As filed with the Securities and Exchange Commission on May 1, 1998
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 o
Pre-Effective Amendment No. o
Post-Effective Amendment No. 6 x
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940o
Amendment No. 7 x
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
(Exact Name of Registrant)
1150 South Olive Los Angeles, CA 90015-2211
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-213-742-2111
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel Sutherland, Asbill & Brennan, LLP
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004-2404
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the registration statement.
DECLARATION PURSUANT TO RULE 24f-2
It is proposed that this filing will become effective: o
immediately upon filing pursuant to paragraph
(b) x on May 1, 1998 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.
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
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Pursuant to Rule 495
N-1A
Item No. Caption
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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
</TABLE>
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.
<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 May 1, 1998
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. 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
Page
CONDENSED FINANCIAL INFORMATION....................... 1
TRANSAMERICA VARIABLE INSURANCE FUND, INC. ........... 3
INVESTMENT OBJECTIVE AND POLICIES..................... 3
INVESTMENT METHODS AND RISKS.......................... 6
Small Capitalization Companies............... 6
Convertible Securities....................... 7
High-Yield ("Junk") Bonds.................... 7
Repurchase Agreements........................ 7
Money Market Securities...................... 8
State Insurance Regulation................... 8
PORTFOLIO TURNOVER.................................... 8
MANAGEMENT............................................ 9
Directors and Officers....................... 9
Investment Adviser........................... 9
Investment Sub-Adviser....................... 10
PERFORMANCE INFORMATION............................... 11
DETERMINATION OF NET ASSET VALUE...................... 12
OFFERING, PURCHASE AND REDEMPTION OF SHARES........... 12
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS..... 13
TAXES ............................................. 13
OTHER INFORMATION..................................... 13
Preparing for Year 2000
Reports...................................... 13
Voting and Other Rights...................... 13
Custody of Assets and Administrative Service 14
Summary of Bond Ratings...................... 14
FOR MORE INFORMATION.................................. 15
<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, in which the assets and liabilities of the Separate Account
were transferred intact to the Growth Portfolio, 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 values for presentation purposes.
The per share data in the table for the period January 1, 1993,
through December 31, 1997, 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, 1988, 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. 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. The financial
statements for the Growth Portfolio which appear in the Statement of
Additional Information are dated as of December 31, 1997.
There are no financial statements for the Money Market Portfolio
because it did not commence operations until January 1998.
GROWTH PORTFOLIO
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1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.93 $8.582 $5.615 $5.239 $4.287
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Investment Operations
Net investment income (loss) (0.05) (0.065) (0.069) (0.042) (0.030)
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Net realized and unrealized gain 5.13 2.413 3.036 0.418 0.982
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Total from investment operations 5.08 2.348 2.967 0.376 0.952
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Distribution from net realized gains (1.26) - - - -
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Net asset value, end of year $14.75 $10.930 $8.582 $5.615 $5.239
====== ======= ====== ====== ======
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Total Return 46.50% 27.36% 52.84% 7.19% 22.20%
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Ratios and Supplemental Data
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Net assets, end of year (in thousands) $46,378 $32,238 $25,738 $17,267 $16,584
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Expenses to average net assets (1) 0.85% 1.27% 1.41% 1.43% 1.43%
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Net investment income (loss) to average net assets (2) (0.39%) (0.68%) (0.94%) (0.80%) (0.65%)
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Portfolio turnover rate 20.54% 34.58% 18.11% 30.84% 42.04%
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Average commission rate (3) $0.0575 $0.07 - - -
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<PAGE>
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
1992 1991 1990 1989 1988
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Net asset value, beginning of year $3.783 $2.689 $3.026 $2.266 $1.694
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Investment Operations
Net investment income (loss) (0.012) (0.009) (0.022) (0.010) (0.054)
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Net realized and unrealized gain 0.492 1.085 (0.360) 0.750 0.517
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Total from investment operations 0.504 1.095 (0.337) 0.760 0.572
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Net asset value, end of year $4.287 $3.783 $2.689 $3.026 $2.266
====== ====== ====== ====== ======
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Total Return 13.32% 40.71% (11.14%) 33.56 33.74%
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Ratios and Supplemental Data
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Net assets, end of year (in thousands) $13,966 $12,516 $9,281 $10,861 $8,453
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Expenses to average net assets (1) 1.43% 1.43% 1.43% 1.44% 1.43%
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Net investment income (loss) to average net assets (2) (0.31%) 0.28% 0.81% 0.37% 2.66%
- ---------------------------------------------------------------- ---------- ---------- ----------- ---------- -----------
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Portfolio turnover rate 43.07% 32.90% 49.87% 22.39% 52.18%
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Average commission rate (3) - - - - -
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</TABLE>
(1) If the Investment Adviser had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.98% and
1.34% for the years ended December 31,
1997 and 1996, respectively.
(2) If the Investment Adviser had not reimbursed expenses the ratio of
net investment loss to average net assets would have been (0.52%) and
(0.75%) for the years ended December 31, 1997 and 1996, respectively.
(3) This disclosure is required for fiscal periods beginning on or after
September 1, 1995, and represents the average commission rate paid on equity
security transactions on which commissions are charged.
(4) Prior to November 1, 1996, activity represents accumulated unit
values of Separate Account Fund C which
<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, if any, 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" or "Sub-Adviser" or "Manager") to act as the Portfolios'
sub-adviser 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. The
Growth Portfolio invests primarily in common stocks of growth companies that are
considered by the manager to be premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
dominant market share; leading brand recognition; proprietary products or
technology; low-cost production capability; and excellent management with
shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements.
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. 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
Investment Sub-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.
Sub-Adviser
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services" or "Sub-Adviser" or "Manager"), 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.
Although the Fund pays dividends on the Money Market Portfolio monthly,
dividends are determined daily. Net capital gains of the Money Market
Portfolios, if any, are distributed annually.
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
Preparing For Year 2000
Many computer software systems in use today cannot distinguish the year
2000 from the year 1900 because dates are encoded using the standard six-place
format that allows entry of only the last two digits of the year. This is
commonly known as the "Year 2000 Problem." This issue could adversely impact the
Fund if the computer systems used by the Fund's Investment Adviser, Sub-Adviser,
Custodian, transfer agent and other service providers do not accurately process
date information after January 1, 2000. The Investment Adviser and Sub-Adviser
are addressing this issue by testing the computer systems they use to ensure
that those systems will operate properly after January 1, 2000, and they are
also seeking assurances from the Custodian, transfer agent and other service
providers they use that their computer systems will be adapted to address the
Year 2000 Problem in time to prevent adverse consequences after January 1, 2000.
However, especially when taking into account interaction with other systems, it
is difficult to predict with precision that there will be no disruption of
services in connection with the year 2000.
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" or "Custodian"), 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.
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 28202
800-258-4260
<PAGE>
The following is the Table of Contents for the SAI:
TABLE OF CONTENTS
Page
----
INTRODUCTION...................................................... 3
ADDITIONAL INVESTMENT POLICY INFORMATION.......................... 4
SPECIAL INVESTMENT METHODS AND RISKS.............................. 4
Restricted and Illiquid Securities....................... 4
Borrowing................................................ 5
Other Investment Companies............................... 5
Options on Securities and Securities Indices............. 5
Warrants and Rights...................................... 7
Repurchase Agreements.................................... 7
High-Yield ("Junk") Bond................................. 8
Foreign Securities....................................... 9
DESCRIPTION OF FIXED-INCOME INSTRUMENTS........................... 9
U. S. Government Obligations............................. 9
Certificates of Deposit.................................. 10
Time Deposits............................................ 10
Bankers' Acceptance...................................... 10
Commercial Paper......................................... 10
Variable Rate, Floating Rate, or Variable Amount Securities. 10
Corporate Debt Securities................................... 10
Asset-Backed Securities..................................... 10
Participating Interests in Loans............................ 11
International Organization Obligations...................... 11
Custody Receipts............................................ 11
Pass-Through Securities..................................... 11
INVESTMENT RESTRICTIONS............................................ 12
Fundamental Policies and Restrictions..................... 12
Non-Fundamental Restrictions.............................. 13
Interpretive Rules........................................ 15
INVESTMENT ADVISER................................................. 15
Investment Advisory Agreement............................. 15
Investment Sub-Advisory Agreement......................... 16
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE........... 17
DETERMINATION OF NET ASSET VALUE................................... 18
PERFORMANCE INFORMATION............................................ 20
Growth Portfolio Performance.............................. 20
Money Market Portfolio Performance........................ 22
Published Performance..................................... 22
FEDERAL TAX MATTERS................................................ 24
SHARES OF STOCK.................................................... 25
CUSTODY OF ASSETS.................................................. 26
DIRECTORS AND OFFICERS............................................. 26
Compensation.............................................. 28
LEGAL PROCEEDINGS.................................................. 28
OTHER INFORMATION.................................................. 28
Legal Counsel............................................. 28
Other Information......................................... 29
Independent Public Accountants............................ 29
Financial Statements...................................... 29
APPENDIX A......................................................... 30
<PAGE>
<PAGE>
1
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street, Los Angeles, California 90015, (213) 742-2111
PROSPECTUS
May 1, 1998
The Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
management investment company. The Growth Portfolio seeks long-term capital
growth. Common stock (listed and unlisted) is the basic form of investment. The
Portfolio may also invest in debt securities and preferred stock having a call
on common stocks.
Shares of the Fund are currently offered only to separate accounts of
insurance companies to fund the benefits of variable annuity contracts and
variable life insurance policies (collectively "variable insurance contracts").
Each variable insurance contract involves fees and expenses not described in
this Prospectus. See the accompanying variable insurance contract prospectus for
information regarding contract fees and expenses and any restrictions on
purchases or allocations.
This Prospectus contains information about the Fund and the Portfolio
that a prospective purchaser of a variable insurance contract should know before
allocating purchase payments or premiums to the Portfolio. It should be read in
conjunction with the Prospectus for the variable insurance contract and should
be retained for future reference. A Statement of Additional Information
containing more detailed information about the Fund is available free by writing
to the Fund at the Transamerica Annuity Service Center, 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202, or by calling 800-258-4260. The
Statement of Additional Information, which has the same date as this Prospectus,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus should be read in
conjunction with the prospectus for the
variable insurance contract.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are fund shares federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in fund shares involves certain investment risks,
including possible loss of principal.
<PAGE>
TABLE OF CONTENTS
7
Page
CONDENSED FINANCIAL INFORMATION........................1
TRANSAMERICA VARIABLE INSURANCE FUND, INC..............3
GROWTH PORTFOLIO.......................................3
INVESTMENT OBJECTIVE AND POLICIES......................3
INVESTMENT METHODS AND RISKS...........................4
Small Capitalization Companies................4
Convertible Securities........................5
High-Yield ("Junk") Bonds.....................5
Repurchase Agreements.........................5
State Insurance Regulation....................6
PORTFOLIO TURNOVER.....................................6
MANAGEMENT.............................................6
Directors and Officers........................6
Investment Adviser............................6
Investment Sub-Adviser........................7
PERFORMANCE INFORMATION................................7
DETERMINATION OF NET ASSET VALUE.......................8
OFFERING, PURCHASE AND REDEMPTION OF SHARES............8
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS......9
TAXES ..............................................9
OTHER INFORMATION......................................9
Preparing for Year 2000........................
Reports ..............................................9
Voting and Other Rights.......................9
Custody of Assets and Administrative Services...10
Summary of Bond Ratings......................10
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION...................11
<PAGE>
CONDENSED FINANCIAL INFORMATION
Financial Highlights
The following table gives information regarding income, expenses and
capital changes for 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, in which the assets and liabilities of the Separate Account
were transferred intact to the Growth Portfolio, 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 values for presentation purposes.
The per share data in the table for the period January 1, 1993, through
December 31, 1997, 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, 1988,
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, 1997.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
1997 1996 1995 1994 1993
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.93 $8.582 $5.615 $5.239 $4.287
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Investment Operations
Net investment income (loss) (0.05) (0.065) (0.069) (0.042) (0.030)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net realized and unrealized gain 5.13 2.413 3.036 0.418 0.982
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total from investment operations 5.08 2.348 2.967 0.376 0.952
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Distribution from realized gains (1.26) - - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net asset value, end of year $14.75 $10.930 $8.582 $5.615 $5.239
====== ======= ====== ====== ======
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Total Return 46.50% 27.36% 52.84% 7.19% 22.20%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net assets, end of year (in thousands) $46,378 $32,238 $25,738 $17,267 $16,584
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Expenses to average net assets (1) 0.85% 1.27% 1.41% 1.43% 1.43%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Net investment income (loss) to average net assets (2) (0.39%) (0.68%) (0.94%) (0.80%) (0.65%)
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Portfolio turnover rate 20.54% 34.58% 18.11% 30.84% 42.04%
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
Average commission rate (3) $0.0575 $0.07 - - -
- -------------------------------------------------------- ------------- ---------- --------- ------------ ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
1992 1991 1990 1989 1988
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, beginning of year $3.783 $2.689 $3.026 $2.266 $1.694
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Investment Operations
Net investment income (loss) (0.012) (0.009) (0.022) (0.010) (0.054)
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net realized and unrealized gain 0.492 1.085 (0.360) 0.750 0.517
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total from investment operations 0.504 1.095 (0.337) 0.760 0.572
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net asset value, end of year $4.287 $3.783 $2.689 $3.026 $2.266
====== ====== ====== ====== ======
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Total Return 13.32% 40.71% (11.14%) 33.56 33.74%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Ratios and Supplemental Data
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net assets, end of year (in thousands) $13,966 $12,516 $9,281 $10,861 $8,453
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Expenses to average net assets (1) 1.43% 1.43% 1.43% 1.44% 1.43%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Net investment income (loss) to average net assets (2) (0.31%) 0.28% 0.81% 0.37% 2.66%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Portfolio turnover rate 43.07% 32.90% 49.87% 22.39% 52.18%
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
Average commission rate (3) - - - - -
- -------------------------------------------------------- ------------- ---------- ----------- ---------- ----------
</TABLE>
(1) If the Investment Adviser had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.98% and 1.34%
for the years ended December 31, 1997 and 1996, respectively.
(2) If the Investment Adviser had not reimbursed expenses the ratio of net
investment loss to average net assets would have been (0.52%) and (0.75%)
for the years ended December 31, 1997 and 1996, respectively.
(3) This disclosure is required for fiscal periods beginning on or after
September 1, 1995 and represents the average commission rate paid on equity
security transactions on which commissions are charged.
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
GROWTH PORTFOLIO
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. This prospectus sets forth
information about the Growth Portfolio only. Additional Portfolios may be
created from time to time. By investing in the Growth Portfolio, an investor
becomes entitled to a pro rata share of all dividends and distributions arising
from the net income and capital gains if any, on the investments of the Growth
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 asset and liabilities 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
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" or "Manager") to act as the Fund's sub-advisor to
provide the day-to-day portfolio management for the Portfolio.
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 Growth Portfolio are
described below. There can be no assurance that the Growth Portfolio will
achieve its investment objective. Investors should not consider any one
Portfolio alone to be a complete investment program. As with any security, a
risk of loss, including possible loss of principal, is inherent in an investment
in the shares of the Portfolio.
The different types of securities, investments, and investment
techniques used by the Portfolio involve risks of varying degrees. These risks
are described in greater detail, under "Investment Methods and Risks" and in the
Statement of Additional Information. The Portfolio is subject to certain
investment restrictions that are described under the caption "Investment
Restrictions" in the Statement of Additional Information.
The investment objective of the Portfolio as well as the investment
policies that are not fundamental may be changed by the Fund's Board of
Directors without shareholder approval. Certain of the investment restrictions
of the Portfolio are fundamental, however, and may not be changed without the
approval of a majority of the votes attributable to the outstanding shares of
the Portfolio. See "Investment Restrictions" in the Statement of Additional
Information.
The Growth Portfolio's investment objective is long-term capital
growth. Common stock, listed and unlisted, is the basic form of investment. The
Growth Portfolio invests primarily in common stocks of growth companies that are
considered by the manager to be premier companies. In the manager's view,
characteristics of premier companies include one or more of the following:
dominant market share; leading brand recognition; proprietary products or
technology; low-cost production capability; and excellent management with
shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements.
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. When in the judgment of
Investment Services market conditions warrant, the Growth Portfolio may, for
temporary defensive purposes, hold part or all of its assets in cash, debt or
money market instruments.
The Portfolio may invest up to 10% of the Portfolio's assets in debt
securities having a call on common stocks that are rated below investment grade.
Those securities are rated Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if
unrated, deemed to be of comparable quality by Investment Services.
If a security that was originally rated "investment grade" is
downgraded by a ratings service, it may or may not be sold. This depends on
Investment Services' assessment of the issuer's prospects. However, Investment
Services will not purchase below-investment-grade securities if that purchase
would increase their representation in the Portfolio to more than 10%.
The Portfolio may invest up to 10% of its net assets in the securities
of foreign issuers that are in the form of American Depository Receipts
("ADRs"). ADRs are registered stocks of foreign companies that are typically
issued by an American bank or trust company evidencing ownership of the
underlying securities. ADRs are designed for use on the U.S. stock exchanges.
With respect to 75% of total assets, the Portfolio may not purchase
more than 10% of the voting securities of any one issuer. The Portfolio may not
invest in companies for the purposes of exercising control or management.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the salability of which is
otherwise conditioned, including real estate and certain repurchase agreements
or time deposits maturing in more than seven days ("restricted securities"), as
long as any such purchase or acquisition will not immediately result in the
value of all such restricted securities exceeding 15% of the value of the
Portfolio's net assets.
INVESTMENT METHODS AND RISKS
The Growth Portfolio is subject to the risk of changing economic
conditions and fluctuations in the price of securities owned by the Portfolio.
In addition, the different types of securities, investments, and
investment techniques used by the Portfolio involve risks of varying degrees.
For example, with respect to equity securities, there can be no assurance of
capital appreciation and there is a substantial risk of decline in value. With
respect to debt securities, there exists the risk that the issuer of a security
may not be able to meet its obligations on interest or principal payments at the
time required by the investment. Certain risks associated with the types of
investments in which the Portfolio may invest are discussed below. For more
information on investment methods and risks, see "Special Investment Methods and
Risks" in the Statement of Additional Information.
Small Capitalization Companies
The Growth Portfolio may invest in securities of smaller, lesser-known
companies. Such investments involve greater risks than the investments of
larger, more mature, better known issuers, including an increased possibility of
portfolio price volatility. Historically, 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. 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 "Summary of Bond Ratings" on page 10 and the Statement
of Additional Information for a description of bond rating categories.
Repurchase Agreements
The Growth Portfolio may enter into repurchase agreements with Federal
Reserve System member banks or U.S. securities dealers. A repurchase agreement
occurs when the Portfolio purchases an interest-bearing debt obligation and the
seller agrees to repurchase the debt obligation on a specified date in the
future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Portfolio's money is invested in the security.
Since the security constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a collateralized loan. The Portfolio's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller is unable to make a timely repurchase, the Portfolio's
expected proceeds could be delayed, or the Portfolio could suffer a loss in
principal or current interest, or incur costs in liquidating the collateral. In
evaluating whether to enter into a repurchase agreement, Investment Services
will carefully consider the creditworthiness of the seller pursuant to
procedures established by the Fund's Board of Directors.
The Growth Portfolio will not invest in repurchase agreements maturing
in more than seven days if that would constitute more than 10% of the
Portfolio's net assets when taking into account the remaining days to maturity
of the Portfolio's existing repurchase agreements.
State Insurance Regulation
The Portfolio is intended to be a funding vehicle for variable annuity
contracts and variable life policies to be offered by insurance companies and
will seek to be offered in as many jurisdictions as possible. Certain states
have regulations or guidelines concerning concentration of investments and other
investment techniques. If such regulations and guidelines are applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its portfolio with the flexibility provided herein. It
is the Portfolio's intention that it operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
PORTFOLIO TURNOVER
The Growth Portfolio will not consider portfolio turnover to be a
limiting factor in making investment decisions. Changes will be made in the
Portfolio if such changes are considered advisable to better achieve the
Portfolio's investment objective. The portfolio turnover rate is calculated by
dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of the portfolio securities, excluding
debt securities having a maturity at the date of purchase of one year or less.
Investment Services anticipates that the annual turnover rate for the Growth
Portfolio will generally not exceed 75%.
High rates of portfolio turnover involve correspondingly greater
expenses which must be borne by the Portfolio and its shareholders, including
higher brokerage commissions, dealer mark-ups and other transaction costs on the
sale of securities and reinvestment of other securities. High rate of turnover
may result in the acceleration of taxable gains and may under certain
circumstances make it more difficult for a Portfolio to qualify as a regulated
investment company under the Internal Revenue Code.
See "Federal Tax Matters" in the Statement of Additional Information.
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
Investment Sub-Adviser, the custodian, the accounting and administrative
services providers and other providers of services to the Portfolio. The
officers of the Fund supervise its daily business operations. The Statement of
Additional Information contains information as to the identity of, and other
information about, the directors and officers of the Fund.
Investment Adviser
Transamerica Occidental Life Insurance Company ("Transamerica"), 1150
South Olive Street, Los Angeles, California 90015, is the investment adviser of
the Portfolio. Transamerica is a stock life insurance company incorporated in
the state of California on June 30, 1906. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. Transamerica acted as
investment adviser to Transamerica Occidental's Separate Account Fund C
("Separate Account Fund C"), the Fund's predecessor.
The Fund has entered into an Investment Advisory Agreement with
Transamerica under which the Transamerica assumes overall responsibility,
subject to the supervision of the Fund's Board of Directors, for administering
all operations of the Fund and for monitoring and evaluating the management of
the assets of the Portfolio by Investment Services on an ongoing basis.
Transamerica provides or arranges for the provision of the overall business
management and administrative services necessary for the Fund's operations and
furnishes or procures any other services and information necessary for the
proper conduct of the Fund's business. Transamerica also acts as liaison among,
and supervisor of, the various service providers to the Fund.
For its services to the Portfolio, Transamerica receives an annual
advisory fee of 0.75% of the average daily net assets of the Growth Portfolio.
The fee is deducted daily from the assets of the Portfolio. This fee may be
higher than the average advisory fee paid to the investment advisers of other
growth portfolios. Transamerica may waive some or all of its fee from time to
time at its discretion.
Sub-Adviser
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services" or "Sub-Adviser"), a wholly-owned subsidiary of
Transamerica Corporation, to render investment services to the Portfolio.
Investment Services has been in existence since 1967 and has provided investment
services to investment companies 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 Portfolio's average daily net assets, 0.25% of the next $150 million, and
0.20% of assets in excess of $200 million. Investment Services will provide
recommendations on the management of Portfolio assets, provide investment
research reports and information, supervise and manage the investments of the
Portfolio, and direct the purchase and sale of Portfolio investments.
Investment Services is also responsible for the selection of brokers
and dealers to execute transactions for the Fund. Some of these brokers or
dealers may be affiliated persons of Transamerica and Investment Services,
although 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 Growth Portfolio are reviewed
continuously by the
senior officers of Investment Services. The portfolio manager for the Growth
Portfolio is Jeffrey S.
Van Harte, C.F.A., Vice President and Senior Fund Manager at Investment
Services. Mr. Van Harte is a
member of the San Francisco Society of Financial Analysts and received a B.A.
from California State
University at Fullerton in 1980. Mr. Van Harte has been managing the portfolio
of the Fund's
predecessor, Separate Account Fund C, since 1984.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return
figures for the Portfolio in advertisements and communications to shareholders
or sales literature.
Average annual total return is determined by computing the annual
percentage change in value of $1,000 invested for specified periods ending with
the most recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The average annual total return calculation
assumes a complete redemption of the investment at the end of the relevant
period.
The Fund also may from time to time disseminate year-by-year total
return, cumulative total return and yield information for the Portfolio in
advertisements, communications to shareholders or sales literature. These may be
provided for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a specified
period are each derived by calculating the percentage rate required to make a
$1,000 investment in the Portfolio (assuming all distributions are reinvested)
at the beginning of such period equal to the actual total value of such
investment at the end of such period.
In addition, the Fund may from time to time publish performance of the
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 the Fund 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 Portfolio's performance
data does not reflect separate account or contract level charges.
The investment results of the Portfolio will fluctuate over time and
any presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the
Portfolio's performance may be in any future period. In addition to information
provided in shareholder reports, the Fund may, in its discretion, from time to
time make a list of the Portfolio's holdings available to investors upon
request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is normally determined
once daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open, except as noted below. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year, except for certain holidays. The
net asset value of the Portfolio's shares will not be calculated on the Friday
following Thanksgiving, the Friday following Christmas if Christmas falls on a
Thursday and the Monday before Christmas if Christmas falls on a Tuesday. The
net asset value of the Portfolio is determined by dividing the value of the
Portfolio's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the
Portfolio outstanding.
The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. The short-term debt securities
having remaining maturities of sixty days or less held by the Growth Portfolio
(if any) are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Fund's Board of Directors. See "Determination of Net Asset
Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to a participation agreement between the Fund and
Transamerica, shares of the Portfolio are sold in a continuous offering and are
authorized to be offered to Separate Account C to support its variable annuity
contracts (the "Contracts"). Net purchase payments under the Contracts are
placed in Separate Account C and the assets of the Separate Account C are
invested in the shares of the Growth Portfolio. Separate Account C purchases and
redeems shares of the Portfolio at net asset value without sales or redemption
charges.
For each day on which the Portfolio's net asset value is calculated,
Separate Account C will transmit to the Fund any orders to purchase or redeem
shares of the Portfolio based on the purchase payments, redemption (surrender)
requests, and transfer requests from Contract owners, annuitants and
beneficiaries that have been processed on that day. Shares of the Portfolio 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 future, the Fund may offer shares of the Portfolio (including
new Portfolios that might be added to the Fund) to other separate accounts of
various insurance companies, whether or not affiliated with Transamerica, to
support variable annuity contracts or variable life insurance contracts.
Likewise, the Fund may also, in the future, offer shares of the Portfolio
directly to qualified pension and retirement plans.
In the event that shares of the Portfolio are offered to a separate
account supporting variable life insurance or to qualified pension and
retirement plans, a potential for certain conflicts may exist between the
interests of variable annuity contract owners, variable life insurance contract
owners and plan participants. The Fund currently does not foresee any
disadvantage to owners of the Contracts arising from the fact that shares of the
Portfolio might be held by such entities. However, in such an event, the Fund's
Board of Directors will monitor the Portfolio in order to identify any material
irreconcilable conflicts of interest which may possibly arise, and to determine
what action, if any, should be taken in response to such conflicts.
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Growth Portfolio 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.
TAXES
The Fund believes that the Portfolio qualifies as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Portfolio intends to distribute substantially all
of its net income and net capital gains to its shareholders. As a result, under
the provisions of subchapter M, there should be little or no income or gains
taxable to the Portfolio. In addition, the Portfolio intends to comply with
certain other distribution rules specified in the Code so that it will not incur
a 4% nondeductible federal excise tax that otherwise would apply.
See "Federal Tax Matters" in the Statement of Additional Information.
The shareholders of the Portfolio are currently limited to Separate
Account C and Transamerica. For more information regarding the tax implications
for the purchaser of a Contract who allocates investments to the Portfolio,
please refer to the prospectus for Separate Account C.
OTHER INFORMATION
Preparing For Year 2000
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem." This issue could adversely impact the Fund if
the computer systems used by the Fund's Investment Adviser, Sub-Adviser,
Custodian, transfer agent and other service providers do not accurately process
date information after January 1, 2000. The Investment Adviser and Sub-Adviser
are addressing this issue by testing the computer systems they use to ensure
that those systems will operate properly after January 1, 2000, and they are
also seeking assurances from the Custodian, transfer agent and other service
providers they use that their computer systems will be adapted to address the
Year 2000 Problem in time to prevent adverse consequences after January 1, 2000.
However, especially when taking into account interaction with other systems, it
is difficult to predict with precision that there will be no disruption of
services in connection with the year 2000.
Reports
Annual Reports containing audited financial statements of the Fund and
Semi-Annual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Fund at the telephone number or
address set forth on the cover page of this Prospectus.
Voting and Other Rights
Each share outstanding is entitled to one vote on all matters submitted
to a vote of shareholders (of the Portfolio or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolio and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of the Portfolio), when issued, is nonassessable and
has no preemptive or conversion rights. The shares have noncumulative voting
rights.
As a Maryland corporation, the Fund is not required to hold regular
annual shareholder meetings 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 Portfolio which may result in it being deemed a controlling person of the
Portfolio, as that term is defined in the 1940 Act.
Custody of Assets and Administrative Services
Pursuant to a custody agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian"), 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."
<TABLE>
<CAPTION>
Investment Grade Moody's Standard & Poor's
- --------------------------------------------------------------------------- -----------------
<S> <C> <C> <C>
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
</TABLE>
For more information on bond ratings, including gradations within each
category of quality, see the Statement of Additional Information.
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 28202
800-258-4260
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
Page
INTRODUCTION...................................................... 1
ADDITIONAL INVESTMENT POLICY INFORMATION.......................... 1
SPECIAL INVESTMENT METHODS AND RISKS.............................. 2
Restricted and Illiquid Securities....................... 2
Borrowing................................................ 2
Other Investment Companies............................... 2
Options on Securities and Securities Indices.........................3
Warrants and Rights...................................... 4
Repurchase Agreements.................................... 4
High-Yield ("Junk") Bond................................. 5
Foreign Securities....................................... 5
INVESTMENT RESTRICTIONS........................................... 5
Fundamental Restrictions.......................................... 5
Non-Fundamental Restrictions...................................... 7
Interpretive Rules....................................... 7
INVESTMENT ADVISER................................................ 8
Investment Advisory Agreement..................................... 8
Investment Sub-Advisory Agreement........................ 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE.......... 9
DETERMINATION OF NET ASSET VALUE.................................. 10
PERFORMANCE INFORMATION........................................... 11
FEDERAL TAX MATTERS............................................... 13
SHARES OF STOCK................................................... 14
CUSTODY OF ASSETS................................................. 15
DIRECTORS AND OFFICERS............................................ 15
Compensation............................................. 16
LEGAL PROCEEDINGS................................................. 17
OTHER INFORMATION................................................. 17
Legal Counsel............................................ 17
Other Information........................................ 17
Independent Auditors..................................... 18
Financial Statements..................................... 18
APPENDIX A........................................................ 19
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the May 1, 1998,
Prospectus write to the Fund at the Transamerica Annuity Service Center, 401
North Tryon Street, Suite 700, Charlotte, North Carolina 28202, or by calling
800-258-4260.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
ADDITIONAL INVESTMENT POLICY INFORMATION 1
SPECIAL INVESTMENT METHODS AND RISKS 2
Restricted and Illiquid Securities 2
Borrowing 2
Other Investment Companies 2
Options on Securities and Securities Indices 3
Warrants and Rights 4
Repurchase Agreements 4
High-Yield ("Junk") Bond 5
Foreign Securities 5
INVESTMENT RESTRICTIONS 5
Fundamental Restrictions 5
Non-Fundamental Restrictions 7
Interpretive Rules 7
INVESTMENT ADVISER 8
Investment Advisory Agreement 8
Investment Sub-Advisory Agreement 9
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE 9
DETERMINATION OF NET ASSET VALUE 10
PERFORMANCE INFORMATION 11
FEDERAL TAX MATTERS 13
SHARES OF STOCK 14
CUSTODY OF ASSETS 15
DIRECTORS AND OFFICERS 15
Compensation 16
LEGAL PROCEEDINGS 17
OTHER INFORMATION 17
Legal Counsel 17
Other Information 17
Independent Auditors 18
Financial Statements 18
APPENDIX A 19
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INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio") and the Money Market
Portfolio. This Statement of Additional Information sets forth information about
the Growth Portfolio only. By investing in the Growth Portfolio, an investor
becomes entitled to a pro-rata share of all dividends and distributions arising
from the net income and capital gains on the investments of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
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The Fund currently offers shares of the Growth Portfolio to insurance
companies as an underlying funding vehicle for variable annuity and variable
life insurance contracts (the "Contracts"). The Contracts are registered with
the Securities and Exchange Commission ("SEC"), and have separate prospectuses
and Statements of Additional Information.
The Fund may, in the future, offer its stock to qualified pension and
retirement plans. The Fund does not offer its stock directly to the general
public.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares were owned by Transamerica Life Insurance and Annuity
Company on behalf of Separate Account VA-6.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
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SPECIAL INVESTMENT METHODS AND RISKS
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage. Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of a call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Portfolio would realize a loss
on the purchase of a put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase options that are traded on United
States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price and that the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgment may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" means the lesser of: (a) 67% or more of the votes
attributable to shares of the Portfolio present at a meeting, if the holders of
more than 50% of such votes are present or represented by proxy; or (b) more
than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the Portfolio
may not purchase more than 10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than 25% of the
value of its total assets in securities issued by companies engaged in any one
industry. This limitation does not apply to investments in Government
Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets in real properties, including property acquired in
satisfaction of obligations previously held or received in part payment on the
sale of other real property owned. The purchase and sale of real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell commodities or
commodities contracts.
9. Senior Securities The Portfolio may not issue senior securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities Purchases or acquisitions may be
made of securities which are not readily marketable by reason of the fact that
they are subject to the registration requirements of the Securities Act of 1933
or the salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio to own securities of any one investment company that have a
total value greater than 5% of the value of the total assets of the Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns an equal amount of such securities or securities currently
exchangeable, without payment of any further consideration, for securities of
the same issue as, and at least equal in amount to, the securities sold short
(generally called a "short sale against the box") and unless not more than 10%
of the value of the Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain any short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies for the
purpose of exercising management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
<PAGE>
INVESTMENT ADVISER
Transamerica is the investment adviser of the Fund and its Portfolio.
It will oversee the management of the assets of the Portfolio by Investment
Services. In turn, Investment Services is responsible for the day-to-day
management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of the Portfolio and paid to Transamerica periodically.
Transamerica or its affiliates pays the salaries and fees, if any, of all
officers and directors of the Fund who are "interested persons" (as defined in
the 1940 Act) of Transamerica and of all personnel of Transamerica performing
services relating to research, statistical and investment activities and the
fees of the Sub-Adviser.
The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, registration fees and
expenses, and fees and expenses of directors unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed 0.10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The total dollar amounts paid by the Portfolio, and/or its predecessor
Separate Account Fund C, to Transamerica under the applicable investment
advisory contract for the last three fiscal years are as follows: Separate
Account Fund C paid $67,198 in 1995; Separate Account Fund C and the Portfolio
together paid $66,831 in 1996; and the Portfolio paid $313,749 in 1997.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and by the Contract Owners of Separate Account Fund C at a
Contract Owners meeting held on October 30, 1996. The investment advisory
agreement will remain in effect from year to year provided such continuance is
specifically approved as to the Portfolio at least annually by: (a) the Board of
Directors or the vote of a majority of the votes attributable to shares of the
Portfolio; and (b) the vote of a majority of the non-interested Directors, cast
in person at a meeting called for the purpose of voting on such approval. The
investment advisory agreement will terminate automatically if assigned (as
defined in the 1940 Act). The investment advisory agreement is also terminable
as to any Portfolio at any time by the Board of Directors or by vote of a
majority of the votes attributable to outstanding voting securities of the
applicable Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica.
Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services is located at 1150 South Olive Street, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Portfolio's average
daily net assets, 0.25% of the next $150 million, and 0.20% of assets in excess
of $200 million. Investment Services will provide recommendations on the
management of Fund assets, provide investment research reports and information,
supervise and manage the investments of the Portfolio, and direct the purchase
and sale of Portfolio investments. Investment decisions regarding the
composition of the Portfolio and the nature and timing of changes in the
Portfolio are subject to the control of the Board of Directors of the Fund.
The sub-advisory agreement was approved for the Portfolio by the Board
of Directors, including a majority of the Directors who are not parties to the
sub-advisory agreement or "interested persons" (as such term is defined in the
1940 Act) of any party thereto (the "non-interested Directors"), on July 24,
1996, and by the Contract Owners of Separate Account Fund C at a Contract Owners
meeting held on October 30, 1996. The sub-advisory agreement will remain in
effect from year to year provided such continuance is specifically approved as
to the Portfolio at least annually by: (a) the Board of Directors or the vote of
a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The sub-advisory agreement
will terminate automatically if assigned (as defined in the 1940 Act). The
sub-advisory agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 30 days written
notice to Investment Services.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
activities, and some of such services obtained in connection with the execution
of transactions for the Portfolio may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of the Portfolio, and the services furnished by such brokers
may be used by Investment Services in providing investment sub-advisory services
for the Portfolio. The aggregate dollar amounts of the brokerage commissions
paid with respect to portfolio transactions of the Portfolio by Investment
Services as sub-adviser to Separate Account Fund C (the Portfolio's predecessor)
were $7,253 for fiscal year 1995, and $19,115 for the first ten months of 1996.
The aggregate dollar amount of brokerage commissions paid by the Portfolio after
the reorganization, during November and December 1996, was $5,550, so that the
total paid by Investment Services and the Portfolio during fiscal year 1996 was
$24,665. The total paid by the Portfolio during fiscal year 1997 was $16,312.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Portfolio's
predecessor) for 1995 was 30.84%. The portfolio turnover rate for 1996, when
combining the experience of Separate Account Fund C through October 31, 1996,
and the Portfolio's experience for November and December 1996 was 34.58%. The
Portfolio's portfolio turnover rate for 1997 was 20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments
("Equities") listed on any U.S. stock market or the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last sale price on that exchange
or NASDAQ on the valuation day; if no sale occurs, Equities
traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices; (b)
over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; (c)
debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors; (d) options and futures contracts
are valued at the last sale price on the market where any such
option contracts are principally traded; (e) over-the-counter
options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; (f) all
other securities and other assets, including those for which a
pricing service supplies no quotations or quotations are not
deemed by Investment Services to be representative of market
values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and (g) debt securities with a
remaining maturity of 60 days or less will be valued at their
amortized cost which approximates market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the price will be determined in good faith by or under procedures
established by the Board of Directors.
PERFORMANCE INFORMATION
The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C. Separate Account Fund C had been a separate account of
Transamerica registered under the 1940 Act on Form N-3 as an open-end,
diversified, management investment company. The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
called Separate Account C, was approved at a meeting of the Contract owners held
on October 30, 1996. The assets of Separate Account Fund C, as of close of
business October 31, 1996, were transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio treats the historical performance data of Separate Account Fund C as
its own for periods prior to the reorganization.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, its investment performance for periods prior to the reorganization
reflect total mutual fund fees and expenses of 0.98% per year.
In computing its standardized total returns for periods prior to the
reorganization, the Portfolio assumes that the charges currently imposed by the
Portfolio were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data does not reflect
any sales or insurance charges, or any other separate account or contract level
charges, that were imposed under the annuity contracts issued through Separate
Account Fund C.
Any performance data quoted for the Portfolio represents historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio does not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Portfolio recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 5000 Index; (k) the Salomon Brothers
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
Such performance data is based on historical results and is not intended
to indicate future performance. The total return of the Portfolio varies based
on market conditions, portfolio expenses, portfolio investments and other
factors. The value of the Portfolio's shares fluctuates and an investor's shares
may be worth more or less than their original cost upon redemption. The Fund may
also, at its discretion, from time to time make a list of the Portfolio's
holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain tax requirements
with respect to the diversification of its assets. The Portfolio must have, at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United States
Government securities, securities of other regulated investment companies, and
other securities which, in respect of any one issuer, do not exceed 5% of the
value of the Portfolio's total assets and that do not represent more than 10% of
the outstanding voting securities of the issuer. In addition, not more than 25%
of the value of the Portfolio's total assets may be invested in securities
(other than United States Government securities or the securities of other
regulated investment companies) of any one issuer, or of two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, are fully paid and non-assessable and have no preemptive
or conversion rights.
As the designated successor to Separate Account Fund C, the Growth
Portfolio of the Fund received the assets of Separate Account Fund C. In
exchange, the Fund provided Separate Account C with shares in the Growth
Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
CUSTODY OF ASSETS
Pursuant to a Custodian Agreement with the Fund, State Street Bank and
Trust Company ("State Street" or "Custodian") 225 Franklin Street, Boston,
Massachusetts 02110 holds the cash and portfolio securities of the Fund as
custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Company, or Participants Trust Company book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald E. Cantlay (76) Board of Directors Director, Managing General Partner of Cee
'n' Tee Company; Director of California
Trucking Association and Western Highway
Institute; Director of FPA Capital Fund
and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and
Director of Transamerica Investment
Services, Inc.; Senior Vice President and
Chief Investment Officer of Transamerica
Corporation. Director and Chief
Investment Officer of Transamerica
Occidental Life Insurance Company.
Jon C. Strauss (58) Board of Directors President of Harvey Mudd College;
Previously Vice President and Chief
Financial Officer of Howard Hughes Medical
Institute; President of Worcester
Polytechnic Institute; Vice President and
Professor of Engineering at University of
Southern California; Vice President Budget
and Finance, Director of Computer
Activities and Professor of Computer and
Decision Sciences at University of
Pennsylvania.
Gary U. Rolle (57)* Chairman, Board of Director,
Directors Executive Vice President and Chief
Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company.
Peter J. Sodini (57) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive
Officer and Director, The Pantry, Inc. (a
supermarket). Director Pamida Holdings
Corp. (a retail merchandiser) and Buttrey
Food and Drug Co. (a supermarket).
Barbara A. Kelley (45) President President, Chief Operating Officer and
Director of Transamerica Financial
Resources, Inc. and President and Director
of Transamerica Securities Sales
Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica
Product, Inc. I, Transamerica Product,
Inc. II, Transamerica Product, Inc. IV,
and Transamerica Leasing Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of
the Institutional Marketing Services
Division of Transamerica Life Insurance
and Annuity Company and prior to 1994,
Vice President and National Sales Manager
of the Dreyfus Service Organization .
Sally S. Yamada (47) Assistant Secretary Vice President and Treasurer of
Transamerica
Occidental Life Insurance Company
and Treasurer of Transamerica Life
Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life
Insurance Company and prior to 1994
Counsel and Vice President for Colonial
Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams
& Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief Financial
Officer, Transamerica Investment Services,
Inc., since 1997; Independent Financial
Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940
Act.
** Except as otherwise noted, the mailing address of each Board member and
officer is 1150 South Olive, Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same or similar position with Transamerica Occidental's Separate Account Fund B.
The members of the Board of Directors are also members of the Board of Directors
of Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ended December 31, 1997, to all Directors of
the Fund.
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Total Pension or From Registrant
Aggregate Retirement Benefits and Fund Complex
Compensation Accrued As Part of Fund Paid to Directors3/
Name of Person From Fund1/ Expenses2/
<S> <C> <C> <C>
Donald E. Cantlay $1,500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini -$1500- -0- $4,750
Jon C. Strauss $500 -0- $500
</TABLE>
---------------------
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent auditors.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for the fiscal year ended December 31, 1997.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1A. Moody's Investors Service, Inc. Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
a medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or maybe
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements and their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Unrated:
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue. Should
no rating be assigned, the reason may be one of the following:1. An application
for rating was not received or accepted.2. The issue or issuer belongs to a
group of securities or companies that are not rated as a matter of policy.3.
There is a lack of essential data pertaining to the issue or issuer.4.The issue
was privately placed, in which case the rating is not published in Moody's
publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.Note: Those
bonds in the Aa, A and Baa groups which Moody's believe possess the strongest
investment attributes are designated by the symbols Aa1, A1 and Baa1.B. Standard
& Poor's Corporations AAA: Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong. AA: Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. A: Bonds rated A have
a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. BBB: Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than in
higher rated categories. BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.Notes: Bonds which are
unrated expose the investor to risks with respect to capacity to pay interest or
repay principal which are similar to the risks of lower-rated speculative
obligations. Investment Services'
uses its judgment, analysis and experience to evaluate such bonds.
- --------
1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement of Additional
Information for the securities listed. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligations to do so, and the ratings indicated
do not necessarily represent ratings which will be given to these securities on
the date of the Fund's fiscal year end.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-------------------------------------------
GROWTH PORTFOLIO
and
MONEY MARKET PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
May 1, 1998
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth 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.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION............................................................ 3
ADDITIONAL INVESTMENT POLICY INFORMATION................................ 4
SPECIAL INVESTMENT METHODS AND RISKS.................................... 4
Restricted and Illiquid Securities............................. 4
Borrowing...................................................... 5
Other Investment Companies..................................... 5
Options on Securities and Securities Indices................... 5
Warrants and Rights............................................ 7
Repurchase Agreements.......................................... 7
High-Yield ("Junk") Bond....................................... 8
Foreign Securities............................................. 9
DESCRIPTION OF FIXED-INCOME INSTRUMENTS................................. 9
U. S. Government Obligations................................... 9
Certificates of Deposit........................................ 10
Time Deposits.................................................. 10
Bankers' Acceptance............................................ 10
Commercial Paper............................................... 10
Variable Rate, Floating Rate, or Variable Amount Securities.... 10
Corporate Debt Securities...................................... 10
Asset-Backed Securities........................................ 10
Participating Interests in Loans............................... 11
International Organization Obligations......................... 11
Custody Receipts............................................... 11
Pass-Through Securities........................................ 11
INVESTMENT RESTRICTIONS................................................. 12
Fundamental Policies and Restrictions.......................... 12
Non-Fundamental Restrictions................................... 13
Interpretive Rules............................................. 15
INVESTMENT ADVISER...................................................... 15
Investment Advisory Agreement.................................. 15
Investment Sub-Advisory Agreement...................... 16
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE........ 17
DETERMINATION OF NET ASSET VALUE................................ 18
PERFORMANCE INFORMATION......................................... 20
Growth Portfolio Performance........................... 20
Money Market Portfolio Performance..................... 22
Published Performance.................................. 22
FEDERAL TAX MATTERS............................................. 24
SHARES OF STOCK................................................. 25
CUSTODY OF ASSETS............................................... 26
DIRECTORS AND OFFICERS.......................................... 26
Compensation........................................... 28
LEGAL PROCEEDINGS............................................... 28
OTHER INFORMATION............................................... 28
Legal Counsel.......................................... 28
Other Information...................................... 29
Independent Public Accountants......................... 29
Financial Statements................................... 29
APPENDIX A...................................................... 30
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund's Growth Portfolio is the successor to Transamerica Occidental's
Separate Account Fund C ("Separate Account Fund C"). The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust, Separate Account C, was approved at a meeting of the Contract
owners held on October 30, 1996. The assets of Separate Account Fund C, as of
close of business October 31, 1996, were transferred intact to the Growth
Portfolio of the Fund in exchange for shares in the Growth Portfolio which are
held by Separate Account C.
The Fund currently consists of two investment portfolios, the Growth
Portfolio and the Money Market Portfolio. The Money Market Portfolio did not
commence operations until January 1998. 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.
As of April 15, 1998, 95.763% of the outstanding shares of the Growth
Portfolio were owned by Transamerica on behalf of Separate Account C, and 4.237%
of the outstanding shares of the Growth Portfolio were owned by Transamerica
Life Insurance and Annuity Company on behalf of Separate Account VA-6. As of
April 15, 1998, 95.701% of the outstanding shares of the Money Market Portfolio
were owned by Transamerica Life Insurance and Annuity Company and 4.299% were
owned by Transamerica Life Insurance and Annuity Company on behalf of Separate
Account VA-6.
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 Portfolios as the underlying
funding vehicles for the variable annuity and variable life insurance contracts
(the "Contracts"). The Contracts are registered with the Securities and Exchange
Commission ("SEC"), and have separate prospectuses, and Statements of Additional
Information.
The Fund may, in the future, offer its stock to other separate accounts
of other insurance companies supporting other variable annuity contracts or
variable life insurance polices and to qualified pension and retirement plans.
The Fund does not offer its stock directly to the general public.
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' 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.
<PAGE>
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 0.35%
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.
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. Transamerica was the investment adviser to the Separate
Account Fund C. The advisory fee paid by Separate Account Fund C was .30% of its
average daily net assets. The dollar amount paid by Separate Account Fund C to
Transamerica in 1995 was $67,198. The total dollar amount paid to Transamerica
in 1996, including amounts paid by Separate Account Fund C through October 31
and amounts paid by the Growth Portfolio after October 31, 1996, was $66,831.
The total dollar amount paid to Transamerica by the Portfolio in 1997 was
$313,749. The Money Market Portfolio did not commence operations in 1997.
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.
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 sub-advisory agreement was approved by the Board of Directors,
including a majority of the Directors who are not parties to the sub-advisory
agreement or "interested persons" (as such term is defined in the 1940 Act) of
any party thereto (the "non-interested Directors"), for the Growth Portfolio on
July 24, 1996, and for the Money Market Portfolio on October 31, 1997. The
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 sub-advisory agreement will terminate automatically
if assigned (as defined in the 1940 Act). The 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.
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
$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 Portfolioafter the
reorganization, during November and December 1996, was $5,550, so that the total
paid during 1996 was $24,665. The total paid by the Growth Portfolio during
fiscal year 1997 was $16,312. The Money Market Portfolio did not commence
operations in 1997.
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%. The Portfolio's portfolio turnover rate for 1997 was
20.54%.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of 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.
Prior to the reorganization on November 1, 1996, Separate Account Fund C
paid a mortality and expense risk fee of 1.10% and an investment advisory fee of
0.30% per year, and it did not bear any operating expenses. After the
reorganization, the Growth Portfolio does not pay any mortality and expense risk
fees, and its total investment advisory fee and operating expenses during 1997
were 0.98% (before fee waivers and expense reimbursements) and 0.85% after fee
waivers and expense reimbursements. In accordance with conversations with the
SEC staff, investment performance for the Growth Portfolio for periods prior to
the reorganization reflect total mutual fund fees and expenses of 0.98% per
year.
In computing its standardized total returns for periods prior to the
reorganization, the 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
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 (76) Board of Directors Director, Managing General Partner of Cee 'n' Tee
Company; Director of California Trucking
Association and Western Highway Institute; Director
of FPA Capital Fund and FPA New Income Fund.
Richard N. Latzer (61)* Board of Directors President, Chief Executive Officer and Director of
Transamerica Investment Services, Inc.; Senior
Vice President and Chief Investment Officer of
Transamerica Corporation. Director and Chief
Investment Officer of Transamerica Occidental Life
Insurance Company.
Jon C. Strauss (58) Board of Directors President of Harvey Mudd College; Previously Vice
President and Chief Financial Officer of Howard
Hughes Medical Institute; President of Worcester
Polytechnic Institute; Vice President and Professor
of Engineering at University of Southern
California; Vice President Budget and Finance,
Director of Computer Activities and Professor of
Computer and Decision Sciences at University of
Pennsylvania.
Gary U. Rolle' (57)* Chairman, Board of Director, 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 (57) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive Officer and
Director, The Pantry, Inc. (a supermarket).
Director Pamida Holdings Corp. (a retail
merchandiser) and Buttrey Food and Drug Co. (a
supermarket).
Barbara A. Kelley (45) President President, Chief Operating Officer and Director of
Transamerica Financial Resources, Inc. and
President and Director of Transamerica Securities
Sales Corporation, Transamerica Advisors, Inc.,
Transamerica Product, Inc., Transamerica Product,
Inc. I, Transamerica Product, Inc. II, Transamerica
Product, Inc. IV, and Transamerica Leasing
Ventures, Inc.
Matt Coben (37)*** Vice President Vice President, Broker/Dealer Channel of the
Institutional Marketing Services Division of
Transamerica Life Insurance and Annuity Company
and prior to 1994, Vice President and National
Sales Manager of the Dreyfus Service Organization .
Sally S. Yamada (47) Vice President and Treasurer of Transamerica
Assistant Secretary Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Regina M. Fink (42) Secretary Counsel for Transamerica Occidental Life Insurance
Company and prior to 1994 Counsel and Vice
President for Colonial Management Associates, Inc.
Thomas M. Adams (63) Assistant Secretary Partner in the law firm of Lanning , Adams &
Peterson.
Susan R. Hughes (42) Treasurer Vice President and Chief financial Officer,
Transamerica Investment Services, Inc., since 1997;
Independent Financial Consultant 1992-1997,
</TABLE>
* These members of the Board are interested persons as defined by
Section 2(a)(19) of the 1940 Act.
** Except as otherwise noted, the mailing address of each Board
member and officer is 1150 South Olive,
Los Angeles, California 90015.
*** The mailing address of this officer is 401 North Tryon Street Suite
700, Charlotte, North Carolina 28202.
The principal occupations listed above apply for the last five years. In
some instances, the occupation listed above is the current position; prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same position with Transamerica Occidental's Separate Account Fund B. The
members of the Board of Directors are also members of the Board of Directors of
Transamerica Income Shares, Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
Compensation
The following table shows the compensation paid by the Fund and the
Fund Complex during the fiscal year ending December 31, 1997, to all Directors
of the Fund.
<TABLE>
<CAPTION>
Compensation
Total Pension or From Registrant
Retirement Benefits and Fund Complex
Aggregate Accrued As Part of Fund Paid to Directors3/
Name of Person Compensation Expenses2/
From Fund1/
<S> <C> <C> <C>
Donald E. Cantlay $1500 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore -$1500 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini $1500 -0- $4,750
Jon C. Strauss $500 -0- $500
</TABLE>
- ---------------------
1/ Each director of the Fund is compensated $250 for each meeting they attend.
(The Board of the Fund plans to hold four regularly scheduled board meetings
each year; other meetings may be scheduled.) This is the same compensation the
directors received while members of the Board of Managers of Separate Account
Fund C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year 1997, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
services, Inc. Mr. Rolle' is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan, LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Independent Public Accountants
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071, acts as the Fund's independent certified public accountants.
Financial Statements
This Statement of Additional Information contains the financial
statements for the Growth Portfolio of Transamerica Variable Insurance Fund,
Inc., for fiscal year ending December 31, 1998. No financial statements are
provided for the Money Market Portfolio because as of December 31, 1997, the
Money Market Portfolio had not yet commenced operations.
<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.
<PAGE>
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>
See notes to financial statements
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Schedule of Investments -- December 31, 1997
<TABLE>
<CAPTION>
Shares or
Market
Principal Market
Shares Value
Amount Value
<PAGE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 96.2%
- -------------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 4.1%
First Data Corporation 65,000 $ 1,901,250
- -------------------------------------------------------------------------------------------------------------------------------
CHEMICALS -- 7.4%
BetzDearborn, Inc. 30,000 1,831,875
W.R. Grace & Company 20,000 1,608,750
- -------------------------------------------------------------------------------------------------------------------------------
3,440,625
- -------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & BUSINESS EQUIPMENT -- 10.9%
Dell Computer Corporation (a) 60,000 5,040,000
- -------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES -- 4.3%
Gillette Company 20,000 2,008,750
- -------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.6%
Millipore Corporation 35,000 1,187,813
- -------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS -- 11.5%
Applied Materials, Inc. (a) 70,000 2,108,750
Intel Corporation 46,000 3,231,500
- -------------------------------------------------------------------------------------------------------------------------------
5,340,250
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 16.9%
Charles Schwab Corporation 82,500 3,459,844
Franklin Resources, Inc. 33,000 2,868,937
MoneyGram Payment Systems, Inc. (a) 140,000 1,505,000
- -------------------------------------------------------------------------------------------------------------------------------
7,833,781
- -------------------------------------------------------------------------------------------------------------------------------
HOTELS & RESTAURANTS -- 6.9%
Host Marriott Corp. (a) 70,000 1,373,750
Mirage Resorts, Incorporated (a) 80,000 1,820,000
- -------------------------------------------------------------------------------------------------------------------------------
3,193,750
- -------------------------------------------------------------------------------------------------------------------------------
LEISURE TIME -- 6.6%
Pixar, Inc. (a) 50,000 1,081,250
The Walt Disney Company 20,000 1,981,250
- -------------------------------------------------------------------------------------------------------------------------------
3,062,500
- -------------------------------------------------------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 2.7%
Sealed Air Corporation (a) 20,000 1,235,000
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE OPERATIONS -- 3.8%
CCA Prison Realty Trust 40,000 $ 1,785,000
- -------------------------------------------------------------------------------------------------------------------------------
RETAIL -- 8.6%
Fred Meyer, Inc. (a) 109,200 3,972,150
- -------------------------------------------------------------------------------------------------------------------------------
SOFTWARE -- 9.9%
Microsoft Corporation (a) 24,000 3,102,000
Transaction Systems Architects, Inc. (a) 40,000 1,520,000
- -------------------------------------------------------------------------------------------------------------------------------
4,622,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost $18,047,300) 44,622,869
- -------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.9%
- -------------------------------------------------------------------------------------------------------------------------------
State Street Bank and Trust Company 4.75%, due 01/02/98, (collateralized by
$1,830,000 par value U.S. Treasury Notes, 5.875%, due 10/31/98, with a value
of
$1,850,690, cost $1,812,000) 1,812,000 1,812,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(cost $19,859,300)* 46,434,869
LIABILITIES IN EXCESS OF OTHER
ASSETS - (0.1)% (56,462)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS-- 100.0% $46,378,407
===============================================================================================================================
</TABLE>
(a) non-income producing security
* Aggregate cost for Federal tax purposes. Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax
cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $26,994,664 and $419,095,
respectively. Net unrealized appreciation for tax purposes is $26,575,569.
<PAGE>
See notes to financial statements
.
<PAGE>
See notes to financial statements
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
<C>
Investments, at value (cost $19,859,300) $
46,434,869
Cash
842
Dividends and interest receivable
25,339
Due from Adviser
6,202
- -------------
46,467,252
LIABILITIES
Directors fees payable
3,000
Advisory fees payable
29,359
Accrued expenses
56,486
- -------------
88,845
TOTAL NET ASSETS $
46,378,407
=============
NET ASSETS CONSIST OF:
Paid in capital $
18,348,425
Accumulated net realized gain on investments
1,454,413
Net unrealized appreciation of investments
26,575,569
- -------------
TOTAL NET ASSETS $
46,378,407
=============
Shares outstanding
3,144,213
Net asset value per
share $ 14.75
</TABLE>
<PAGE>
See notes to financial statements
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Statement of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S>
<C>
Interest income $
30,935
Dividend income
163,094
- -------------
194,029
EXPENSES
Investment Adviser fee
313,749
Custodian fees
32,536
Administration fees
43,165
Audit fees
15,000
Directors' fees and expenses
3,000
Printing expenses
2,000
Other
264
- -------------
Operating expenses before fee waiver
409,714
Fees waived and expenses reimbursed
(54,131)
- --------------
355,583
NET INVESTMENT LOSS
(161,554)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments
5,194,303
Net change in unrealized appreciation of investments
9,864,234
- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
15,058,537
- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $
14,896,983
=============
</TABLE>
<PAGE>
See notes to financial statements
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31,
1997
1996
----
- ----
INCREASE IN NET ASSETS
From operations:
<S> <C>
<C>
Net investment loss $ (161,554) $
(190,588)
Net realized gain on investments 5,194,303
3,186,767
Net change in unrealized appreciation of investments 9,864,234
3,967,540
-------------
- -------------
Net increase in net assets resulting from operations 14,896,983
6,963,719
Dividends and distributions to shareholders from:
Net realized gains
(3,656,425) -
Net fund share transactions 2,899,412
(463,327)
-------------
- ----------------
Increase in net assets 14,139,970
6,500,392
NET ASSETS
Beginning of period 32,238,437
25,738,045
-------------
- -------------
End of period $ 46,378,407 $
32,238,437
=============
=============
</TABLE>
<PAGE>
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Financial Highlights
Selected data for a share outstanding throughout each period are as follows*
<TABLE>
<CAPTION>
Year ended December 31,
- --------------------------------------------------------------
---------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 10.93 $ 8.582 $ 5.615 $ 5.239 $ 4.287
- -----------------------------------------------------------------------------
Investment Operations
Net investment income (loss) (0.05) (0.065) (0.069) (0.042)
(0.030)
Net realized and unrealized gain 5.13 2.413 3.036 0.418 0.982
- --------------------------------------------------------------
---------------
Total from investment operations ........5.08 2.348 2.967 0.376 0.952
Distributions to Shareholders from:
Net realized gains (1.26) - - - -
- -----------------------------------------------------------------------------
Total distributions (1.26) - - - -
- -----------------------------------------------------------------------------
Net Asset Value, end of period $ 14.75 $ 10.930 $ 8.582 $ 5.615 $ 5.239
==============================================================
===============
Total Return 46.50% 27.36% 52.84% 7.19% 22.20%
=============================================================================
Ratios and Supplemental Data:
Expenses to average net assets (1) 0.85% 1.27% 1.41% 1.43% 1.43%
Net investment income (loss)
to average net assets (2) (0.39%) (0.68%) (0.94%) (0.80%) (0.65%)
Portfolio turnover rate 20.54% 34.58% 18.11% 30.84% 42.04%
Average commission rate (3) $0.0575 $0.0700 - - -
Net Assets, end of period (in
thousands) $46,378 $32,238 $25,738 $17,267 $16,584
</TABLE>
* Prior to November 1, 1996, activity represents accumulated unit values of the
Separate Account which have been converted to share values for presentation
purposes.
(1) If the Investment Adviser had not waived expenses, the ratio of operating
expenses to average net assets would have been 0.98% and 1.34% for the
years ended December 31, 1997 and 1996, respectively.
(2) If the Investment Adviser had not waived expenses, the ratio of net
investment loss to average net assets would have been (0.52%) and (0.75%)
for the years ended December 31, 1997 and 1996, respectively.
(3) Represents the average commission rate paid on equity security transactions
on which commissions are charged.
<PAGE>
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Notes to Financial Statements
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Transamerica Variable Insurance Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The Fund currently consists of two investment portfolios, the Growth
Portfolio and the Money Market Portfolio (the "Portfolios"). The Growth
Portfolio's investment objective is long-term capital growth and the Money
Market Portfolio's investment objective is to maximize current income. The Money
Market Portfolio commenced operations on January 2, 1998. These financial
statements pertain only to the Growth Portfolio.
The Fund was established as a Maryland Corporation on June 23, 1995, as the
successor to Transamerica Occidental's Separate Account Fund C (the "Separate
Account") which was organized as an open-end diversified management investment
company. On November 1, 1996, all investments held by the Separate Account with
a fair value of $29,567,077 and a cost basis of $15,661,836 were transferred to
the Growth Portfolio of the Fund. In exchange for these investments, the
Separate Account received all of the outstanding shares (2,956,116) of the Fund.
This transaction was accounted for in a manner similar to a pooling of
interests. Thereafter, the Separate Account's only investment is an investment
in the Fund.
As the Fund is treated as the successor to the Separate Account, all activity
prior to November 1, 1996 incorporates activity of the Separate Account.
Effective October 31, 1996, the net asset value of the Fund was re-priced at $10
per unit. All previous accumulation unit values of the Separate Account have
been restated for presentation purposes to account for this change. Selected
financial information for the ten month period ended October 31, 1996 is as
follows:
Investment income $154,796
Expenses (311,877)
-----------------
Net investment loss (157,081)
Net realized and unrealized gain on investments 4,374,273
-----------------
Net increase in net assets resulting from operations $4,217,192
=================
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements:
(A) Valuation of Securities - Equity securities traded on a national exchange,
NASDAQ and over-the-counter securities are valued at the last sale price.
Securities for which market quotations are not readily available are valued
at fair value as determined in good faith pursuant to procedures
established by the Fund's Board of Directors. Debt securities with a
maturity of 60 days or less are valued at amortized cost, which
approximates market value.
(B) 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 the Portfolios purchase 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.
If the seller is unable to make a timely repurchase, the Portfolio's
expected proceeds could be delayed, or the Portfolio could suffer a loss in
principal or current interest, or incur costs in liquidating the
collateral.
(C) Securities Transactions and Investment Income - Securities transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded daily on an accrual basis. Realized
gains and losses on investments are determined using the identified cost
method for both financial statement and Federal income tax purposes. The
aggregate cost of securities purchased (excluding short-term investments)
and proceeds from sales for the Growth Portfolio were $8,374,876 and
$10,662,938 respectively, for the year ended December 31, 1997.
<PAGE>
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Notes to Financial Statements
December 31, 1997
(D) Dividends and Distributions - The Growth Portfolio distributes
substantially all of its net investment income and capital gains, if any,
in the form of dividends to its shareholders. The Growth Portfolio
declares
its dividends and capital gain distributions at least annually.
(E) Federal Income Taxes - The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
(F) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of financial statements and the reported amounts
of revenue and expenses during the period. Actual results could differ
from those estimates.
2. Investment Advisory Fees and Other Transactions With Affiliates
The Fund has entered into an Investment Advisory Agreement with Transamerica
Occidental Life Insurance Company ("the "Adviser"), a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which in turn is a wholly
owned subsidiary of Transamerica Corporation. For its services to the Growth
Portfolio, the Adviser receives an annual advisory fee of 0.75% of the average
daily net assets of the Portfolio.
The Adviser has contracted with Transamerica Investment Services, Inc., a
wholly-owned subsidiary of Transamerica Corporation to provide investment advice
to the Portfolio. Transamerica Investment Services receives its fee directly
from the Adviser, and receives no compensation from the Portfolio.
The Adviser, at its discretion, has agreed to waive its fee and assume any other
operating expenses (other than certain extraordinary or non-recurring expenses)
of the Portfolio which exceed 0.85% of the average daily net assets of the
Portfolio.
Certain directors and officers of the Fund are also directors and officers of
the Adviser, the Separate Account, Transamerica Investment Services, and other
affiliated Transamerica entities, however they receive no compensation from the
Fund.
All shares of the Fund are owned by the Separate Account.
3. Capital Stock Transactions
The Fund has one billion shares of $0.001 par value stock authorized. As of
December 31, 1997, the Growth Portfolio was authorized to issue two hundred
million shares.
<TABLE>
<CAPTION>
Year ended December 31, 1997 Year ended December 31, 1996
---------------------------- ----------------------------
Shares Amount Shares Amount
---------------------------------------- ---------------- ----------------- ----------------
- ------------------
<S> <C> <C> <C> <C>
Capital stock sold - $ $ 13,223
- 1,200
Separate Account Deposits* - -
Separate Account Annuity Payments* - 36,216
(424,375)
Capital stock issued upon
reinvestment of dividends and
distributions
247,893 3,656,425
Capital stock redeemed
(53,456) (757,013) (7,540) (88,391)
---------------------------------------- ---------------- ----------------- ----------------
- ------------------
Net increase (decrease) 194,437 $2,899,412 $ (463,327)
(6,340)
---------------------------------------- ---------------- ----------------- ----------------
- ------------------
</TABLE>
<PAGE>
GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Notes to Financial Statements
December 31, 1997
*Prior to November 1, 1996, the Separate Account received deposits from and made
certain annuity payments and distributions to unit holders of the Separate
Account. These transactions are classified as fund share transactions in the
Statements of Changes in Net Assets.
4. Federal Income Tax
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales, net operating losses and
capital loss carryforwards. For the year ended December 31, 1997, the Growth
Portfolio increased accumulated net investment loss by $195,061, decreased
accumulated net realized gain on investments by $49,556 and decreased paid in
capital by $145,505.
<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. 4/
5/ 8/ 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. 4/
(11) (a) Consent of Sutherland, Asbill &
Brennan, L.L.P. 4/ 5/ 6/ 9/
(b) Consent of Ernst & Young LLP.
5/ 6/ 9/
(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/ 9/
(27) Financial Data Schedule 6/ 7/ 9/
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).
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. 5 to this Registration Statement on Form
N-1A, File No. 33-99016 (October 31, 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 - DE
ARC Reinsurance Corporation - HI
Transamerica Management, Inc. - DE
Criterion Investment Management Company - TX
Inter-America Corporation - CA
Mortgage Corporation of America - CA
Pyramid Insurance Company, Ltd. - HI
Pacific Cable Ltd. - Bmda.
TC Cable, Inc. - DE
RTI Holdings, Inc. - DE
Transamerica Airlines, Inc. - DE
Transamerica Business Technologies Corporation - DE
Transamerica CBO I, Inc. - DE
Transamerica Corporation (Oregon) - OR
Transamerica Delaware, L.P. - DE
Transamerica Finance Corporation - DE
TA Leasing Holding Co., Inc. - DE
Trans Ocean Ltd. - DE
Trans Ocean Container Corp. - DE
SpaceWise Inc. - DE
TOD Liquidating Corp. - CA
TOL S.R.L. - Itl.
Trans Ocean Container Finance Corp. - DE
Trans Ocean Leasing Deutschland GmbH - Ger.
Trans Ocean Leasing PTY Limited - Aust.
Trans Ocean Management Corporation - CA
Trans Ocean Management S.A. - SWTZ
Trans Ocean Regional Corporate Holdings - CA
Trans Ocean Tank Services Corporation - DE
Transamerica Leasing Inc. - DE
Better Asset Management Company LLC - DE
Transamerica Leasing Holdings Inc. - DE
Greybox Logistics Services Inc. - DE
Greybox L.L.C. - DE
Transamerica Trailer Leasing S.N.C. - Fra.
Greybox Services Limited - U.K.
Intermodal Equipment, Inc. - DE
Transamerica Leasing N.V. - Belg.
Transamerica Leasing SRL - Itl.
Transamerica Distribution Services Inc. - DE
Transamerica Leasing Coordination Center - Belg.
Transamerica Leasing do Brasil Ltda. - Braz.
Transamerica Leasing GmbH - Ger.
Transamerica Leasing Limited - U.K.
ICS Terminals (UK) Limited - U.K.
Transamerica Leasing Pty. Ltd. - Aust.
Transamerica Leasing (Canada) Inc. - Can.
Transamerica Leasing (HK) Ltd. - H.K.
Transamerica Leasing (Proprietary) Limited - S.Afr.
Transamerica Tank Container Leasing Pty. Limited - Aust.
Transamerica Trailer Holdings I Inc. - DE
Transamerica Trailer Holdings II Inc. - DE
Transamerica Trailer Holdings III Inc. - DE
Transamerica Trailer Leasing AB - Swed.
Transamerica Trailer Leasing AG - SWTZ
Transamerica Trailer Leasing A/S - Denmk.
Transamerica Trailer Leasing GmbH - Ger.
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
Transamerica Commercial Finance Corporation, I - DE
BWAC Credit Corporation - DE
BWAC International Corporation - DE
BWAC Twelve, Inc. - DE
TIFCO Lending Corporation - IL
Transamerica Insurance Finance Corporation - MD
Transamerica Insurance Finance Company (Europe) - MD
Transamerica Insurance Finance Corporation, California - CA
Transamerica Insurance Finance Corporation, Canada - ON
Transamerica Business Credit Corporation - DE
Direct Capital Equity Investment, Inc. - DE
TA Air East, Corp. -
TA Air III, Corp. - DE
TA Air II, Corp. - DE
TA Air IV, Corp. - DE
TA Air I, Corp. - DE
TBC III, Inc. - DE
TBC II, Inc. - DE
TBC IV, Inc. -
TBC I, Inc. - DE
TBC Tax III, Inc. -
TBC Tax II, Inc. -
TBC Tax IV, Inc. -
TBC Tax IX, Inc. -
TBC Tax I, Inc. -
TBC Tax VIII, Inc. -
TBC Tax VII, Inc. -
TBC Tax VI, Inc. -
TBC Tax V, Inc. -
TBC Tax XII, Inc. -
TBC Tax XI, Inc. -
TBC V, Inc. -
The Plain Company - DE
Transamerica Distribution Finance Corporation - DE
Transamerica Accounts Holding Corporation - DE
Transamerica Commercial Finance Corporation - DE
Inventory Funding Trust - DE
Inventory Funding Company, LLC - DE
TCF Asset Management Corporation - CO
Transamerica Joint Ventures, Inc. - DE
Transamerica Inventory Finance Corporation - DE
BWAC Seventeen, Inc. - DE
Transamerica Commercial Finance Canada, Limited - ON
Transamerica Commercial Finance Corporation, Canada - Can.
BWAC Twenty-One, Inc. - DE
Transamerica Commercial Finance Limited - U.K.
WFC Polska Sp. Zo.o -
Transamerica Commercial Holdings Limited - U.K.
Transamerica Commercial Holdings, Inc. -
Transamerica Trailer Leasing Limited - NY
Transamerica Commercial Finance France S.A. - Fra.
Transamerica GmbH Inc. - DE
Transamerica Retail Financial Services Corporation - DE
Transamerica Consumer Finance Holding Company - DE
Metropolitan Mortgage Company - FL
Easy Yes Mortgage, Inc. - FL
Easy Yes Mortgage, Inc. - GA
First Florida Appraisal Services, Inc. - FL
First Georgia Appraisal Services, Inc. - GA
Freedom Tax Services, Inc. - FL
J.J. & W. Advertising, Inc. - FL
J.J. & W. Realty Corporation - FL
Liberty Mortgage Company of Ft. Myers, Inc. - FL
Metropolis Mortgage Company - FL
Perfect Mortgage Company - FL
Whirlpool Financial National Bank - DE
Transamerica Vendor Financial Services - DE
Transamerica Distribution Finance Corporation de Mexico -
Transamerica Corporate Services de Mexico -
Transamerica Federal Savings Bank -
Transamerica HomeFirst, Inc. - CA
Transamerica Home Loan - CA
Transamerica Lending Company - DE
Transamerica Financial Products, Inc. - CA
Transamerica Foundation - CA
Transamerica Insurance Corporation of California - CA
Arbor Life Insurance Company - AZ
Plaza Insurance Sales, Inc. - CA
Transamerica Advisors, Inc. - CA
Transamerica Annuity Service Corporation - NM
Transamerica Financial Resources, Inc. - DE
Financial Resources Insurance Agency of Texas - TX
TBK Insurance Agency of Ohio, Inc. - OH
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- - AL
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - MA
Transamerica International Insurance Services, Inc. - DE
Home Loans and Finance Ltd. - U.K.
Transamerica Occidental Life Insurance Company - CA
NEF Investment Company - CA
Transamerica China Investments Holdings Limited - H.K.
Transamerica Life Insurance and Annuity Company - NC
Transamerica Assurance Company - CO
Transamerica Life Insurance Company of Canada - Can.
Transamerica Life Insurance Company of New York - NY
Transamerica South Park Resources, Inc. - DE
Transamerica Variable Insurance Fund, Inc. - MD
USA Administration Services, Inc. - KS
Transamerica Products, Inc. - CA
Transamerica Leasing Ventures, Inc. - CA
Transamerica Products II, Inc. - CA
Transamerica Products IV, Inc. - CA
Transamerica Products I, Inc. - CA
Transamerica Securities Sales Corporation - MD
Transamerica Service Company - DE
Transamerica Intellitech, Inc. - DE
Transamerica International Holdings, Inc. - DE
Transamerica Investment Services, Inc. - DE
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- - MD
Transamerica LP Holdings Corp. - DE
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - DE
Bankers Mortgage Company of California - CA
Pyramid Investment Corporation - DE
The Gilwell Company - CA
Transamerica Affordable Housing, Inc. - CA
Transamerica Minerals Company - CA
Transamerica Oakmont Corporation - CA
Ventana Inn, Inc. - CA
Transamerica Senior Properties, Inc. - DE
Transamerica Senior Living, Inc. - DE
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
ss.Limited Partner; Transamerica Corporation is General Partner
Item 26. Numbers of Holders of Securities (as ofDecember 31, 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 2/1/98 to 2/1/99.
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 1998with 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.
George A. Foegele*** Director and None President and Chief
Senior Vice President Executive Officer of
Transamerica Life Insurance
Company of Canada
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
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.
Paul E. Rutledge III** Director and None None
President - Reinsurance Division
T. Desmond Sugrue Director and Executive None None
Vice President
Bruce A. Turkstra Director, Executive None None
Vice President and Chief
Information Officer
Nooruddin S. Veerjee Director and President, None President of Transamerica
Insurance Products Division 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
*** 300 Consilium Place, Scarborough, Ontario, Canada M1H3G2
<TABLE>
<CAPTION>
List of Officers for Transamerica Occidental Life Insurance Company
<S> <C>
Thomas J. Cusack President and Chief Executive Officer
Nooruddin S. Veerjee President - Insurance Products Division
Bruce A. Turkstra Executive Vice President and Chief Information Officer
George A. Foegele Senior Vice President
Paul E. Rutledge III President - Reinsurance Division
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer, CLU Executive Vice President, General Counsel and Corporate Secretary
David E. Gooding Executive Vice President and Chief Information Officer
Bruce Clark Senior Vice President and Chief Actuary
Meheriar Hasan Vice President
Daniel E. Jund, FLMI Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
William N. Scott, CLU, FLMI Senior Vice President
T. Desmond Sugrue Executive Vice President
Ron F. Wagley Senior Vice President and Chief Agency Officer
Darrel K.S. Yuen President-Asian Operations
Richard N. Latzer Chief Investment Officer
Gary U. Rolle', CFA Chief Investment Officer
Stephen J. Ahearn Investment Officer
Glen E. Bickerstaff Investment Officer
Jim Bowman Vice President
John M. Casparian Investment Officer
Catherine Collinson Vice President
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Michael F. Luongo Investment Officer
Matthew Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Lennart H. Walin Investment Officer
Paul Wintermute Investment Officer
William D. Adams Vice President
Sandra Bailey-Whichard Vice President
Nicki Bair Senior Vice President
Dennis Barry Vice President
Laurie Bayless Vice President
Marsha Blackman Vice President
Nancy Blozis Vice President and Controller
Thomas Briggle Vice President
Thomas Brimacombe Vice President
Roy Chong-Kit Senior Vice President and Actuary
Alan T. Cunningham Vice President and Deputy General Counsel
Aldo Davanzo Vice President and Assistant Secretary
Daniel Demattos Vice President
Peter DeWolf Vice President
Randy Dobo Vice President and Actuary
Thomas P. Dolan, FLMI Vice President
John V. Dohmen Vice President
Harry Dunn, FSA Vice President and Chief Reinsurance Actuary
Gail DuBois Vice President and Associate Actuary
Ken Ellis Vice President
George Garcia Vice President and Chief Medicare Officer
David M. Goldstein Vice President and Associate General Counsel
Paul Hankwitz, MD Vice President and Chief Medical Director
Kevin Hobbs Vice President
Randall C. Hoiby Vice President and Associate General Counsel
John W. Holowasko Vice President
Phoebe Huang Vice President
William M. Hurst Vice President and Associate General Counsel
James M. Jackson Vice President and Deputy General Counsel
Allan H. Johnson, FSA Vice President and Actuary
Ken Kilbane Vice President
Frank J. LaRusso Vice President and Chief Underwriting Officer
Richard K. M. Lau, ASA Vice President
Philip E. McHale, FLMI Vice President
Mark Madden Vice President
Maureen McCarthy Vice President
Vic Modugno Vice President and Associate Actuary
Jess Nadelman Vice President
Wayne Nakano, CPA Vice President
Paul Norris Vice President and Actuary
Michael Palace, ASA Vice President and Actuary
Jerry Paul Vice President
Stephen W. Pinkham Vice President
Kristy M. Pipes Senior Vice President
Bruce Powell Vice President
Larry H. Roy Vice President
Gary L. Seagraves Vice President
Joel D. Seigle Vice President
Sandra Smith Vice President
James O. Strand Vice President
Alice Su Vice President
Lee Tang Vice President
Bill Tate Vice President
Claude W. Thau, FSA Senior Vice President
Kim A. Tursky Vice President and Assistant Secretary
John Vieren Vice President
Timothy Weis Vice President
William R. Wellnitz, FSA Senior Vice President and Actuary
Virginia M. Wilson Vice President and Controller
Thomas Winters Vice President
Ronald R. Wolfe Regional Vice President
Sally Yamada Vice President and Treasurer
Olisa Abaelu Second Vice President
Flora Bahaudin Second Vice President
Frank Beardsley Vice President
Benjamin Bock Vice President
Daniel J. Bohmfalk Second Vice President and Associate Actuary
Ken Bromberg Second Vice President
Art Bueno Second Vice President
Barry Buner Second Vice President
Beverly Cherry Second Vice President
Wonjoon Cho Second Vice President
Art Cohen Second Vice President
Lance Cockings, CPA Second Vice President
Ron Corlew Second Vice President
Dave Costanza Second Vice President
Gloria Durosko Second Vice President
Reid A. Evers Vice President and Associate General Counsel
David Fairhall Second Vice President and Associate Actuary
Selma Fox Second Vice President
Toni A. Forge Second Vice President
Jerry Gable, FSA Second Vice President
Roger Hagopian Second Vice President
Sharon Haley Second Vice President
Brian Hoyt Second Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil, FIA, MAAA Vice President and Associate Actuary
Andrew G. Kanelos Second Vice President
Ronald G. Keller Second Vice President
Joan Klubnik Second Vice President
Roger Korte Second Vice President
Lynette Lawson Second Vice President
Dean LeCesne Second Vice President
Liwen Lien Second Vice President
Marilyn McCullough Vice President
Richard MacKenzie Second Vice President
Danny Mahoney Second Vice President
Carl Marcero Second Vice President and Chief Reinsurance Underwriter
Claudia Maytum Second Vice President
Clay Moye Second Vice President
Daniel A. Norwick Second Vice President
John Oliver Second Vice President
Susan O'Brien Second Vice President
Stephanie Quincey Second Vice President
Paul Reisz Second Vice President
James R. Robinson Second Vice President
Ray Robinson Second Vice President
John J. Romer Vice President
Thomas M. Ronce Second Vice President and Assistant General Counsel
Laura Scully Second Vice President
Frederick Seto Second Vice President
Jack Shalley, MD Second Vice President and Medical Director
Steven R. Shepard Second Vice President and Assistant General Counsel
Frank Snyder Second Vice President
Mary Spence Second Vice President
Jean Stefaniak Second Vice President
Michael S. Stein Second Vice President
Christina Stiver Vice President
David Stone Second Vice President
Suzette Stover-Hoyt Second Vice President
John Tillotson Second Vice President
K. Y. To Second Vice President
Boning Tong Second Vice President and Associate Actuary
Janet Unruh Second Vice President and Assistant General Counsel
Colleen Vandermark Vice President
Marsha Wallace Second Vice President
Sheila Wickens, MD Second Vice President and Medical Director
Michael B. Wolfe Vice President
James Wolfenden Statement Officer
Kamran Haghighi Tax Officer
</TABLE>
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).
(e) Transamerica hereby represents that the fees and the charges deducted
under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the
risks assumed by Transamerica.
<PAGE>
SIGNATURES
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. 6 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 24th day
of April, 1998.
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
By: __________________________*
Regina M. Fnk Secretary
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 April 24, 1998
Barbara A. Kelley
______________________* Treasurer April 24, 1998Sally S. Yamada
______________________* Director April 24, 1998
Donald E. Cantlay
______________________* Director April 24, 1998
Richard N. Latzer
______________________* Director and Chairman April 24, 1998
Gary U. Rolle'
______________________* Director April 24, 1998
Peter J. Sodini
______________________* Director April 24, 1998
Jon C. Strauss
</TABLE>
On April 24, 1998 as Attorney-in-Fact pursuant to
powers of
*By: Regina M. Fink
attorney filed with the initial registration statement.
<PAGE>
Exhibit 11(a)
SUTHERLAND, ASBILL & BRENNAN LLP
1275 Pennsyulvania Avenue, N.W.
Washington, D.C. 20004
April 29, 1998
Transamerica Variable Insurance FUnd, Inv.
1150 South Olive
Los Angeles, CA 90015
Re: Transamerica Variable Insurance FUnd, Inc.
File No. 33-99016
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Counsel" in the Statement of Additional Information included in Post-
Effective Amendment No. 6 to the Registration Statement on Form N-1A for
Transamerica Variable Insurance FUnd, Inc. (File No. 333-99016). In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours
SUTHERLAND, ASBILL & BRENNAN LLP
/s/Frederick R. Bellamy
<PAGE>
Exhibit 11(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "other Informaiton" in Post-EFfective Amendmetn No, 6 under
the Securities Act of 1933 and Amendment No. 7 under the Investment Company
Act of 1940 to the Registration Statement (N-1A No. 333-99016) 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 January 30, 1998, with respect to the financial statements and finacial
highlights of the Growth Portfolio of Transamerica Variable Insurance FUnd, Inc.
included in its Annual Report for the year ended Decemberf 31, 997 filed with
the Securities and Exchange Commission.
/s/Ernst & Young LLP
Los Angeles, California
April 29, 1998
<PAGE>
Exhibit (19) Powers of Attorney
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Robert Abeles
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Thomas J. Cusack
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
James W. Dederer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Richard H. Finn
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
George A. Foegele
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
David E. Gooding
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Edgar H. Grubb
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Frank C. Herringer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Richard N. Latzer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), her true and lawful attorney-in-fact and agent, with full power of
substitution to each, for her and on her behalf and in her name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and her or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Karen MacDonald
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Mark McEachen
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Gary U. Rolle'
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Paul E. Rutledge III
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
T. Desmond Sugrue
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Bruce A. Turkstra
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Nooruddin Veerjee
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance
Company, a California corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, with full power of
substitution to each, for him and on his behalf and in his name, place and
stead, to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933 and under the Investment Company
Act of 1940 with respect to any life insurance and annuity policies:
registration statements on any form or forms under the Securities Act of 1933
and under the Investment Company Act of 1940, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
20th day of March, 1998.
------------------------------
Robert A. Watson
<PAGE>
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