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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
(Name of Registrant as Specified In Its Charter)
NAME OF COMPANY
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 SOUTH OLIVE STREET
LOS ANGELES, CA 90015
(800) 258-4260
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Transamerica Variable Insurance Fund, Inc., a Maryland corporation
(the "Corporation"), will be held on June 16, 1999, at 9 a.m. (Pacific Time), at
the executive offices of the Corporation, 1150 South Olive Street, Los Angeles,
CA 90015. At the Special Meeting, you and the other shareholders of the
Corporation will be asked to consider and vote on the following matters:
1. To approve a new investment advisory agreement, relating to each of the
Growth Portfolio and the Money Market Portfolio, each a portfolio
series of the Corporation, between Transamerica Occidental Life
Insurance Company and the Corporation as discussed in Part I of the
attached Proxy Statement. (Each investment advisory agreement will be
voted on only by shareholders of the relevant Portfolio.)
2. To approve a new investment sub-advisory agreement, relating to each of
the Growth Portfolio and the Money Market Portfolio, each a portfolio
series of the Corporation, between Transamerica Occidental Life
Insurance Company and Transamerica Investment Services, Inc., as
discussed in Part II of the attached Proxy Statement. (Each investment
sub-advisory agreement will be voted on only by shareholders of the
relevant Portfolio.)
3. To elect four directors to the Board of Directors of the Corporation,
as discussed in Part III of the attached Proxy Statement.
4. To ratify or reject the selection by the Board of Directors of Ernst &
Young LLP as independent public accountants to the Corporation for the
fiscal year ending December 31, 1999, as discussed in Part IV of the
attached Proxy Statement.
5. To transact such other business as may properly come before the Special
Meeting or any adjournment(s) thereof.
By Order of the Board of Directors
/s/ Regina Fink
Regina M. Fink
Secretary
Los Angeles, California
May 20, 1999
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TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 SOUTH OLIVE STREET
LOS ANGELES, CA 90015
(800) 258-4260
PROXY STATEMENT
Transamerica Variable Insurance Fund, Inc. (the "Corporation") serves as an
underlying funding vehicle for use in connection with variable annuity and
variable life insurance contracts (the "Contracts") issued by Transamerica
Occidental Life Insurance Company, Transamerica Life Insurance and Annuity
Company and Transamerica Life Insurance Company of New York (collectively, the
"Variable Insurers"). Consequently, as used herein, the term "shareholder"
refers to each of the Variable Insurers that has invested in the Corporation.
With one exception noted below, the Variable Insurers hold shares of the
Corporation in their respective separate accounts in which contributions and
premiums received under the Contracts are invested; these separate accounts in
turn purchase shares of the Corporation, as described in the Corporation's
prospectus. The Corporation expects that the Variable Insurers will offer to the
owners of the Contracts (the "Contract Owners") the right to give such Variable
Insurers instructions as to how those shares of the Corporation attributable to
their Contracts should be voted. Certain of the shares of the Corporation, as
more fully described below, are owned directly by Transamerica Life Insurance
and Annuity Company ("TALIAC") and not on behalf of any of its separate
accounts, and are therefore not attributable to any Contracts.
This Proxy Statement is furnished on behalf of the Board of Directors of
the Corporation (the "Board") to the shareholders of the Corporation for their
use in obtaining instructions from the Contract Owners as to how to vote on the
proposals to be considered at the Special Meeting of Shareholders of the
Corporation, to be held at the executive offices of the Corporation, 1150 South
Olive Street, Los Angeles, California 90015, on June 16, 1999 at 9 a.m. (Pacific
Time), and at any and all adjournments thereof (the "Special Meeting").
The Corporation currently consists of two series of shares that have
commenced operations, the Growth Portfolio and the Money Market Portfolio (each
a "Portfolio" and, collectively, the "Portfolios").
It is expected that the Variable Insurers will each attend the Special
Meeting in person or by proxy and will vote shares of the Corporation held by
them on behalf of their respective separate accounts in accordance with voting
instructions received from Contract Owners. The Corporation expects, with
respect to each Variable Insurer separate account that holds shares of a
Portfolio, that all shares of that Portfolio attributable to Contracts allocated
to that separate account for which no voting instructions have been received and
all shares attributable to amounts retained by that Variable Insurer in that
separate account will be voted in the same manner and in the same proportions as
are the shares attributable to Contracts allocated to that separate account for
which voting instructions have been received. The number of shares for which a
Contract Owner has the right to give voting instructions with respect to the
Special Meeting was determined as of the close of business on May 10, 1999 (the
"Record Date").
This Proxy Statement and the Notice of Special Meeting are first being sent
to shareholders on or about May 21, 1999 or as soon as practicable thereafter.
Any shareholder giving a proxy has the power to revoke it by mail (addressed to
the Secretary at the principal executive office of the Corporation, c/o
Transamerica Occidental Life Insurance Company, at the address shown at the
beginning of this Proxy Statement) or in person at the Special Meeting, by
executing a superseding proxy or by submitting a notice of revocation to the
Corporation. All properly executed proxies received in time for the Special
Meeting will be voted as specified in the proxy or, if no specification is made,
in favor of the Proposals referred to in the Proxy Statement.
The Corporation expects that voting instruction forms, prepared for use by
the Variable Insurers, as well as this Proxy Statement, will be mailed to the
Contract Owners on or about May 21, 1999, or as soon as practicable thereafter,
in order to obtain voting instructions from the Contract Owners.
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Shareholders are being asked to vote on four proposals at the Special
Meeting. Shareholders will vote on these proposals as set forth below.
<TABLE>
<CAPTION>
DESCRIPTION OF PROPOSAL VOTING PROCEDURE
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Proposal 1 Approval of New Investment Advisory Agreement........ Shareholders of each Portfolio
vote separately.
Proposal 2 Approval of New Investment Sub-Advisory Agreement.... Shareholders of each Portfolio
vote separately.
Proposal 3 Election of Directors................................ Shareholders of all Portfolios
vote together as a single class.
Proposal 4 Ratification of Accountants.......................... Shareholders of all Portfolios
vote together as a single class.
</TABLE>
The presence at the Special Meeting, in person or by proxy, of the holders
of one-third of the votes of the relevant Portfolio (for proposals on which each
Portfolio votes separately, such as Proposals 1 and 2) or of the Corporation
(for proposals on which all Portfolios vote as a single class, such as Proposals
3 and 4) entitled to be voted shall be necessary and sufficient to constitute a
quorum for the transaction of business. For purposes of determining the presence
of a quorum, abstentions will be counted as present. With respect to each
Portfolio, Proposals 1 and 2 require the approval of a "majority of the
outstanding voting securities" of such Portfolio, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). Abstentions and broker
"nonvotes" will have the effect of a vote against Proposals 1 and 2. See
"Proposal 1 -- Required Vote" and "Proposal 2 -- Required Vote." Broker
"nonvotes" occur when the Corporation receives a proxy from a broker or nominee
who does not have discretionary power to vote on a particular matter and the
broker or nominee has not received instructions from the beneficial owner or
other person entitled to vote the shares represented by the proxy. With respect
to Proposals 3 and 4, all Portfolios will vote together as a single class.
Proposal 3 requires a plurality vote for the election of each director, and
Proposal 4 requires a majority of the votes cast at the Special Meeting for
approval. Abstentions and broker nonvotes will not be counted in favor of or
against Proposals 3 and 4. See "Proposal 3 -- Required Vote" and "Proposal
4 -- Required Vote."
The solicitation of voting instructions will be made primarily by mail, but
may be supplemented by telephone calls, telegrams, personal interviews and other
communications by officers, employees and agents of Transamerica Corporation
("Transamerica") and its affiliates. Voting instructions may be obtained
telephonically or by electronic transmission. The Variable Insurers have
retained Georgeson & Company Inc., 88 Pine Street, New York, NY 10005, to aid in
the solicitation of voting instructions. The costs of retaining Georgeson &
Company Inc., which are anticipated to be approximately $10,000, and other
expenses incurred in connection with the solicitation of voting instructions and
the holding of the Special Meeting, will be borne by Transamerica or its
affiliates and not by the Corporation.
Each holder of record of a share (or fraction thereof) of the Corporation,
as to any matter on which such holder is entitled to vote, on all business at
the Special Meeting, will be entitled to one vote for each dollar of net asset
value of the Corporation's stock standing in such holder's name on the books of
the Corporation on the Record Date. The table provided in Appendix 1 sets forth
the number of shares outstanding for each Portfolio as of the Record Date.
As noted above, except for certain shares owned by TALIAC, the Corporation
sells shares only in connection with Contracts issued by the Variable Insurers.
As of May 10, 1999, Transamerica and its indirect wholly-owned subsidiaries,
Transamerica Occidental Life Insurance Company, TALIAC and Transamerica Life
Insurance Company of New York, owned 100% of the Corporation's outstanding
shares. Also as of May 10, 1999, TALIAC owned beneficially 2,128,906 shares, or
23.85%, of the Money Market Portfolio, which shares are not allocated to any
separate account and are therefore not attributable to any Contracts. As
indicated above, the Corporation expects that the Variable Insurers will offer
to Contract Owners the right to give such Variable Insurers instructions as to
how those shares of a Portfolio attributable to their Contracts should be voted.
To the best of the Corporation's knowledge, as of May 10, 1999, no Contract
Owner had the right to give voting instructions with respect to 5% or more of
any Portfolio's outstanding shares.
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To the best of the Corporation's knowledge, as of May 10, 1999, no
director, nominee for director or executive officer of the Corporation owned any
Contracts entitling such director, nominee or executive officer to give voting
instructions with respect to any shares of the Corporation.
Each Portfolio provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. Shareholders can receive an additional copy of the most
recent annual report for each Portfolio and a copy of any more recent
semi-annual report, without charge, by calling 800-258-4260 or by writing the
Corporation at the address shown at the beginning of this Proxy Statement.
I. APPROVAL OF NEW
INVESTMENT ADVISORY AGREEMENT
(PROPOSAL 1)
INTRODUCTION
Transamerica Occidental Life Insurance Company ("TOLIC") acts as the
investment adviser to each Portfolio pursuant to an investment advisory
agreement entered into by the Corporation and TOLIC. The investment advisory
agreement in effect with respect to each Portfolio and TOLIC prior to the
consummation of the transaction described below between AEGON N.V. ("AEGON"),
Tony Merger Corp. ("Merger Sub") and Transamerica (the "AEGON-Transamerica
Transaction" or the "Transaction") is referred to in this Proxy Statement as a
"Former Investment Advisory Agreement," and, collectively, the "Former
Investment Advisory Agreements." The investment advisory agreement proposed to
become effective with respect to each Portfolio and TOLIC as of the consummation
of the AEGON-Transamerica Transaction is referred to in this Proxy Statement as
a "New Investment Advisory Agreement" (collectively, the "New Investment
Advisory Agreements," and, together with the Former Investment Advisory
Agreements, the "Investment Advisory Agreements"). A copy of the master form of
New Investment Advisory Agreement is attached as Exhibit A.
THE AEGON-TRANSAMERICA TRANSACTION
TOLIC is an indirect wholly-owned subsidiary of Transamerica. On February
17, 1999, AEGON, Merger Sub, a wholly-owned subsidiary of AEGON, and
Transamerica entered into an Agreement and Plan of Merger and Reorganization
(the "Merger Agreement"). Pursuant to the Merger Agreement, Transamerica will
merge with and into Merger Sub. Merger Sub will be the surviving corporation in
the Transaction, and the separate corporate existence of Transamerica will
cease. The Certificate of Incorporation of Merger Sub will be amended to change
the name of Merger Sub from Tony Merger Corp. to Transamerica Corporation. The
result of the Transaction will be that Transamerica will become a wholly-owned
subsidiary of AEGON.
Consummation of the Transaction may be deemed to constitute an
"assignment," as that term is defined in the 1940 Act, of each Portfolio's
Former Investment Advisory Agreement with TOLIC. As required by the 1940 Act,
each of the Former Investment Advisory Agreements provides for its automatic
termination in the event of its assignment. Accordingly, a New Investment
Advisory Agreement with respect to each Portfolio and TOLIC was approved by the
Board and is now being proposed for approval by the shareholders of each
Portfolio. TOLIC is seeking an exemptive order (the "Exemptive Order") from the
Securities and Exchange Commission (the "SEC" or the "Commission") permitting
each Portfolio to obtain shareholder approval of its New Investment Advisory
Agreement within 150 days after the consummation of the Transaction, which is
expected to occur in mid-June (and, consequently, within 150 days after the
termination of its Former Investment Advisory Agreement). Pursuant to the
Exemptive Order, should TOLIC choose to rely on it, each Portfolio's investment
advisory fees would be held in escrow until the earlier of (i) shareholder
approval of the Portfolio's New Investment Advisory Agreement and (ii) the
expiration of the 150-day period. THE NEW INVESTMENT ADVISORY AGREEMENT FOR EACH
PORTFOLIO IS SUBSTANTIALLY IDENTICAL TO THE CORRESPONDING FORMER INVESTMENT
ADVISORY AGREEMENT, EXCEPT FOR THE DATE OF EXECUTION AND THE TERMINATION DATE.
The material terms of
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the Investment Advisory Agreements are described under "Description of the
Investment Advisory Agreements" below.
In connection with the Transaction, certain executive officers of
Transamerica and its subsidiaries, including TOLIC and Transamerica Investment
Services, Inc. ("TIS"), the sub-adviser to the Portfolios, will receive certain
benefits. Such benefits will include (i) the acceleration and cash-out of
unvested stock options, vested stock options and stock appreciation rights and
(ii) payments made under certain value added incentive plans. Such benefits may
also include severance payments that are contingent upon an executive officer's
termination. Mr. Rolle, Chairman of the Board of Directors of the Corporation
and an executive officer of TOLIC and TIS, will receive a portion of such
benefits.
BOARD'S RECOMMENDATION
The Board met on May 6, 1999, and the Board members, including the Board
members who are not parties to the New Investment Advisory Agreements or the New
Investment Sub-Advisory Agreements (as defined in Proposal 2 below) or
"interested persons" (as defined in the 1940 Act) of any such party (the
"Non-Interested Directors" or "Non-Interested Board members"), voted to approve
the New Investment Advisory Agreements and to recommend approval to the
shareholders of each applicable Portfolio.
BOARD'S EVALUATION
On May 6, 1999, the Board met with senior management personnel of TOLIC. As
a result of its review and consideration of the Transaction and the proposed New
Investment Advisory Agreements, the Board voted unanimously to approve the
applicable New Investment Advisory Agreement and to recommend it to the
shareholders of the respective Portfolio for their approval.
In connection with its review, TOLIC and AEGON represented to the Board
that: although integration of the businesses of Transamerica and AEGON may occur
and therefore some changes may result, it is the current intention that the
Transaction will have no material effect on the operational management of any
Portfolio and that it will not result in any material change in the management
or operations of TOLIC as they relate to the Portfolios; there will not be any
increase in the advisory fee or any change in any other provision, other than
the date of execution and the termination date, of any Investment Advisory
Agreement as a result of the Transaction; and the Transaction will not adversely
affect TOLIC's financial condition.
In connection with its deliberations, the Board obtained such information
as it deemed reasonably necessary to evaluate the New Investment Advisory
Agreements and other agreements, including certain assurances from each of
AEGON, Transamerica and TOLIC, including the following:
- The Transaction will not result in any change in any Portfolio's
investment objectives or policies.
- There is a commitment to the continuance, without interruption, of
services to the Portfolios of the type and quality currently provided by
TOLIC.
- The current plan is to maintain TOLIC's facilities and organization.
Transamerica informed the Board that it intends to comply with Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined in the 1940 Act) to receive any amount or benefit
in connection with a change in control of the investment adviser so long as two
conditions are met. First, for a period of three years after the transaction, at
least 75% of the board members of the investment company must not be "interested
persons" of the investment company's investment adviser or its predecessor
adviser. On or prior to the consummation of the Transaction, the Board is
expected to be in compliance with this provision of Section 15(f). Second, an
"unfair burden" must not be imposed upon the investment company as a result of
such transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction whereby
the investment adviser, or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other
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than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). Transamerica
has advised the Board that it is not aware of any express or implied term,
condition, arrangement or understanding that would impose an "unfair burden" on
the Portfolios as a result of the Transaction. Transamerica has agreed that it,
and its affiliates, will take no action that would have the effect of imposing
an "unfair burden" on the Portfolios as a result of the Transaction. In
furtherance thereof, Transamerica has undertaken to pay the costs of preparing
and distributing proxy materials to, and of holding the meeting of, the
Corporation's shareholders, as well as other fees and expenses in connection
with the Transaction.
In evaluating the New Investment Advisory Agreements, the Board took into
account that the fees and expenses payable by each Portfolio under its New
Investment Advisory Agreement are the same as under its Former Investment
Advisory Agreement, that the services provided to each Portfolio are the same
and that the other terms are, except for the date of execution and the
termination date, identical. The Board noted that, in previously approving the
Former Investment Advisory Agreements, the Board had considered a number of
factors, including the nature and quality of services provided by TOLIC;
investment performance, both that of each Portfolio itself and relative to that
of competitive investment companies; the investment advisory fees and expense
ratios of each Portfolio and competitive investment companies; TOLIC's
profitability from managing each Portfolio; fallout benefits to TOLIC from its
relationship to each Portfolio, including revenues derived from services
provided to the Portfolio by affiliates of TOLIC; and the potential benefits to
TOLIC and its affiliates and to each Portfolio and its shareholders of receiving
research services from broker-dealer firms in connection with the allocation of
portfolio transactions to such firms.
The Board discussed the Transaction with the senior management of TOLIC,
Transamerica and AEGON and among themselves. The Board considered that AEGON and
Transamerica are large, well-established companies with substantial resources.
AS A RESULT OF ITS REVIEW AND CONSIDERATION OF THE TRANSACTION
AND THE NEW INVESTMENT ADVISORY AGREEMENTS, AT ITS MEETING
THE BOARD VOTED TO APPROVE THE NEW INVESTMENT ADVISORY
AGREEMENTS AND TO RECOMMEND THEIR APPROVAL
TO THE SHAREHOLDERS OF EACH PORTFOLIO.
DESCRIPTION OF THE INVESTMENT ADVISORY AGREEMENTS
Except as disclosed below, the Former Investment Advisory Agreements and
New Investment Advisory Agreements are substantially identical.
The Investment Advisory Agreement for each Portfolio appoints TOLIC to
serve as investment adviser to the Portfolio, to manage the investment and
reinvestment of the assets of the Portfolio in accordance with the limitations
specified from time to time in the Corporation's Articles of Incorporation and
By-Laws and in the Portfolio's prospectus and statement of additional
information filed with the SEC as part of the Corporation's registration
statement, and to perform certain other services, subject to the supervision of
the Board. Under the Investment Advisory Agreement, TOLIC has agreed to: (a)
obtain and evaluate pertinent economic, statistical and financial data and other
information relevant to the investment policies of the Portfolio, and make such
data and information reasonably available to the Board at its request; (b)
develop and implement an investment program consistent with the Portfolio's
investment objectives, policies and limitations; (c) provide necessary personnel
to assist the Board in managing the affairs of the Corporation; (d) authorize
and permit any of its directors, officers and employees, who may be elected as
directors or officers of the Corporation, to serve in the capacities in which
they are elected; and (e) maintain all required records, memoranda, instructions
or authorizations relating to the advisory activities rendered to the Portfolio.
Under the Former Investment Advisory Agreements, TOLIC has entered into
investment sub-advisory agreements with Transamerica Investment Services, Inc.,
an affiliate of TOLIC. It is expected that TOLIC and TIS will enter into
substantially identical investment sub-advisory agreements under the New
Investment Advisory Agreements, provided the shareholders of each Portfolio
approve such investment sub-advisory
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agreements as discussed and proposed in Part II of this Proxy Statement.
Pursuant to the Investment Advisory Agreements, TOLIC assumes overall
responsibility, subject to the supervision of the Board, for administering all
operations of the Corporation and for monitoring and evaluating the management
of the assets of the Portfolios by the sub-adviser on an ongoing basis. TOLIC
provides or arranges for the provision of the overall business management and
administrative services necessary for the Corporation's operations, and
furnishes or procures any other services and information necessary for the
proper conduct of the Corporation's business. TOLIC also acts as liaison among,
and supervisor of, the various service providers to the Corporation. TOLIC is
also responsible for overseeing the Corporation's compliance with the
requirements of applicable law and that each portfolio is in conformity with its
investment objectives, policies and restrictions, including oversight of the
sub-adviser.
TOLIC is responsible for its own expenses, including the salaries and fees
of its personnel performing services relating to research, statistical and
investment activities, and the fees and expenses of the sub-adviser. Each
Portfolio pays all the costs of its operations that are not assumed by TOLIC,
including: (a) brokers' commissions in connection with transactions involving
portfolio assets; (b) all taxes, including issuance and transfer taxes, which
may become payable to federal, state or other government entities, with respect
to the operation of the Portfolio; (c) all legal and auditing fees; (d) all
extraordinary expenses which may be incurred by or on behalf of the Portfolio in
connection with matters not in the ordinary course of business; (e) expenses and
fees incurred in connection with registration and qualification of the Portfolio
under federal and state securities laws; (f) charges and expenses of any
custodian to the Portfolio; (g) expenses of calling and holding meetings of
shareholders; (h) fees and expenses of Non-Interested Board Members; and (i) all
ordinary expenses incurred in the ordinary course of business. Portfolio
expenses that are not Portfolio-specific will be allocated among the Portfolios
based on the net assets of each Portfolio.
In return for the services provided by TOLIC and the expenses it assumes
under each Investment Advisory Agreement, each Portfolio pays TOLIC an annual
advisory fee that is a percentage of the average daily net assets of the
Portfolio. The fee is deducted daily from the assets of the Portfolio and paid
to TOLIC monthly. The advisory fee rate for each Portfolio under the Investment
Advisory Agreements is set forth in Appendix 2. As of the end of each
Portfolio's last fiscal year, each Portfolio had net assets and paid an
aggregate advisory fee to TOLIC during such period as also set forth in Appendix
2. TOLIC may waive some or all of the advisory fee from time to time at its
discretion, but is not obligated to so do.
The Investment Advisory Agreements do not place limits on the operating
expenses of the Portfolios. However, TOLIC has voluntarily undertaken to limit
such expenses (including the advisory fee, 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 0.85% of the Growth Portfolio's, and 0.60%
of the Money Market Portfolio's, average daily net assets on an annualized
basis. This undertaking may be terminated at any time without notice.
Each Investment Advisory Agreement further provides that, in providing the
Portfolio with investment advice and other services in connection with the
Agreement, neither TOLIC nor any of its officers, directors, employees or agents
shall be held liable for errors of judgment or for anything except willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of the
Agreement.
Each Investment Advisory Agreement may be terminated without penalty upon
sixty (60) days' written notice by the Board or by vote of the Portfolio's
shareholders. No Investment Advisory Agreement may be terminated by TOLIC
without the prior approval of a new investment advisory agreement by the
Portfolio's shareholders. As stated above, each Investment Advisory Agreement
automatically terminates in the event of its assignment.
TOLIC has acted as the investment adviser to each Portfolio since its
commencement of operations, the date of which is set forth in the table in
Appendix 3. Also shown in Appendix 3 is the effective date of each Former
Investment Advisory Agreement, the date on which each Former Investment Advisory
Agreement was last approved by the shareholders of the relevant Portfolio and
the date on which each Former Investment Advisory Agreement was last approved by
the Board. In the case of each Portfolio, shareholder approval was
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last obtained for the purpose of obtaining initial shareholder approval of the
Investment Advisory Agreement as required by the 1940 Act.
THE NEW INVESTMENT ADVISORY AGREEMENTS
The New Investment Advisory Agreement for each Portfolio, if approved by
the shareholders of that Portfolio, would be dated the date of the consummation
of the Transaction, which is expected to occur in mid-June. Each New Investment
Advisory Agreement would be in effect from year to year provided such
continuance is specifically approved at least annually by the vote of a
"majority of the outstanding voting securities" of each Portfolio, or by the
Board and, in either event, by the vote of a majority of the Non-Interested
Directors, cast in person at a meeting called for such purpose. In the event
that shareholders of a Portfolio do not approve the Portfolio's New Investment
Advisory Agreement, the Board will take such action as it deems to be in the
best interests of the Portfolio and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT ADVISORY AGREEMENTS
The New Investment Advisory Agreements are identical to the Former
Investment Advisory Agreements, except for the dates of execution and the
termination dates.
TOLIC AND OTHER SERVICE PROVIDERS
TOLIC is a California corporation and is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. TOLIC has been in
existence since 1906. TOLIC is a direct wholly-owned subsidiary of Transamerica
Insurance Corporation of California ("Transamerica Insurance"). TOLIC's address
is 1150 South Olive Street, Los Angeles, California 90015. Appendix 4 includes
information regarding each director, nominee for director and officer of the
Corporation who is associated with TOLIC. TOLIC also acts as investment adviser
and TIS also acts as sub-adviser to Transamerica Occidental's Separate Account
Fund B, a management investment company registered under the 1940 Act which has
a similar investment objective to that of the Growth Portfolio. Relevant
information concerning Transamerica Occidental's Separate Account Fund B is set
forth below. TOLIC has not waived, reduced or otherwise agreed to reduce its
compensation for this fund.
<TABLE>
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ANNUAL ANNUAL SUB-
ADVISORY FEE ADVISORY FEE APPROXIMATE
RATE PAYABLE TO RATE PAYABLE TO NET ASSETS
TOLIC (AS A % OF TIS (AS A % OF AS OF
FUND AND YEAR ORGANIZED NET ASSETS) NET ASSETS) 4/30/99
- ----------------------- ---------------- --------------- ------------
<S> <C> <C> <C>
Transamerica Occidental's Separate Account Fund
B (1968)..................................... 0.30% 0.15% $111,421,955
</TABLE>
See Appendix 2 for information regarding the advisory fee rate, net asset
value and advisory fee paid for the Growth Portfolio.
7
<PAGE> 10
The following table shows the address and principal occupation of the
principal executive officer and each director of TOLIC:
<TABLE>
<CAPTION>
NAME ADDRESS PRINCIPAL OCCUPATION
- ---- ------- --------------------
<S> <C> <C>
Thomas J. Cusack..................... * Chairman, President and Chief
Executive Officer of TOLIC; Director
of TIS
Frank Beardsley...................... * Director of TOLIC; President of
Transamerica Asset Management
James W. Dederer..................... * Director, Executive Vice President,
General Counsel & Secretary of TOLIC
George A. Foegele.................... * Director & Senior Vice President of
TOLIC; President & Chief Executive
Officer of Transamerica Life
Insurance Company of Canada
David E. Gooding..................... * Director & Executive Vice President
of TOLIC; Chairman of Transamerica
Life Insurance Company of Canada
Edgar H. Grubb....................... * Director of TOLIC; Director of TIS;
Executive Vice President & Chief
Financial Officer of Transamerica
Frank C. Herringer................... * Director of TOLIC; Director of TIS;
Chairman, President & Chief Executive
Officer of Transamerica
Richard N. Latzer.................... * Director & Chief Investment Officer
of TOLIC; Director, President & Chief
Executive Officer of TIS
Karen O. MacDonald................... * Director, Senior Vice President,
Corporate Actuary & Acting Chief
Financial Officer of TOLIC
Gary U. Rolle........................ * Director & Chief Investment Officer
of TOLIC; Director, Executive Vice
President & Chief Investment Officer
of TIS
Paul E. Rutledge III................. * Director & President, Reinsurance
Division of TOLIC
T. Desmond Sugrue.................... * Director & Executive Vice President
of TOLIC
Nooruddin S. Veerjee................. * Director & President, Insurance
Products Division of TOLIC
Robert A. Watson..................... * Director of TOLIC; President & Chief
Executive Officer of Transamerica
Finance Corporation
</TABLE>
- ---------------
* c/o Transamerica Occidental Life Insurance Company, 1150 South Olive Street,
Los Angeles, CA 90015
Transamerica Insurance is a direct wholly-owned subsidiary of Transamerica.
Its address is 1150 South Olive Street, Los Angeles, CA 90015.
Transamerica is a financial services company with approximately $58.5
billion in assets. Its principal offices are located at 600 Montgomery Street,
24th Floor, San Francisco, California 94111. Transamerica's two major lines of
business are life insurance (including asset management) and finance. As a
result of the AEGON-Transamerica Transaction, Transamerica will become a direct
wholly-owned subsidiary of AEGON.
AEGON is headquartered in The Hague, The Netherlands, and is a publicly
traded holding corporation of one of the world's ten largest life insurance
groups ranked by market capitalization and assets. Over 80% of AEGON's existing
business is in life insurance, pensions and related savings and investment
products. AEGON's address is Mariahoeveplain 50, 2591 TV The Hague, The
Netherlands.
8
<PAGE> 11
Vereniging AEGON ("Association AEGON") controls a majority voting interest
in AEGON through its minority holding of common stock plus its holding of all
the issued and outstanding preferred stock of AEGON. Except for the interest
held by Association AEGON, the voting interest in AEGON is widely dispersed.
Association AEGON currently intends to increase gradually its ownership of AEGON
common stock to 40% by purchasing shares of common stock on the open market. At
the same time, Association AEGON intends to decrease its holding of preferred
stock. It is currently contemplated that, at all times, Association AEGON will
maintain the majority of voting rights of AEGON. Association AEGON is registered
in The Hague, The Netherlands and its address is Mariahoeveplain 50, 2591 TV The
Hague, The Netherlands.
Directors, officers and employees of TOLIC from time to time may enter into
transactions with various banks, including each Portfolio's custodian bank. It
is TOLIC's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other Portfolio
relationships.
State Street Bank and Trust Company ("State Street"), located at 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian to the
Portfolios pursuant to a Custodian Agreement with the Corporation. State Street
also acts as administrator and performs certain administrative services for the
Portfolios pursuant to an Administration Agreement with the Corporation.
Ernst & Young LLP, 725 South Figueroa Street, Los Angeles, California
90017, acts as the Corporation's independent certified public accountants.
REQUIRED VOTE
Approval of each Portfolio's New Investment Advisory Agreement will require
the affirmative vote of a "majority of the outstanding voting securities" of
that Portfolio (as defined in the 1940 Act), which means the affirmative vote of
the lesser of (i) more than 50% of the outstanding shares of that Portfolio and
(ii) 67% or more of the shares of that Portfolio present at the meeting if more
than 50% of the outstanding shares of that Portfolio are represented at the
meeting in person or by proxy.
THE BOARD MEMBERS RECOMMEND THAT THE
SHAREHOLDERS OF EACH PORTFOLIO VOTE IN FAVOR OF THIS PROPOSAL 1.
II. APPROVAL OF NEW
INVESTMENT SUB-ADVISORY AGREEMENT
(PROPOSAL 2)
TOLIC has contracted with Transamerica Investment Services, Inc., a direct
wholly-owned subsidiary of Transamerica, to render investment services to each
Portfolio as the sub-adviser. The investment sub-advisory agreement in effect
with respect to each Portfolio and TIS prior to the consummation of the AEGON-
Transamerica Transaction is referred to in this Proxy Statement as a "Former
Investment Sub-Advisory Agreement," and, collectively, the "Former Investment
Sub-Advisory Agreements." The investment sub-advisory agreement proposed to
become effective with respect to each Portfolio and TIS as of the consummation
of the Transaction is referred to in this Proxy Statement as a "New Investment
Sub-Advisory Agreement" (collectively, the "New Investment Sub-Advisory
Agreements," and, together with the Former Investment Sub-Advisory Agreements,
the "Investment Sub-Advisory Agreements"). A copy of the master form of New
Investment Sub-Advisory Agreement is attached as Exhibit B.
As discussed in Proposal 1 with respect to each Portfolio's Former
Investment Advisory Agreement, consummation of the Transaction may be deemed to
constitute an "assignment," as that term is defined in the 1940 Act, of each
Portfolio's Former Investment Sub-Advisory Agreement with TIS. Each of the
Former Investment Sub-Advisory Agreements provides for its automatic termination
in the event of its assignment, as required by the 1940 Act. Accordingly, a New
Investment Sub-Advisory Agreement with respect to each Portfolio and TIS was
approved by the Board and is now being proposed for approval by the shareholders
of each Portfolio. TIS has joined TOLIC in requesting the Exemptive Order
discussed in Proposal 1, and the same conditions would apply to TIS under the
New Investment Sub-Advisory Agreements if TIS relies on the
9
<PAGE> 12
Exemptive Order, including the escrow of sub-advisory fees, as would apply to
TOLIC under the New Investment Advisory Agreements. THE NEW INVESTMENT
SUB-ADVISORY AGREEMENT FOR EACH PORTFOLIO IS SUBSTANTIALLY IDENTICAL TO THE
CORRESPONDING FORMER INVESTMENT SUB-ADVISORY AGREEMENT, EXCEPT FOR THE DATE OF
EXECUTION AND THE TERMINATION DATE. The material terms of the Investment
Sub-Advisory Agreements are described under "Description of the Investment
Sub-Advisory Agreements" below.
The Board met on May 6, 1999, and the Board members, including the
Non-Interested Board members, voted to approve the New Investment Sub-Advisory
Agreements and to recommend approval to the shareholders of each applicable
Portfolio. In considering whether to approve such agreements, the Board received
similar representations with respect to AEGON and TIS, and considered similar
factors, to those it received and considered in approving the New Investment
Advisory Agreements, to the extent applicable. See "Proposal 1 -- Board's
Evaluation."
AS A RESULT OF ITS REVIEW AND CONSIDERATION OF THE TRANSACTION AND THE NEW
INVESTMENT SUB-ADVISORY AGREEMENTS, AT ITS MEETING THE BOARD VOTED TO APPROVE
THE NEW INVESTMENT SUB-ADVISORY AGREEMENTS AND TO RECOMMEND THEIR APPROVAL TO
THE SHAREHOLDERS OF EACH PORTFOLIO.
DESCRIPTION OF THE INVESTMENT SUB-ADVISORY AGREEMENTS
Except as disclosed below, the Former Investment Sub-Advisory Agreements
and New Investment Sub-Advisory Agreements are substantially identical.
Under the Investment Sub-Advisory Agreements, TIS provides recommendations
on the management of each Portfolio's assets, provides investment research
reports and information, supervises and manages the investments of each
Portfolio, and directs the purchase and sale of portfolio investments.
Investment decisions regarding the Portfolio are subject to the control of the
Board and must be consistent with each Portfolio's investment objective,
policies and limitations as stated from time to time in the Corporation's
Articles of Incorporation and By-Laws and in each Portfolio's prospectus and
statement of additional information filed with the SEC as part of the
Corporation's registration statement.
TIS selects brokers or dealers with whom transactions are executed and
negotiates commission rates, subject to the supervision of TOLIC and the Board.
Securities orders will be placed with brokers or dealers selected for their
ability to give the best execution at prices and commission rates (if any)
favorable to the Portfolios and, in some instances, for their ability to provide
statistical, investment research and other services. As part of the process of
brokerage allocation, TIS is authorized to pay commissions that may exceed what
another broker might have charged. TIS must determine in good faith that the
amount of a commission paid was reasonable in relation to the value of the
"brokerage and research services" provided by the executing broker or dealer
viewed in terms of the particular transaction or TIS's overall responsibilities
with respect to accounts for which its is exercising investment discretion.
TIS is responsible for its own expenses, including the salaries and fees of
its personnel performing services relating to research, statistical and
investment activities. TIS also pays the salaries and fees, if any, of the Board
members other than the Non-Interested Board members and officers.
In return for the services provided by TIS and the expenses it assumes
under each Investment Sub-Advisory Agreement, TOLIC pays TIS a fee paid
quarterly in arrears and calculated as a percentage of the average daily net
assets of each Portfolio during the quarter at the annual rate set forth in
Appendix 2. As of the end of each Portfolio's last fiscal year, TIS received the
aggregate sub-advisory fee during such period from TOLIC relating to each
Portfolio as also set forth in Appendix 2.
Each Investment Sub-Advisory Agreement further provides that, in providing
the Portfolio with investment advice and other services in connection with the
Agreement, neither TIS nor any of its officers, directors, employees or agents
shall be held liable for errors of judgment or for anything except willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of the
Agreement.
10
<PAGE> 13
Each Investment Sub-Advisory Agreement provides that it may be terminated
without penalty upon thirty (30) days' written notice by the Board or by vote of
the Portfolio's shareholders. Each Investment Sub-Advisory Agreement also
provides that it may not be terminated by TOLIC without the prior approval of a
new investment sub-advisory agreement by the Portfolio's shareholders. Each
Investment Sub-Advisory Agreement further provides that it will terminate upon
two (2) days' written notice to TIS of the termination of the corresponding
Investment Advisory Agreement. As stated above, each Investment Sub-Advisory
Agreement provides that it will automatically terminate in the event of its
assignment.
TIS has acted as the investment sub-adviser to each Portfolio since its
commencement of operations, the date of which is set forth in the table in
Appendix 3. Also shown in Appendix 3 is the effective date of each Former
Investment Sub-Advisory Agreement, the date on which each Former Investment
Sub-Advisory Agreement was last approved by the shareholders of the relevant
Portfolio and the date on which each Former Investment Sub-Advisory Agreement
was last approved by the Board. In the case of each Portfolio, shareholder
approval was last obtained for the purpose of obtaining initial shareholder
approval of the Investment Sub-Advisory Agreement as required by the 1940 Act.
THE NEW INVESTMENT SUB-ADVISORY AGREEMENTS
The New Investment Sub-Advisory Agreement for each Portfolio, if approved
by the shareholders of that Portfolio, would be dated the date of the
consummation of the Transaction, which is expected to occur in mid-June. Each
New Investment Sub-Advisory Agreement would be in effect from year to year
provided such continuance is specifically approved at least annually by the vote
of a "majority of the outstanding voting securities" of each Portfolio, or by
the Board and, in either event, the vote of a majority of the Non-Interested
Directors, cast in person at a meeting called for such purpose. In the event
that shareholders of a Portfolio do not approve the Portfolio's New Investment
Sub-Advisory Agreement, the Board will take such action as it deems to be in the
best interests of the Portfolio and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT SUB-ADVISORY AGREEMENTS
The New Investment Sub-Advisory Agreements are identical to the Former
Investment Sub-Advisory Agreements, except for the dates of execution and the
termination dates.
TIS
TIS is a Delaware corporation and is an investment adviser registered under
the Investment Advisers Act of 1940, as amended. TIS has been in existence since
1967 and has provided investment services to investment companies since 1968.
TIS is a direct wholly-owned subsidiary of Transamerica. TIS's address is 1150
South Olive Street, Los Angeles, California 90015. Appendix 4 includes
information regarding each director, nominee for director and officer of the
Corporation who is associated with TIS. TIS also provides sub-advisory services
to Transamerica Occidental's Separate Account Fund B, which has a similar
investment objective to that of the Growth Portfolio. See "Proposal 1 -- TOLIC
and Other Service Providers" regarding the sub-advisory fee relating to, and the
net assets of, Transamerica Occidental's Separate Account Fund B. TIS has not
waived, reduced or otherwise agreed to reduce its compensation for this fund.
See Appendix 2 for information regarding the sub-advisory fee rate, net asset
value and sub-advisory fee paid for the Growth Portfolio.
11
<PAGE> 14
The following table shows the address and principal occupation of the
principal executive officer and each director of TIS:
<TABLE>
<CAPTION>
NAME ADDRESS PRINCIPAL OCCUPATION
- ---- ------- --------------------
<S> <C> <C>
Richard N. Latzer....................... * Director, President & Chief Executive
Officer of TIS; Director & Chief
Investment Officer of TOLIC
Gary U. Rolle........................... * Director, Executive Vice President &
Chief Investment Officer of TIS;
Director & Chief Investment Officer of
TOLIC
Thomas J. Cusack........................ * Director of TIS; Chairman, President &
Chief Executive Officer of TOLIC
Edgar H. Grubb.......................... * Director of TIS; Director of TOLIC;
Executive Vice President & Chief
Financial Officer of Transamerica
Frank C. Herringer...................... * Director of TIS; Director of TOLIC;
Chairman, President & Chief Executive
Officer of Transamerica
</TABLE>
- ---------------
* c/o Transamerica Investment Services, Inc., 1150 South Olive Street, Los
Angeles, CA 90015
Directors, officers and employees of TIS from time to time may enter into
transactions with various banks, including each Portfolio's custodian bank. It
is TIS's opinion that the terms and conditions of those transactions will not be
influenced by existing or potential custodial or other Portfolio relationships.
REQUIRED VOTE
Approval of each Portfolio's New Investment Sub-Advisory Agreement will
require the affirmative vote of a "majority of the outstanding voting
securities" of that Portfolio (as defined in the 1940 Act), which means the
affirmative vote of the lesser of (i) more than 50% of the outstanding shares of
that Portfolio and (ii) 67% or more of the shares of that Portfolio present at
the meeting if more than 50% of the outstanding shares of that Portfolio are
represented at the meeting in person or by proxy.
THE BOARD MEMBERS RECOMMEND THAT THE
SHAREHOLDERS OF EACH PORTFOLIO VOTE IN FAVOR OF THIS PROPOSAL 2.
III. ELECTION OF DIRECTORS
(PROPOSAL 3)
It is proposed that the three persons currently serving as directors of the
Corporation (the "Directors") be re-elected and that a fourth person be newly
elected to the Board. The nominees for Director (the "Nominees") who are
proposed for election at the Special Meeting are Gary U. Rolle, Peter J. Sodini
and Jon C. Strauss, each of whom is currently a Director, and Dr. James H.
Garrity.
The term of office of each person elected as a Director will be until the
next meeting held for the purpose of electing Directors and until his successor
is elected and qualified (or until such Director's earlier retirement,
resignation, death or disqualification). The Nominees have agreed to serve as
Directors if elected. If any of the Nominees should be unavailable for election
at the time of the Special Meeting (which is not presently anticipated), the
persons named as proxies may vote for another person in their discretion.
The principal occupations and business experience for at least the last
five years of each Nominee and each executive officer of the Corporation are as
indicated in the table below.
12
<PAGE> 15
NOMINEES AND EXECUTIVE OFFICERS INFORMATION
<TABLE>
<CAPTION>
CURRENT
POSITION WITH PRINCIPAL OCCUPATION
NAME, ADDRESS** AND AGE THE CORPORATION DURING THE PAST FIVE YEARS
- ----------------------- --------------- --------------------------
<S> <C> <C>
Gary U. Rolle (58)*............... President, Chairman, Executive Vice President and Chief
Director Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company;
Director of Transamerica Investors, Inc.
Peter J. Sodini (58).............. Director Associate at Freeman Spogli & Co. (a
private investor); President, Chief
Executive Officer and Director of The
Pantry, Inc. (a supermarket); Director of
Pamida Holdings Corp. (a retail
merchandiser) and Buttrey Food and Drug
Co. (a supermarket).
Jon C. Strauss (59)............... Director 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.
Dr. James H. Garrity (60)......... None President of John Tracy Clinic and the
Tracy Family Hearing Center.
Sandra C. Brown (43).............. Vice President Vice President of Transamerica Occidental
Life Insurance Company and Transamerica
Life Insurance and Annuity Company since
1998. Previously Vice President, Mutual
Fund Administration at Bank of America.
Susan R. Hughes (43).............. Treasurer Vice President and Chief Financial
Officer of Transamerica Investment
Services, Inc. since 1997; Independent
Financial Consultant 1992-1997.
Regina M. Fink (43)............... Secretary Counsel for Transamerica Occidental Life
Insurance Company and, prior to 1994,
Counsel and Vice President for Colonial
Management Associates, Inc.
Sally S. Yamada (48).............. Assistant Treasurer Vice President and Treasurer of
Transamerica Occidental Life Insurance
Company and Treasurer of Transamerica
Life Insurance and Annuity Company.
Thomas M. Adams (64).............. Assistant Secretary Partner in the law firm of Lanning, Adams
& Peterson
</TABLE>
- ---------------
* Nominee who is an "interested person" (as defined in the 1940 Act) of the
Corporation, TOLIC or TIS. Mr. Rolle is an "interested person" by reason of
his positions with TIS and TOLIC.
** The mailing address for each Nominee and executive officer is 1150 South
Olive Street, Los Angeles, California 90015.
13
<PAGE> 16
The principal occupations of the Nominees and executive officers for at
least the last five years have been with the employers as shown in the table
above, although in some cases they have held different positions with such
employers.
As noted above, except for certain shares owned by TALIAC, the Corporation
sells shares only in connection with Contracts issued by the Variable Insurers.
To the best of the Corporation's knowledge, as of May 10, 1999, no Director,
Nominee or executive officer of the Corporation owned any Contracts entitling
such person to give voting instructions with respect to any shares of the
Corporation.
The Board of Directors met 4 times during the fiscal year ended December
31, 1998. Each Director attended at least 75% of such meetings. The Corporation
has a standing audit committee, which during the fiscal year ended December 31,
1998 was composed of Messrs. Sodini, Strauss and Cantlay (a former Director),
which is responsible for the selection of the Corporation's auditors and for the
monitoring of the audit process and its results. Messrs. Sodini and Strauss each
attended the one audit committee meeting held during the fiscal year ended
December 31, 1998.
The Corporation pays the Directors, other than those who are interested
persons of TOLIC or TIS, an annual fee of $500 plus $250 for each meeting
attended. The Corporation does not pay any pension or retirement benefits for
its Directors.
The following table sets forth the amount of compensation paid to the
Directors (or deferred in lieu of current payment) by the Corporation during its
fiscal year ended December 31, 1998:
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME OF PERSON FROM CORPORATION FROM COMPLEX*
- -------------- ---------------------- ------------------
<S> <C> <C>
Donald E. Cantlay**.................................... $1,250 $7,000
Richard N. Latzer**.................................... -0- -0-
Jon C. Strauss......................................... $1,500 $8,750
Gary U. Rolle.......................................... -0- -0-
Peter J. Sodini........................................ $1,500 $8,750
</TABLE>
- ---------------
* During fiscal year 1998, 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 also a director of Transamerica
Investors, Inc. These registered investment companies comprise the "Fund
Complex."
** Messrs. Cantlay and Latzer are no longer Directors.
REQUIRED VOTE
The election of directors of the Corporation will be by a plurality of the
shares of the Corporation (all Portfolios voting together as a single class)
present at the Special Meeting in person or by proxy. Shares represented by
duly-executed proxies will be voted for the election of the persons named herein
as Nominees, unless such authority has been withheld in accordance with an
instruction given by a shareholder to abstain from voting for one or more
Nominees on the form of proxy. If no instructions are given, the proxy will be
voted for such Nominees.
THE BOARD MEMBERS RECOMMEND A VOTE FOR THE ELECTION OF THE NOMINEES.
IV. RATIFICATION OF ACCOUNTANTS
(PROPOSAL 4)
The Board of Directors has selected Ernst & Young LLP as the auditors for
the Corporation for the fiscal year ending December 31, 1999, subject to removal
by a majority of the outstanding voting securities of the Corporation. Upon the
reasonable request of any shareholder of the Corporation, representatives of
Ernst &
14
<PAGE> 17
Young LLP will attend the meeting, and will, as they see fit, make a statement
and/or respond to appropriate questions.
REQUIRED VOTE
The ratification of the selection of Ernst & Young LLP as the independent
public accountants for the Corporation will require a majority of votes cast
(all Portfolios voting together as a single class) at the Special Meeting in
person or by proxy, if a quorum is present.
THE BOARD MEMBERS RECOMMEND THAT SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CORPORATION.
ADDITIONAL INFORMATION
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a Proxy Statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Corporation, c/o Transamerica
Occidental Life Insurance Company at the address shown at the beginning of this
Proxy Statement, within a reasonable time before the solicitation of proxies for
such meeting. The timely submission of a proposal does not guarantee its
inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
No Board member is aware of any matters that will be presented for action
at the Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
each Portfolio.
ADJOURNMENT
In the event that sufficient votes in favor of any of the proposals set
forth in the Notice of a Special Meeting of Shareholders are not received by the
time scheduled for the Special Meeting, the persons named as proxies may propose
one or more adjournments of the Special Meeting after the date set for the
original Special Meeting to permit further solicitation of proxies with respect
to any such proposals. In addition, if, in the judgment of the persons named as
proxies, it is advisable to defer the action on one or more proposals, the
persons named as proxies may propose one or more adjournments of the Special
Meeting. Any such adjournment will require the affirmative vote of a majority of
the votes cast on the question in person or by proxy at the session of the
Special Meeting as permitted by the Corporation's By-Laws. The persons named as
proxies will vote in favor of any such adjournment those proxies which they are
entitled to vote in favor of any such proposals. They will vote against any such
adjournment those proxies required to be voted against any such proposals. The
costs of any additional solicitation and of any adjourned session will be borne
by Transamerica or its affiliates. Any proposals for which sufficient favorable
votes have been received by the time of the Special Meeting will be acted upon
and such action will be final regardless of whether the Special Meeting is
adjourned to permit additional solicitation with respect to any other proposal.
15
<PAGE> 18
APPENDIX 1
PORTFOLIO SHARES OUTSTANDING
The table below sets forth the number of shares outstanding for each Portfolio
as of May 10, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING AS OF
PORTFOLIO MAY 10, 1999
- --------- -----------------
<S> <C>
Growth Portfolio........................................ 7,049,005
Money Market Portfolio.................................. 8,925,602
</TABLE>
16
<PAGE> 19
APPENDIX 2
PORTFOLIO ADVISORY AND SUB-ADVISORY FEE RATES, NET ASSETS
AND AGGREGATE ADVISORY AND SUB-ADVISORY FEES
<TABLE>
<CAPTION>
ANNUAL
ADVISORY
FEE RATE AGGREGATE
(AS A % OF ADVISORY
FISCAL AVERAGE NET FEES
PORTFOLIO YEAR END NET ASSETS ASSETS) (BEFORE WAIVER)
- --------- -------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Growth Portfolio................................... 12/31/98 $107,892,179 0.75% $519,142*
Money Market Portfolio............................. 12/31/98 $ 6,803,054 0.35% $ 11,662**
</TABLE>
- ---------------
* For the fiscal year ended 12/31/98, TOLIC waived a portion of the advisory
fee payable by the Growth Portfolio such that the resulting advisory fee
amounted to 0.64% of average net assets and aggregate advisory fees paid by
the Growth Portfolio for the fiscal year ended 12/31/98 amounted to $440,099
after the waiver.
** For the fiscal year ended 12/31/98, TOLIC waived the entire advisory fee
payable by the Money Market Portfolio.
<TABLE>
<CAPTION>
ANNUAL AGGREGATE
SUB-ADVISORY FEE RATE SUB-ADVISORY
PORTFOLIO (AS A % OF AVERAGE NET ASSETS) FEES
- --------- ------------------------------ ------------
<S> <C> <C>
Growth Portfolio........................ 0.30% of first $50 million $197,784
0.25% of next $150 million
0.20% over $200 million
Money Market Portfolio.................. 0.15% $ 5,019
</TABLE>
17
<PAGE> 20
APPENDIX 3
DATES RELATING TO THE PORTFOLIOS' INVESTMENT ADVISORY
AND SUB-ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
FORMER FORMER
DATE OF INVESTMENT INVESTMENT
FORMER ADVISORY ADVISORY
INVESTMENT AGREEMENT LAST AGREEMENT LAST
COMMENCEMENT ADVISORY APPROVED BY APPROVED BY
PORTFOLIO OF OPERATIONS AGREEMENT SHAREHOLDERS DIRECTORS
- --------- ------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Growth Portfolio....................... 11/1/96 10/30/96 10/30/96 2/4/99
Money Market Portfolio................. 1/2/98 1/2/98 1/2/98 2/4/99
</TABLE>
<TABLE>
<CAPTION>
FORMER FORMER
DATE OF INVESTMENT INVESTMENT
FORMER SUB-ADVISORY SUB-ADVISORY
INVESTMENT AGREEMENT LAST AGREEMENT LAST
SUB-ADVISORY APPROVED BY APPROVED BY
PORTFOLIO AGREEMENT SHAREHOLDERS DIRECTORS
- --------- ------------ -------------- --------------
<S> <C> <C> <C>
Growth Portfolio................................... 10/30/96 10/30/96 2/4/99
Money Market Portfolio............................. 1/2/98 1/2/98 2/4/99
</TABLE>
18
<PAGE> 21
APPENDIX 4
DIRECTORS, NOMINEES FOR DIRECTOR AND OFFICERS
ASSOCIATED WITH TOLIC AND TIS
DIRECTORS, NOMINEES FOR DIRECTOR AND OFFICERS ASSOCIATED WITH TOLIC
<TABLE>
<CAPTION>
NAME POSITION WITH THE CORPORATION
- ---- -----------------------------
<S> <C>
Gary U. Rolle............................................... President, Chairman, Director
Sandra C. Brown............................................. Vice President
Regina M. Fink.............................................. Secretary
Sally S. Yamada............................................. Assistant Treasurer
</TABLE>
DIRECTORS, NOMINEES FOR DIRECTOR AND OFFICERS ASSOCIATED WITH TIS
<TABLE>
<CAPTION>
NAME POSITION WITH THE CORPORATION
- ---- -----------------------------
<S> <C>
Gary U. Rolle............................................... President, Chairman, Director
Susan R. Hughes............................................. Treasurer
</TABLE>
19
<PAGE> 22
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
BETWEEN
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
AND
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<PAGE> 23
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT is made this day of
, 1999, between Transamerica Occidental Life Insurance Company, a
California corporation ("Adviser"), and Transamerica Variable Insurance Fund,
Inc., a Maryland corporation (the "Fund"), that is authorized to issue shares of
several investment portfolios ("Portfolios"), each Portfolio consisting of a
separate series of shares of beneficial interest in the Fund.
WHEREAS, Adviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund has been organized for the purpose of engaging in
business as an open-end investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act") and desires to avail itself of the
investment experience, assistance and facilities available from Adviser and to
have Adviser perform for its various management and clerical services, and
Adviser is willing to furnish such advice, facilities and services on the terms
and conditions hereinafter set forth, and, in connection with this Investment
Advisory Agreement, to enter into a sub-advisory agreement with a sub-adviser
approved by the Fund;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. The Fund hereby employs Adviser to manage the investment and
reinvestment of the assets of the Portfolios of the Fund specified in
Exhibit A in accordance with the limitations specified in the Fund's
Articles of Incorporation and By-Laws, as amended from time to time,
("Articles") and in each Portfolio's prospectus ("Prospectus") and the
statement of additional information ("SAI") filed with the Securities and
Exchange Commission ("SEC") as part of the Fund's Registration Statement,
as amended from time to time, and to perform the other services herein set
forth, subject to the supervision of the Board of Directors of the Fund,
for the period and on the terms herein set forth. Adviser hereby accepts
such employment and agrees during such period, at its own expense, to
render the services and to assume the obligations herein set forth for the
compensation herein provided.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets of the Portfolios of the Fund, Adviser shall:
(a) obtain and evaluate pertinent economic, statistical and
financial data and other information relevant to the investment policies
of the Portfolios of the Fund, affecting the economy generally, and
individual companies or industries the securities of which are included
in each Portfolio's investment portfolio or are under consideration for
inclusion therein and make such data and information reasonably
available to the Board of Directors of the Fund at its request;
(b) develop and implement an investment program for each Portfolio
of the Fund consistent with each Portfolio's investment objective,
policies and limitations as stated in the Prospectus, SAI and Articles
of the Fund, which shall be subject to the overall review from time to
time of the Board of Directors of the Fund;
(c) provide necessary personnel to assist the Board of Directors of
the Fund in managing the affairs of the Fund;
(d) authorize and permit any of its directors, officers and
employees, who may be elected as directors or officers of the Fund, to
serve in the capacities in which they are elected;
(e) provide for all expenses and fees incurred by the sub-adviser
as approved by the Board of Directors of the Fund.
3. Any investment program undertaken by Adviser pursuant to this
Agreement and any other activities undertaken by Adviser on behalf of the
Fund shall at all times be subject to any directives of the
A-1
<PAGE> 24
Board of Directors of the Fund or any duly constituted committee thereof
acting pursuant to like authority.
4. Adviser understands that shares of the Portfolios will be sold to
one or more separate accounts or sub-accounts of separate accounts of
insurance companies as the funding medium for variable annuity contracts
and variable life insurance policies ("variable products"); and that the
variable products will not be treated as variable products for tax purposes
if each Portfolio does not:
(a) meet the diversification requirements specified in Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations issued thereunder; and
(b) qualify as a "regulated investment company" under Subchapter M
of the Code and any successor provision.
5. Adviser represents that it shall use its best efforts to manage
and invest the Portfolios' assets in such a manner, and to coordinate with
the Portfolios' accounting agent and/or administrator, to ensure that;
(a) each Portfolio complies with Section 817(h) of the Code, and
the regulations issued thereunder, specifically Regulation Section
1.817-5, relating to the diversification requirements for variable
annuity and variable life insurance contracts, and any amendments or
other modifications to such Section or regulation;
(b) each Portfolio continuously qualifies as a "regulated
investment company" under Subchapter M of the Code and any successor
provision; and
(c) each Portfolio complies with any and all applicable state
insurance law restrictions, as amended from time to time, that operate
to limit or restrict the investments that a Portfolio may otherwise
make.
6. For the services rendered hereunder, Adviser shall receive from
each Portfolio of the Fund an amount for each valuation period of each
Portfolio of the Fund, at the annual rate specified on Exhibit A hereto,
such amount to be paid to Adviser as specified on Exhibit A. For the
purpose of determining fees payable to Adviser, the value of each
Portfolio's net assets shall be computed at the time and in the manner
specified in the Prospectus and/or SAI. No Portfolio of the Fund shall be
liable for the obligations of any other Portfolio of the Fund. Adviser
shall look only to the assets of a particular Portfolio for payment of fees
and services rendered to that Portfolio. Adviser may, in its discretion and
from time to time, waive all or a portion of its fees.
7. With respect to the portfolio securities of each Portfolio of the
Fund, Adviser shall purchase such securities from or through and sell such
securities to or through such persons, brokers or dealers, as it may deem
appropriate. Such persons, brokers or dealers may include those affiliated
with Adviser. Securities orders will be placed with brokers or dealers
selected for their ability to give the best execution at prices and
commissions rates (if any) favorable to the Fund and, in some instances,
for their ability to provide statistical, investment research and other
services. As part of the process of brokerage allocation, Adviser is
authorized to pay commissions which may exceed what another broker might
have charged. To the extent that preference is given in the allocation of
the Fund's portfolio business to those brokers and dealers which provide
statistical, investment research, pricing quotations, or other services,
the Fund will bear any cost of obtaining such services, and Adviser and
other clients advised by Adviser may benefit from those services. Under the
provisions of Section 28(e) of the Securities Exchange Act of 1934, Adviser
must determine in good faith that the amount of a commission paid was
reasonable in relation to the value of the "brokerage and research
services" provided by the executing broker or dealer viewed in terms of the
particular transaction or Adviser's overall responsibilities with respect
to accounts as to which it is exercising investment discretion.
8. The services of Adviser to the Fund hereunder are not to be deemed
exclusive and Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired or interfered with thereby.
A-2
<PAGE> 25
9. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of Adviser who may also be a director,
officer or employee of the Fund to engage in any other business or to
devote his time and attention in part to the management or other aspects of
any other business or to render services of any kind to any other
corporation, firm, individual or association.
10. Adviser agrees that it will maintain, or shall cause any
sub-adviser or other designee to maintain, all required records, memoranda,
instructions or authorizations relating to the activities hereunder which
are required to be maintained by the Fund pursuant to the 1940 Act and the
rules and regulations thereunder. In compliance with Rule 31a-3 of the 1940
Act, Adviser agrees to preserve for the periods described in Rule 31a-2
under the 1940 Act any records that it maintains for the Fund and that are
required to be maintained by Rule 31a-1 under the 1940 Act. All records
maintained by Adviser with respect to these functions shall be open at all
times to inspection and audit by authorized representatives of the Fund,
and any or all such records shall be delivered to the Fund upon demand. Any
records maintained by Adviser with respect to such investment functions are
the property of the Fund.
11. This Agreement shall be submitted for approval by the
shareholders of the Portfolios and if then approved by a majority of the
Portfolio's outstanding voting securities, this Agreement:
(a) shall continue in effect with respect to each Portfolio only so
long as its continuance is specifically approved for each Portfolio
annually by the Board of Directors of Fund (including a majority of the
independent directors) as required by the 1940 Act or by shareholders of
each Portfolio casting a majority of the votes entitled to be cast by
shareholders;
(b) may not be terminated by Adviser with respect to each Portfolio
without the prior approval of a new investment advisory agreement by the
Portfolio's shareholders casting a majority of the votes entitled to be
cast and shall be subject to termination without the payment of any
penalty, on sixty days' written notice, by the Board of Directors of the
Fund or by vote of the Portfolio's shareholders casting a majority of
the votes entitled to be cast;
(c) shall not be amended without prior approval by the Portfolio's
shareholders casting a majority of the votes entitled to be cast; and
(d) shall automatically terminate in the event of its assignment by
either party.
12. The Fund shall pay:
(a) brokers' commissions in connection with portfolio asset
transactions to which the Fund is a party;
(b) all taxes, including issuance and transfer taxes, which may
become payable to federal, state or other governmental entities, with
respect to the operation of the Portfolios of the Fund;
(c) all legal and auditing fees;
(d) all extraordinary expenses which may be incurred by or on
behalf of the Fund in connection with matters not in the ordinary course
of business;
(e) provide for expenses (including all fees) incurred in
connection with the registration and qualification of the Portfolios of
the Fund under the 1940 Act, the Securities Act of 1933 and state laws;
(f) provide for the charges and expenses of any custodian or
depository appointed for the safekeeping of the cash, securities or
other property of the Portfolios of the Fund; and
(g) bear the expenses of calling and holding of meetings of
shareholders, the fees and expenses of members of the Board of Directors
of the Fund, and all ordinary expenses incurred in the ordinary course
of business.
13. (a) In providing the Portfolios of the Fund with investment
advice and other services as herein provided, neither Adviser, nor any
officer, director, employee or agent thereof, shall be held liable to the
A-3
<PAGE> 26
Fund or Portfolios, or any shareholder, director, or officer thereof, or
stockholders, for errors of judgment or for anything except willful
misfeasance, bad faith, or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under the terms
of this agreement.
(b) The federal securities laws impose liabilities under certain
circumstances on persons who act in good faith, and therefore nothing
herein shall in any way constitute a waiver or limitation of any rights
which the Fund may have under any federal securities laws.
14. Adviser hereby agrees that while this agreement is in effect, it
will not amend its articles of incorporation or by-laws in a manner which
would impair the ability to provide business management services and
investment advice to the Portfolios of the Fund.
15. Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid to:
Adviser: Secretary
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015
Fund: Secretary
Transamerica Variable Insurance Fund, Inc.
1150 South Olive Street
Los Angeles, California 90015
16. This agreement shall be construed in accordance with the laws of
the State of California, and is subject to the provisions of the Advisers
Act, the 1940 Act and the rules and regulations of the Securities and
Exchange Commission.
17. Waiver by either party of any obligations of the other party does
not constitute a waiver of any further or other obligation of the other
party.
18. The singular of any word used in this agreement includes the
plural. Unless otherwise indicated herein, terms and phrases used in this
Agreement shall have the meaning ascribed to them in the 1940 Act, the
Advisers Act and the rules and regulations promulgated thereunder.
19. All rights, powers and privileges conferred hereunder upon the
parties shall be cumulative and shall not restrict those given by law.
20. This agreement contains the entire agreement of the parties
hereto and no prior representation, inducements, promises or agreements,
oral or otherwise, between the parties not embodied herein shall be of any
force or effect.
21. This agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original and such
counterparts together shall constitute but one and the same contract, which
shall be sufficiently evidenced by any such original counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective, duly authorized officials.
<TABLE>
<S> <C>
TRANSAMERICA VARIABLE TRANSAMERICA OCCIDENTAL LIFE
INSURANCE FUND, INC. INSURANCE COMPANY
By: By:
------------------------------------------------- -------------------------------------------------
Name: Name:
- ---------------------------------------------- ----------------------------------------------
Title: Title:
- ----------------------------------------------- -----------------------------------------------
</TABLE>
A-4
<PAGE> 27
EXHIBIT A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (THE "ADVISER")
AND
TRANSAMERICA VARIABLE INSURANCE FUND, INC. (THE "FUND")
Pursuant to Section 6 of this Agreement, the Fund shall pay Adviser monthly
compensation at an effective annual rate as follows:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
- ----------------- ---------------------------
<S> <C>
Growth Portfolio............................. 0.75 of 1% of the value of the Portfolio's
average daily net assets
Money Market................................. 0.35 of 1% of the value of the Portfolio's
average daily net assets
</TABLE>
<PAGE> 28
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND
TRANSAMERICA INVESTMENT SERVICES, INC.
<PAGE> 29
INVESTMENT SUB-ADVISORY AGREEMENT
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, a California corporation
("Adviser"), and TRANSAMERICA INVESTMENT SERVICES, INC., a Delaware corporation
("Sub-Adviser"), agree as follows:
WHEREAS, Sub-Adviser is engaged in business as an investment adviser and is
so registered as an adviser under the federal Investment Advisers Act of 1940
(the "Advisers Act"), and Adviser desires to avail itself of the investment
experience of Sub-Adviser and to have Sub-Adviser furnish certain investment
advisory services to the Growth Portfolio and the Money Market Portfolio (each a
"Portfolio") of the Transamerica Variable Insurance Fund, Inc. ("Fund") and such
other portfolios of the Fund as the Fund may establish in the future (each also
a "Portfolio"), in connection with the Advisory Agreement, a copy of which is
attached hereto as Exhibit A, and Sub-Adviser is willing to furnish such advice
and services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the above-referenced facts and their
mutual promises, the parties agree as follows:
1. INVESTMENT ADVICE AND OTHER SERVICES
(a) Sub-Adviser shall, to the extent required in the conduct of the
investment activities of the Portfolios, place at the disposal of the
Portfolios, its judgment and experience and develop and implement an investment
program for each Portfolio consistent with each Portfolio's investment
objective, policies and limitations as stated in the Fund's Articles of
Incorporation and By-Laws, as amended from time to time (the "Articles") and in
the Fund's prospectus (the "Prospectus") and statement of additional information
("SAI") filed with the Securities and Exchange Commission ("SEC") as part of the
Fund's Registration Statement on Form N-1A, as amended from time to time,
subject to the supervision of the Board of Directors of the Fund, for the period
and on terms herein set forth. Sub-Adviser shall also, from time to time,
furnish to and place at the disposal of Adviser and the Fund such reports and
information relating to industries, businesses, corporations, or securities as
may be reasonably required by Adviser or the Fund or as Sub-Adviser may deem to
be helpful to Adviser or the Fund in the administration of the Portfolios'
assets.
(b) Sub-Adviser agrees to use its best efforts in providing such advice and
recommendations and in the preparation of such reports and information, and for
this purpose Sub-Adviser shall at all times maintain a staff of officers and
other trained personnel for the performance of its obligations under this
agreement. Sub-Adviser may, at its expense, employ other persons to furnish to
Sub-Adviser statistical and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance.
(c) Adviser will, on an ongoing basis, notify Sub-Adviser of every change
in the fundamental and non-fundamental investment policies of the Portfolios and
will make available to Sub-Adviser as promptly as practicable copies of all
amendments and supplements to the Prospectus, SAI, and the Articles and such
other financial reports and proxy statements of the Portfolios as Sub-Adviser
shall require.
(d) Sub-Adviser shall take, on behalf of the Portfolios, all actions which
it deems necessary to implement each Portfolio's investment objective, policies
and limitations as stated in the Fund's Prospectus, SAI and the Articles and in
compliance with the 1940 Act, subject to the supervision of Adviser and the
Board of Directors of the Fund. To that end Sub-Adviser is authorized as the
agent and the attorney-in-fact of Adviser and the Fund to give instructions as
to deliveries of securities and to execute account documentation, agreements,
contracts and other documents as Sub-Adviser may be required to sign by brokers,
dealers, counterparties, and other persons in connection with the management of
the assets of the Portfolios. Selection of the brokers or dealers with whom
transactions are executed and negotiation of commission rates will be made by
Sub-Adviser, subject to the supervision of Adviser and the Board of Directors of
the Fund.
(e) Securities orders will be placed with brokers or dealers selected for
their ability to give the best execution at prices and commissions rates (if
any) favorable to the Fund and, in some instances, for their ability to provide
statistical, investment research and other services. As part of the process of
brokerage
B-1
<PAGE> 30
allocation, Sub-Adviser is authorized to pay commissions which may exceed what
another broker might have charged. To the extent that preference is given in the
allocation of the Fund's portfolio business to those brokers and dealers which
provide statistical, investment research, pricing quotations, or other services,
the Fund will bear any cost of obtaining such services, and Sub-Adviser and
other clients advised by Sub-Adviser may benefit from those services. Under the
provisions of Section 28(e) of the Securities Exchange Act of 1934, Sub-Adviser
must determine in good faith that the amount of a commission paid was reasonable
in relation to the value of the "brokerage and research services" provided by
the executing broker or dealer viewed in terms of the particular transaction or
Sub-Adviser's overall responsibilities with respect to accounts as to which it
is exercising investment discretion. All such actions are subject to the
limitations as set out in Section 6.
2. ALLOCATION OF CHARGES AND EXPENSES
Sub-Adviser shall furnish at its own expense executive, supervisory and
other personnel and services, office space, equipment, utilities and telephone
services in connection with supplying the investment advisory, statistical and
research services contemplated by this agreement.
3. COMPENSATION TO SUB-ADVISER
Adviser agrees to pay to Sub-Adviser and Sub-Adviser agrees to accept, as
full compensation for all services rendered hereunder, a fee paid quarterly in
arrears and to be calculated as a percentage of the average daily net assets of
each Portfolio during the previous quarter at the annual rate specified in
Exhibit B hereto. For the purpose of determining fees payable to Sub-Adviser,
the value of each Portfolio's net assets shall be computed at the time and in
the manner specified in the Prospectus and/or SAI. No Portfolio shall be liable
for the obligations of any other Portfolio. Sub-Adviser shall look only to the
assets of a particular Portfolio for payment of fees and services rendered to
that Portfolio. Sub-Adviser may, in its discretion and from time to time, waive
all or a portion of its fees.
4. DURATION AND TERMINATION
This Agreement shall be submitted for approval by the shareholders of the
Portfolios and if then approved by a majority of the Portfolio's outstanding
voting securities, this Agreement:
(a) shall continue in effect with respect to each Portfolio only so
long as its continuance is specifically approved for each Portfolio
annually by the Board of Directors of the Fund as required by the 1940 Act
or by shareholders of each Portfolio casting a majority of the votes
entitled to be cast by shareholders;
(b) may not be terminated by Adviser with respect to each Portfolio
without the prior approval of a new investment sub-advisory agreement by
the Portfolio's shareholders casting a majority of the votes entitled to be
cast and shall be subject to termination without the payment of any
penalty, on thirty (30) days' written notice, by the Board of Directors of
the Fund or by vote of the Portfolio's shareholders casting a majority of
the votes entitled to be cast, and will terminate upon two (2) days written
notice to Sub-Adviser of termination of the Advisory Agreement between
Adviser and the Fund;
(c) shall not be amended without prior approval by the Portfolio's
shareholders casting a majority of the votes entitled to be cast; and
(d) shall automatically terminate in the event of its assignment by
either party.
Notice of termination will be effective the day after the notice is
deposited, postage prepaid, registered or certified mail, return receipt
requested, in the mail addressed to the other party's address as set forth in
Section 14 or such other more recent address, or if the mail is not used, the
day it is delivered to the other party's last known address or to an officer of
Adviser or of Sub-Adviser, as the case may be.
B-2
<PAGE> 31
5. COMPLIANCE WITH THE FUND'S POLICIES
Sub-Adviser covenants and agrees that the investment planning, investment
advice and services that it furnishes Adviser will be in accordance with the
investment objective, policies, and limitations of each Portfolio as set forth
in the Fund's Prospectus, SAI and Articles and shall be in compliance with the
1940 Act.
6. TAX AND OTHER COMPLIANCE
(a) Sub-Adviser understands that shares of the Portfolios will be sold to
one or more separate accounts or sub-accounts of insurance companies as the
funding medium for variable annuity contracts and variable life insurance
policies ("variable products"); and that the variable products will not be
treated as variable products for tax purposes if each Portfolio does not:
1. meet the diversification requirements specified in Section 817(h)
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder; and
2. qualify as a "regulated investment company" under Subchapter M of
the Code and any successor provision.
(b) Sub-Adviser represents that it shall use its best efforts to manage and
invest the Portfolios' assets in such a manner and, with regard to its duties
under this Agreement, ensure that:
1. each Portfolio complies with Section 817(h) of the Code, and the
regulations issued thereunder, specifically Regulation Section 1.817-5,
relating to the diversification requirements for variable annuity and
variable life insurance contracts, and any amendments or other
modifications to such Section or regulation;
2. each Portfolio continuously qualifies as a "regulated investment
company" under Subchapter M of the Code and any successor provision; and
3. any and all applicable state insurance law restrictions, as
amended from time to time, on investments that operate to limit or restrict
the investments that a Portfolio may otherwise make are complied with.
7. RECORDS
(a) Sub-Adviser agrees that it will maintain all required records,
memoranda, instructions or authorizations relating to the acquisition or
disposition of assets of the Fund, including all books and records required to
be maintained by the 1940 Act and the rules and regulations thereunder. In
compliance with Rule 31a-3 of the 1940 Act, Sub-Adviser agrees to preserve for
the periods described in Rule 31a-2 under the 1940 Act any records that it
maintains for the Portfolios and that are required to be maintained by Rule
31a-1 under the 1940 Act. All records maintained by Sub-Adviser with respect to
these functions shall be open at all times to inspection and audit by Adviser's
and/or the Fund's authorized representatives, and any or all such records shall
be delivered to the Fund upon demand. Any records maintained by Sub-Adviser with
respect to such investment function are the property of the Fund.
(b) Sub-Adviser shall assist and provide operational support in the audit
of any records with respect to the services provided hereunder by Adviser's
auditors, its firm of CPA's, the Insurance Department of any state, or upon the
request of any governmental agency (local, municipal, county, state or federal).
Copies of any files will be provided at cost.
(c) Sub-Adviser shall provide, upon Adviser's request, any records which
are necessary to file any report required by any federal, state or local
government or agency. If such records are not timely provided, Sub-Adviser will
pay any costs incurred by Adviser in compiling the necessary documentation.
(d) The terms and conditions of any records generated by this agreement are
confidential and shall be treated as such by Sub-Adviser and its employees.
B-3
<PAGE> 32
8. INFORMATION
Adviser agrees that it will furnish to Sub-Adviser any information that
Sub-Adviser may reasonably request with respect to the services performed or to
be performed by Sub-Adviser under this agreement.
9. LIABILITY OF SUB-ADVISER
In providing the Portfolios with investment advice and other services as
herein provided, neither Sub-Adviser nor any officer, director, employee or
agent thereof shall be held liable by Adviser, the Fund, the Portfolios or any
shareholder, director, or officer thereof or stockholders for errors of judgment
or for anything except willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or reckless disregard of its obligations and
duties under the terms of this agreement.
It is further understood and agreed that Sub-Adviser may rely upon
information furnished to it reasonably believed to be accurate and reliable.
The federal securities laws impose liabilities under certain circumstances
on persons who act in good faith, and therefore nothing herein shall in any way
constitute a waiver or limitation of any rights which Adviser or the Fund may
have under any federal securities laws.
10. STATUS OF SUB-ADVISER
Except as expressly provided or authorized in this agreement, Sub-Adviser
shall have no authority to act for or represent Adviser or the Fund.
11. CORPORATE AUTHORITY
Sub-Adviser hereby certifies that it has full corporate power to enter into
this agreement and perform its obligations thereunder, that such performance
would not give rise to any violation of any other contract with respect to it or
any of its subsidiaries or affiliated companies, and that the officer executing
such agreement has full authority and right to do so.
Sub-Adviser agrees that while this agreement is in effect, it will not
amend its articles of incorporation or by-laws in a manner which would impair
the ability to provide business management services and investment advice to the
Portfolios.
12. DEPARTMENT OF INSURANCE APPROVAL
This agreement is executed by the parties with the understanding that it
may be subject to the approval of or non-disapproval of the California
Department of Insurance. In the event said approval or non-disapproval is not
obtained or the Insurance Department disapproves this agreement Adviser shall
have the unqualified right to terminate this agreement without any penalty.
13. NOTICE
Any notice under this agreement shall be given in writing, addressed and
delivered, or mailed postpaid to:
Adviser: Transamerica Occidental Life Insurance Company
Corporate Secretary
1150 South Olive Street
Los Angeles, California 90015
Sub-Adviser: Transamerica Investment Services, Inc.
Corporate Secretary
1150 South Olive Street
Los Angeles, California 90015
B-4
<PAGE> 33
14. APPLICABLE LAW
This agreement shall be construed in accordance with the laws of the State
of California, and is subject to the provisions of the Advisers Act, the 1940
Act and the rules and regulations of the Securities and Exchange Commission.
15. WAIVER
Waiver by either party of any obligations of the other party does not
constitute a waiver of any further or other obligation of the other party.
16. MISCELLANEOUS
The singular of any word used in this agreement includes the plural.
Unless otherwise indicated herein, terms and phrases used in this Agreement
shall have the meaning ascribed to them in the 1940 Act, the Advisers Act and
the rules and regulations promulgated thereunder.
All rights, powers and privileges conferred hereunder upon the parties
shall be cumulative and shall not restrict those given by law.
This agreement contains the entire agreement of the parties hereto and no
prior representation, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force or effect.
This agreement may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original and such counterparts together
shall constitute but one and the same contract, which shall be sufficiently
evidenced by any such original counterpart.
The captions used in this agreement are solely for the convenience of the
parties hereto and such captions do not constitute a part of this agreement.
IN WITNESS WHEREOF, the parties have caused the signatures of their duly
authorized officers to be hereto affixed.
<TABLE>
<S> <C>
TRANSAMERICA OCCIDENTAL LIFE TRANSAMERICA INVESTMENT
INSURANCE COMPANY SERVICES, INC.
By: ------------------------------------------------- By: -------------------------------------------------
Name: ---------------------------------------------- Name: ----------------------------------------------
Title: Title:
----------------------------------------------- -----------------------------------------------
</TABLE>
B-5
<PAGE> 34
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
<PAGE> 35
EXHIBIT B
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY ("ADVISER")
AND
TRANSAMERICA INVESTMENT SERVICES, INC. ("SUB-ADVISER")
Pursuant to Section 3 of this Agreement, Adviser shall pay Sub-Adviser
compensation at an effective annual rate as follows:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO ANNUAL RATE OF COMPENSATION
- ----------------- ---------------------------
<S> <C>
Growth Portfolio............................. 0.30 of 1% of the Portfolio's average daily
net assets up to $50 million; plus
0.25 of 1% of the Portfolio's average daily
net assets from $50 million to $200
million; plus
0.20 of 1% of the Portfolio's average daily
net assets of $200 million or more.
Money Market Portfolio....................... 0.15 of 1% of the Portfolio's average daily
net assets.
</TABLE>
<PAGE> 36
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 SOUTH OLIVE STREET
LOS ANGELES, CA 90015
The undersigned hereby appoints Gary U. Rolle and Regina M. Fink, and each of
them, as proxies of the undersigned (the "Proxies"), each with full power to
appoint his or her substitute, and hereby authorizes each of them to represent
and vote all the shares of common stock of the Portfolio set forth on the
reverse side of this proxy, held of record as of May 10, 1999 at the Special
Meeting of Shareholders to be held at the executive offices of the Corporation,
1150 South Olive Street, Los Angeles, CA 90015 on June 16, 1999, at 9 a.m.
(Pacific Time), and at any and all of the adjournments(s) or postponements(s)
thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE CORPORATION.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT, FOR APPROVAL OF THE
NEW INVESTMENT SUB-ADVISORY AGREEMENT, FOR ELECTION OF NOMINEES AND FOR
RATIFICATION OF THE SELECTION OF THE INDEPENDENT PUBLIC ACCOUNTANTS. In their
discretion, the Proxies are each authorized to vote upon such other business as
may properly come before the meeting and any adjournments or postponements of
the meeting unless otherwise prohibited by the undersigned. A shareholder
wishing to vote in accordance with the Board of Directors' recommendation need
only sign and date this proxy and return it in the envelope provided.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of a Special Meeting of Shareholders and the Proxy Statement with respect
thereto and hereby revoke(s) any proxy or proxies heretofore given. This proxy
may be revoked at any time before it is exercised.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND PROMPTLY RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE.
Note: Please sign exactly as the name(s) appear(s) on this proxy card. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such. If signing for a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------------------------------ ------------------------------------------------------------
- ------------------------------------------------------------ ------------------------------------------------------------
- ------------------------------------------------------------ ------------------------------------------------------------
</TABLE>
<PAGE> 37
PLEASE MARK VOTES
X
AS IN THIS EXAMPLE
- ------------------------------------------------------------
TRANSAMERICA VARIABLE
INSURANCE FUND, INC.
- ------------------------------------------------------------
CONTROL NUMBER:
RECORD DATE SHARES:
---------------------
PLEASE BE SURE TO SIGN AND DATE THIS PROXY. DATE
- ------------------------------------------------------------
--SHAREHOLDER SIGN HERE-- --CO-OWNER SIGN HERE--
- ------------------------------------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS ABOVE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SIGNING
FOR A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. To approve the new investment [ ] [ ] [ ]
advisory agreement between the
Portfolio and Transamerica
Occidental Life Insurance
Company.
2. To approve the new investment [ ] [ ] [ ]
sub-advisory agreement, relating
to the Portfolio, between
Transamerica Occidental Life
Insurance Company and
Transamerica Investment
Services, Inc.
</TABLE>
<TABLE>
<CAPTION>
FOR THE
NOMINEE ABSTAIN
<S> <C> <C> <C>
3. To elect as directors the
nominees listed below:
GARY U. ROLLE [ ] [ ]
PETER J. SODINI [ ] [ ]
JON C. STRAUSS [ ] [ ]
DR. JAMES H. GARRITY [ ] [ ]
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
4. To ratify the selection by the [ ] [ ] [ ]
Board of Directors of Ernst &
Young LLP as independent public
accountants for the fiscal year
ending December 31, 1999.
</TABLE>
Mark box at right if an address change or comment has
been noted on the reverse side of this card.
<PAGE> 38
TRANSAMERICA VARIABLE INSURANCE FUND -- (TVIF)
Questions and Answers for Proxy Solicitation Purposes -- May 19, 1999
1. What is this document that I received in the mail?
You received a proxy statement, which asks you to vote to approve a new
investment advisory agreement and a new investment sub-advisory agreement,
elect four members to the Board of Directors of your fund, and ratify the
selection of the Fund's independent public accountants. You also received
an instruction card that you should use to vote on these matters.
2. What are the investment advisory and sub-advisory agreements?
They are the agreements under which Transamerica Occidental Life Insurance
Company and Transamerica Investment Services manage the securities
portfolio and provide other business services your fund.
3. Why am I being asked to approve new investment advisory and sub-advisory
agreements?
Transamerica Corporation, the parent company of the investment adviser and
the sub-adviser of the Fund, has agreed to be acquired by AEGON, a
Netherlands insurance company that owns other U.S. insurance companies.
Under the U.S. law that regulates your fund, the investment advisory and
sub-advisory agreements automatically terminate when the advisers or, in
this case, their parent company, is sold. In order for Transamerica
Occidental Life Insurance Company and Transamerica Investment Services to
continue to act as investment adviser and sub-adviser to your fund, the
contract owners must vote to approve the new advisory and sub-advisory
agreements.
4. Will the sale of Transamerica affect the way that my fund is managed?
The current plan is to maintain the facilities and organization of the
adviser and sub-adviser as they relate to your fund.
5. Will fees increase? Are there any substantive changes to the investment
advisory and sub-advisory agreements?
No. The advisory and sub-advisory fees will remain the same. In addition,
the investment advisory and sub-advisory agreements are, in all material
respects, identical.
6. What action do I need to take now?
Your fund's Board of Directors has recommended that you vote to approve
the investment advisory and sub-advisory agreements, that you vote for the
election of the proposed Directors and that you vote to ratify the
selection of your fund's independent public accounts. You should read the
proxy statement and vote your units by marking the instruction card to
approve the new agreements, elect the proposed Directors and ratify the
selection of your fund's independent public accountants, if such is your
intention, then place the instruction card in the envelope provided and
send it back to us.
7. What happens if the new investment advisory and sub-advisory agreements
are not approved?
It would be up to the Board of Directors to decide how to best provide for
the continued management of your fund in that case. In order to avoid any
possible disruption to your fund, we are encouraging you to take the time
to read the proxy statement, fill out the instruction card and send it
back to us.
Should you have any further questions, please contact Georgeson & Company
at 800-223-2064.
