
Art Cohen Second Vice President
Rose Corlew Second Vice President
Dave Costanza Second Vice President
Gloria Durosko Second Vice President
Reid A. Evers Vice President and Associate General Counsel
David Fairhall Second Vice President and Associate Actuary
Selma Fox Second Vice President
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
Sharon Haley Second Vice President
Brian Hoyt Second Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Ronald G. Keller Second Vice President
Ken Kiefer Second Vice President
Joan Klubnik Second Vice President
Roger Korte Second Vice President
Lynette Lawson Second Vice President
Dean LeCesne Second Vice President
Marilyn McCullough Vice President and Chief Reinsurance Underwriter
Richard MacKenzie Second Vice President
Carl Marcero Vice President and Chief Reinsurance Underwriter
Lisa Markus, ASA Second Vice President
Alfredo Marquetti Second Vice President
Claudia Maytum Second Vice President
John Oliver Second Vice President
Susan O'Brien 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
Laura Scully Second Vice President
Jack Shalley, M.D. Second Vice President and Medical Director
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Vice President
David Stone Second Vice President
Suzette Stover-Hoyt Second Vice President
John Tillotson Second Vice President
Janet Unruh Second Vice President and Assistant General Counsel
Colleen Vandermark Vice President
Susan Viator 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
Michael B. Wolfe Vice President
Kamran Haghighi Tax Officer
James Wolfenden Statement Officer
</TABLE>
Item 29. Principal Underwriter
Not applicable. There is no principal underwriter, the Fund is
self-distributing.
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).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Transamerica Variable Insurance Fund, Inc.
certifies that this Post-Effective Amendment meets all of the requirements for
effectiveness of this registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and that it has duly caused this Post-Effective Amendment
No. 5 to the Registration Statement to be signed on its behalf by the
undersigned in the City of Los Angeles, and State of California on this 31st day
of October, 1997.
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 October 31, 1997
Barbara A. Kelley
______________________* Treasurer October 31. 1997
Sally S. Yamada
______________________* Director October 31, 1997
Donald E. Cantlay
______________________* Director October 31, 1997
Richard N. Latzer
______________________* Director October 31, 1997
DeWayne W. Moore
______________________* Director October 31, 1997
Gary U. Rolle'
______________________* Director October 31, 1997
Peter J. Sodini
</TABLE>
On October 31, 1997 as Attorney-in-Fact pursuant to
powers of
*By: Regina M. Fink attorney filed with the initial registration statement.
<PAGE>
Exhibits
Exhibit (6) Form of Participation Agreement
Exhibit (11)(b) Consent of Independent Auditors
<PAGE>
Exhibit (6) Form of Participation Agreement
<PAGE>
PARTICIPATION AGREEMENT
Among
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA SECURITIES SALES CORPORATION
and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
THIS AGREEMENT, made and entered into as of this ____ day of _________,
1997 by and among TRANSAMERICA LIFE INSURANCE AND ANNUITY 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 Maryland 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 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 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 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 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 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 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. 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 Contract'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 ss. 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 SA 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 furnished
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 covering 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
401 N. Tryon, Suite 700
Charlotte, North Carolina 28202
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 LIFE INSURANCE AND ANNUITY 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>
Exhibit (11)(b) Consent of Independent Auditors
<PAGE>
Ernst & Young LLP
514 South Flower Street
Los Angeles, CA 90071
213-997-3200
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Other Information" in Post-Effective Amendment No. 5 under the
Securities Act of 1933 and Post-Effective Amendment No. 6 under the Investment
Company Act of 1940 to the Registration Statement (Form N-1A No. 33-99016) and
related Prospectus and Statement of Additional Information of Transamerica
Variable Insurance Fund, Inc., and to the incorporation by reference therein of
our report dated February 24, 1997 with respect to the financial statements and
financial highlights of Transamerica Variable Insurance Fund, Inc. included in
its Annual Report for the year ended December 31, 1996 filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
October 31, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001002786
<NAME> Transamerica Variable Insurance Fund, Inc.
<SERIES>
<NUMBER> 1
<NAME> Growth Portfolio
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 15,424,060
<INVESTMENTS-AT-VALUE> 32,138,396
<RECEIVABLES> 160,237
<ASSETS-OTHER> 24,017
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,322,649
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84,212
<TOTAL-LIABILITIES> 84,212
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,594,518
<SHARES-COMMON-STOCK> 2,949,776
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (33,507)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (33,909)
<ACCUM-APPREC-OR-DEPREC> 16,711,335
<NET-ASSETS> 32,238,437
<DIVIDEND-INCOME> 133,199
<INTEREST-INCOME> 33,420
<OTHER-INCOME> 0
<EXPENSES-NET> (357,197)
<NET-INVESTMENT-INCOME> (190,588)
<REALIZED-GAINS-CURRENT> 3,186,767
<APPREC-INCREASE-CURRENT> 3,967,540
<NET-CHANGE-FROM-OPS> 6,963,719
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,439
<NUMBER-OF-SHARES-REDEEMED> 512,766
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,500,392
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351,866
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 376,563
<AVERAGE-NET-ASSETS> 28,165,794
<PER-SHARE-NAV-BEGIN> 8.58
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 2.41
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
